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2021 with the Securities and Exchange Commission, 1,501,002 shares of common stock are deemed to be beneficially owned by the Hudson Executive Capital LP (Hudson) and certain of its subsidiaries and affiliates. Hudson reported shared voting and dispositive power with HEC Management GP LLC and Douglas L. Braunstein as to all of the shares.
(8)
Includes 300,000 shares of common stock issuable upon exercise of stock options, 466,010 shares of vested restricted stock units that have been deferred pursuant to the terms of a deferral election, 3,000 shares held in accounts for Mr.Flanders grandchildren under the Uniform Transfers to Minor Act and 500 shares of common stock issuable pursuant to our employee stock purchase plan.
(9)
Includes 73,489 shares of common stock issuable upon exercise of stock options and 13,139 shares held of record by the Derek Yung and Jill Yung 2014 Trust.
(10)
Includes 7,187 shares of common stock issuable upon exercise of stock options and 474 shares of common stock issuable pursuant to our employee stock purchase plan.
(11)
Includes 7,083 shares of common stock issuable upon exercise of stock options.
(12)
Includes 3,000 shares of common stock issuable upon exercise of stock options.
(13)
Includes 44,419 shares of common stock held of record by Michael D. Goldberg Family Trust dated June 3, 2011. Also includes 34,217 shares of vested restricted stock units that have been deferred pursuant to the terms of a deferral election.
(14)
Includes 22,158 shares of vested restricted stock units that have been deferred pursuant to the terms of a deferral election.
(15)
Includes an aggregate of 390,759 shares of common stock issuable upon exercise of stock options, 375 shares of common stock issuable upon vesting of restricted stock units, 522,385 shares of vested restricted stock units that have been deferred pursuant to the terms of a deferral election, and 974 shares of common stock issuable pursuant to our employee stock purchase plan.
ITEM 13.
We describe below transactions and series of similar transactions, since the beginning of our last fiscal year, and any currently proposed transaction, to which we were or will be a participant, in which:
The amounts involved exceeded or will exceed $120,000; and
A director, executive officer, holder of more than 5% of our common stock or any member of any such persons immediate family had or will have a direct or indirect material interest.
### Investment Agreement
On February 17, 2021, we entered into an Investment Agreement (the Investment Agreement) with Echelon Health SPV, LP (the Investor), an investment vehicle of H.I.G., pursuant to which we agreed to sell to the Investor at closing, 2,250,000 shares of our newly designated Series A preferred stock, par value $0.001 per share (Series A Preferred Stock), at an aggregate purchase price of $225,000,000, at a price of $100 per share (the Private Placement). The Private Placement has not closed as of the date of this Amendment No. 1 on Form 10-K/A and is subject to closing conditions, including, among others: (i) the expiration or early termination of the waiting period (and any extension thereof) applicable to the consummation of the Private Placement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (ii) the confirmation by Nasdaq that it has no objection to the terms and conditions of the Private Placement; and (iii) the determination that consummation of the Private Placement would not cause the Companys outside auditor to no longer be deemed independent under the rules and regulations of the Securities and Exchange Commission or the Public Company Accounting Oversight Board. The parties have agreed to cooperate with each other and use reasonable best efforts to promptly take such actions to cause the closing conditions to be satisfied as promptly as reasonably practicable.
The Investment Agreement and Certificate of Designations for the Series A Preferred Stock includes a number of covenants and other rights, including, but not limited to, dividends, redemption put and call rights, liquidation rights, board nomination rights and voting rights. The Investment Agreement (and the Certificate of Designations included as Exhibit A to the Investment Agreement) is included as an exhibit to our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 18, 2021.
### Board Compensation
We pay non-employee directors for service on our board of directors. Our non-employee directors also have received restricted stock units covering shares of our common stock.
1 on Form 10-K/A.
We have entered into offer letters or employment related agreements with each of our executive officers.
1 on Form 10-K/A.
Indemnification Agreements and Limitation of Liability
Our bylaws provide that we will indemnify our directors and officers to the fullest extent permitted by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred or suffered in connection with their service to us or on our behalf. Our bylaws provide that we shall advance the expenses incurred by a director or officer in advance of the final disposition of an action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her action in that capacity, regardless of whether Delaware law would otherwise permit indemnification. In addition, our certificate of incorporation provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper personal benefit from their actions as directors.
We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the persons services as a director or executive officer.
### Equity Award Grants
We have granted restricted stock units and options to purchase shares of our common stock to our directors and executive officers. See
,
Compensation Discussion and AnalysisCompensation Elements,
2020 Outstanding Equity Awards at Fiscal Year-End, and
2020 Option Exercises and Stock Vested at Fiscal Year-End 1 on Form 10-K/A.
Policies and Procedures with Respect to Related-Party Transactions
The charter of our audit committee requires that members of the audit committee, all of whom are independent directors, review and oversee all related-party transactions in accordance with applicable rules and regulations. In addition, the audit committee is responsible for reviewing, approving and monitoring our code of business conduct. Our code of business conduct prohibits conflicts of interest as a matter of policy, except with the informed written consent of our board of directors or a committee of our board of directors in the case of a director or executive officer. There were no related-party transactions during 2020 that did not require review, approval or ratification pursuant to our policies and procedures, or for which such policies and procedures were not followed. Except for the compensation of directors and executive officers described earlier and as set forth above, none of our directors, executive officers or holders of more than 5% of our common stock was involved in any related-party transactions.
### Board Independence
The board of directors has determined that each of its current directors, except Scott N. Flanders, is independent within the meaning of the Nasdaq Stock Market director independence standards, as currently in effect. Our board of directors has also determined that each member of our audit committee meets the requirements for independence of the Nasdaq Stock Market and the Securities and Exchange Commission for audit committee membership. Our board of directors has determined that each member of our compensation committee meets the applicable requirements for independence of the Nasdaq Stock Market and the Securities and Exchange Commission.
ITEM 14.
The following table sets forth the aggregate fees billed by Ernst& Young LLP for audit and other services rendered in 2019 and 2020 (in thousands):
_______________
(1)
Audit fees: These fees consist of professional services rendered for the audit of our annual consolidated financial statements and internal control over financial reporting, review of our quarterly consolidated financial statements, accounting advice and consultations, as well as accounting advice and services that are normally provided by Ernst& Young LLP in connection with regulatory filings or engagements.
(2)
Tax fees: These fees consist of professional services rendered for tax compliance.
(3)
All other fees: These fees consist of services not captured in the audit, audit-related or tax categories, including fees relating to accounting research software.
The audit committee considered whether the provision of services other than audit services is compatible with maintaining Ernst& Young LLPs independence.
The audit committees policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. All audit and permissible non-audit services were pre-approved by the audit committee in accordance with the pre-approval policy described above.
PART IV
ITEM 15.
(a)
We have filed the following documents as part of this Amendment No. 1 on Form 10-K/A:
1.
Information in response to this Item was previously included in Item 8 of Part II of our Annual Report on Form 10-K, filed with the SEC on February 26, 2021.
2.
All schedules are omitted because they are not applicable, not required or because the required information is included in the consolidated financial statements or notes thereto.
3. Exhibits
See Item 15(b) below.
(b)
### Exhibits
We have included into this Amendment No. 1 on Form 10-K/A the exhibits listed on the accompanying Exhibits Index.
(c)
See Item 15(a) above.<|endoftext|>### EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this Amendment) to the Annual Report onForm 10-Kfor the fiscal year ended July 31, 2020 (the Form 10-K) of 3D Makerjet, Inc. is being filed solely for the purpose of furnishing Items 10, 11,12,13 and updating Note 6. with additional disclosure to the Form 10-K, which was not included in the original filing of theForm 10-Q with the Securities and Exchange Commission on February 17, 2021 (the Original Filing Date).
This Amendment speaks as of the Original Filing Date and does not reflect events that may have occurred subsequent to the Original Filing Date, and does not modify or update in any way the disclosures made in the Form 10-K.
### PART I
Item 1. Business
Overview
A cutting-edge developer in the manufacturing sector, ZBOT won the coveted CDA National Design Award for its ZBOT 3D Printer, which is the platform of the 3D MakerJet printer line, making their 3D printer the only CDA winner at the Civilian level, reflecting the products superior quality, as well as the manufacturer's comprehensive strength, commitment, and capabilities.
### Employees
Item 2. Properties
The Company has no properties.
### Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
N/A
### PART II
Item 5.
Market Information
Our Common Stock is quoted on the over the counter pink sheets under the trading symbol MRJT.
Transfer of our common stock may also be restricted under the securities or blue sky laws of certain states and foreign jurisdictions. Consequently, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time.
The following table sets forth the high and low bid quotations for our Common Stock as reported on the pink sheets for the periods indicated.
As of February 17, 2021 the closing price of our Common Stock was $0.04 per share.
As of February 17, 2021 we had 130,200,000 shares of our common stock issued and outstanding, held by twenty-nine (29) shareholders of record, with others holding shares in street name.
Dividends
1.
2.
### Item 6. Selected Financial Data
Item 7.
Plan of Operation
### Going Concern
As of July 31, 2020, there were no off balance sheet arrangements.
Item 7A.
Item 8.
Financial Statements:
(the Company) as of July 31, 2020 and 2019 and the related statement of operations, stockholders equity (deficit) and cash flows for the years then ended.
We were unable to satisfy ourselves by other audit procedures concerning the assets and liabilities held at July 31, 2020 and 2019, as well as the revenues and expenses recognized for the year then ended.
/s/ BF Borgers CPA PC
### B F Borgers CPA PC
Lakewood, CO
### February 16, 2021
3D Makerjet, Inc.
Balance Sheets
(Unaudited)
3D Makerjet, Inc.
### Statements of Operations
(Unaudited)
3D Markerjet, Inc
(Unaudited)
3D Markerjet, Inc
### Statements of Cash flows
(Unaudited)
3D MAKERJET, INC.
(UNAUDITED)
3D MakerJet, Inc. 3D MakerJet, Inc.
Basis of Presentation
### FASB
Codification
### GAAP
) in the United States.
Going Concern
As of July 31, 2020 the Company had no cash and negative retained earnings of $1,794,201.
### Use of Estimates
Cash and cash equivalents
On July 31, 2020 and July 31, 2019, the Companys cash equivalents totaled $-0- and $-0- respectively.
### Income taxes
Accounting for Income Taxes
FASB ASC 740-10-05,
### Net Loss per Share
### NOTE 3 DEBT
As of July 31, 2020, and July 31, 2019, the Company had $602,693 in convertible debt, net of discount outstanding. Additionally there was $43,000 in long term note payable outstanding.
Common Stock
As of July31, 2020, and July 31, 2019, there were 130,200,000 and 130,200,000 shares of Common Stock issued and outstanding, respectively.
### NOTE 4 RELATED PARTY DEBT
As of July 31, 2020, Custodian Ventures had extended $5,259 in interest free demand loans to the Company compared to $-0- as of July 31, 2019
NOTE 5 COMMITMENTS AND CONTINGENCIES
The Company did not have any contractual commitments as of July 31, 2020 and July 31, 2019.
### NOTE 6 SUBSEQUENT EVENTS
On September 24, 2020 the Company filed a Certificate of Designation in the state of Nevada for 10,000,000 shares of Series A Preferred Stock, par value $0.001. Each share of Preferred Stock is convertible into 30 shares of the Companys common stock. These share were issued to Custodian Ventures in return for the continuing expert management services of David Lazar, and for a reduction of $10,000 in related party debt due to Custodian Ventures.
Item 9.
### Item 9A. Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of July 31, 2020, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commissions rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of July 31, 2020, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b).
and
Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2020. Based on this assessment, Management identified the following two material weaknesses that have caused management to conclude that, as of July 31, 2020, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level:
1.
Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act as of the year ending July 31, 2020.
2.
3.
No change in our system of internal control over financial reporting occurred during the period covered by this report, the fiscal year ended July 31, 2020, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
### Item 9B. Other Information
None
PART III
Item 10.
### David Lazar
Mr. Since February of 2018, Mr.
David Lazar was also the sole officer and director of Shentang International, Inc. (Shentang), which is a blank check company. On April 29, 2020, Plentiful Limited, a Samoan company, purchased 10,000,000 shares of Shentangs preferred stock, par value $0.001 per share, representing 98% of the voting stock, from Custodian Ventures for $225,000. This concluded Mr. Lazars association with Shentang. Shentang has not registered any offerings under the Securities Act.
David Lazar was also the sole officer and director of Guozi Zhongyu Capital Holdings (formerly Melt Inc.) (Guozi), which was a blank check company. On February 27, 2019, Zhicheng RAO, purchased 2,185,710,000 shares of Guozis common stock, par value $0.00001 per share, from Custodian Ventures for $325,000, representing 99% of the voting stock. This concluded Mr. Lazars association with Guozi. Guozi has not registered any offerings under the Securities Act.
David Lazar was also the sole officer and director of Cang Bao Tian Xia International Art Trade Center Inc. (formerly Zhongchai Machinery, Inc.) (Cang), which is a blank check company. On December 16, 2018, Xingtao Zhou and Yaqin Fu purchased 3,096,200 shares of common stock and 10,000,000 shares (the Shares) of preferred stock, each par value $0.001 per share, representing approximately 99% of the voting capital, from Custodian Ventures for $375,000. This concluded Mr. Lazars association with Cang. Cang has not registered any offerings under the Securities Act.
Except for GHAR, Inc, Adorbs, Inc. and Reliance Global Group Inc., Mr. Lazar took control of all of the companies listed by becoming the Court-appointed custodian through Custodian Ventures LLC and entity in which he is the managing member.
### Term of Office
Family Relationships
Committees of the Board
### Code of Ethics
Item 11. Executive Compensation
Mr. Lazar, the Companys only Officer and Director received no compensation for his services
Item 12.
The following table sets forth, as of December 31, 2020 certain information as to shares of our voting stock owned by (i) each person known by us to beneficially own more than 5% of our outstanding voting stock, (ii) each of our directors, and (iii) all of our executive officers and directors as a group.
Unless otherwise indicated below, to our knowledge, all persons listed below have sole voting and investment power with respect to their shares of voting stock, except to the extent authority is shared by spouses under applicable law.
(1)
Shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of October 30, 2015 are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person.
(2)
Based upon 130,200,000 shares issued and outstanding on December 31 2020, plus the number of shares that such individual has the right to acquire within 60 days of such date.
(3)
The preferred is convertible to common at the rate of 30 to 1I
Item 13.
As of the date of this Report, Custodian Ventures had extended $15,345 in interest free demand loans to the Company.
### Item 14.
Fees incurred were $-0- and $-0- for the years ended July 31, 2020 and 2019.
These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards and were not incurred for 2020 and 2019.
Tax fees were not incurred during the fiscal year ended July 31, 2020.
### PART IV
Item 15.
(a)
(b)
Exhibits | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
This report:
See Part II, Item 8 of our Annual Report on Form 10-K for the year ended March 31, 2021, which was originally filed with the SEC on June 10, 2021.
2.
Schedules are omitted because they are not required or applicable, or the required information is included in the Financial Statements or related notes.
3.
### Exhibits.
The Exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of, or furnished with, this report.
Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
2.1
Agreement and Plan of Merger and Reorganization, dated as of December 29, 2016, by and among AIT Therapeutics, Inc. and Advanced Inhalation Therapies Ltd., filed as Exhibit 2.1 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
2.2
First Amendment to Agreement and Plan of Merger and Reorganization, dated as of January 12, 2017, by and among AIT Therapeutics, Inc. and Advanced Inhalation Therapies Ltd., filed as Exhibit 2.2 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
2.3
Merger Completion Certificate, dated as of December 29, 2016, by and among Red Maple Ltd. and Advance Inhalation (AIT) Ltd., filed as Exhibit 2.3 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
3.1
Amended and Restated Certificate of Incorporation of AIT Therapeutics, Inc., dated as of January 9, 2017, filed as Exhibit 3.1 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
3.2
Amended and Restated Bylaws of AIT Therapeutics, Inc. filed as Exhibit 3.2 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
3.3
Certificate of Amendment of Amended and Restated Certificate of Incorporation, dated as of June 25, 2019, filed as Exhibit 3.3 to our Annual Report on Form 10-K filed with the SEC on June 28, 2019 and incorporated herein by reference.
4.1
Form of Common Stock Certificate, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on March 15, 2017 and incorporated herein by reference.
4.2
and the Holders party thereto, filed as Exhibit 10.3 to our Current Report on Form 8-K, as filed with the SEC on March 15, 2017 and incorporated herein by reference.
4.3
and the Holders party thereto, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on April 4, 2017 and incorporated herein by reference.
4.4
and the Holders party thereto, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed with the SEC on February 22, 2018 and incorporated herein by reference.
4.5
Form of Warrant to Purchase Common Stock, by and among Beyond Air, Inc. and the Holders party thereto, filed as Exhibit 4.1 to our Current Report on Form 8-K, as filed on March 20, 2020 and incorporated herein by reference
10.1
Amended and Restated Agreement for the Transfer and Assumption of Obligations Under the Securities Purchase and Registration Rights Agreements, dated as of January 12, 2017, by and among AIT Therapeutics, Inc. and Advanced Inhalation Therapies Ltd., filed as Exhibit 10.1 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.2
Securities Purchase and Registration Rights Agreement, by and among Advanced Inhalation Therapies Ltd. and the Investors party thereto, filed as Exhibit 10.2 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.3
License Agreement, dated as of November 1, 2011, by and between Advanced Inhalation Therapies Ltd. and The UBC, filed as Exhibit 10.10 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.4^
Non-Exclusive Patent License Agreement, dated as of October 22, 2013, by and between Advanced Inhalation Therapies Ltd. and SensorMedics Corporation, filed as Exhibit 10.9 to our Current Report on Form 8-K. as filed with the SEC on January 20, 2017 Registration Statement on Form S-1(File No.
10.5
Option Agreement, dated as of August 31, 2015, by and between Advanced Inhalation Therapies Ltd. and Pulmonox Technologies Corporation, filed as Exhibit 10.13 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.6
Tenth Amendment to Option Agreement, dated as of December 31, 2016, by and between Advanced Inhalation Therapies Ltd. and Pulmonox Technologies Corporation, filed as Exhibit 10.14 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.7+
Employment Agreement, dated as of June 24, 2016, by and between Advanced Inhalation Therapies Ltd. and Steven Lisi, filed as Exhibit 10.15 to our Current Report on Form 8-K, as amended and filed with the SEC on March 15, 2017 and incorporated herein by reference.
10.8+
Employment Agreement, dated as of October 1, 2014, by and between Advanced Inhalation Therapies Ltd. and Amir Avniel, filed as Exhibit 10.17 to our Registration Statement on Form S-1 (File No.
10.9+
Employment Agreement, dated as of September 17, 2015, by and between Advanced Inhalation Therapies Ltd. and Amir Avniel, filed as Exhibit 10.18 to our Registration Statement on Form S-1 (File No.
10.10+
Waiver of the back salary, dated as of October 31, 2016, by and between Advanced inhalation Therapies Ltd. and Amir Avniel, filed as Exhibit 10.19 to our Registration Statement on Form S-1 (File No.
10.11
Stock Purchase and Registration Rights Agreement, dated March 31, 2017, by and among the Company and the Investors party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 4, 2017 and incorporated herein by reference.
10.12
Form of Subscription Agreement, dated March 31, 2017, by and among the Company and the Investors party thereto, filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on April 4, 2017 and incorporated herein by reference.
10.15
Securities Purchase Agreement, dated as of August 10, 2018, by and between AIT Therapeutics, Inc. and Lincoln Park Capital Fund, LLC., filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on August 13, 2018 and incorporated herein by reference.
10.16
Registration Rights Agreement, dated as of August 10, 2018, by and between AIT Therapeutics, Inc. and Lincoln Park Capital Fund, LLC, filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on August 13, 2018 and incorporated herein by reference.
10.17+
Offer letter between AIT Therapeutics, Inc. and Douglas J. Beck, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on November 1, 2018 and incorporated herein by reference.
10.18
Form of Subscription Agreement, dated as of June 3, 2019, by and among AIT Therapeutics, Inc. and the Purchasers party thereto, filed as Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on June 7, 2019 and incorporated herein by reference.
10.19*
License, Development and Commercialization Agreement, dated January 23, 2019, by and between AIT Therapeutics, Inc. and Circassia Limited, filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q on February 14, 2019 and incorporated herein by reference.
10.21
Form of Purchase Agreement with U.S. Investors, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on December 10, 2019 and incorporated herein by reference.
10.22
Form of Purchase Agreement with Foreign Investors, filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on December 10, 2019 and incorporated herein by reference.
10.23
Facility Agreement, dated March 17, 2020, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on March 17, 2020 and incorporated herein by reference.
10.24
At-The-Market Equity Offering Sales Agreement, dated April 2, 2020, by and among the Company, SunTrust Robinson Humphrey, Inc. and Oppenheimer & Co., filed as Exhibit 1.1 to our Current Report on Form 8-K, filed with the SEC on April 3, 2020 and incorporated herein by reference.
10.25
Purchase Agreement, dated May 14, 2020, by and between Beyond Air, Inc. and Lincoln Park Capital Fund, LLC, filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on May 14, 2020 and incorporated herein by reference.
10.26
Registration Rights Agreement, dated May 14, 2020, by and between Beyond Air, Inc. and Lincoln Park Capital Fund, LLC, filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on May 14, 2020 and incorporated herein by reference.
10.27*
Supply Agreement, dated as of August 6, 2020, by and between Beyond Air, Inc. and Spartronics Watertown, LLC, filed as Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 12, 2020 and incorporated herein by reference.
10.28*
Manufacture and Supply Agreement, dated as of July 30, 2020, by and between Beyond Air, Inc. and Medisize Ireland Limited, filed as Exhibit 10.1 to our Current Report on Form 8-K, as filed with the SEC on August 18, 2020 and incorporated herein by reference.
10.29+
Beyond Air, Inc. Third Amended and Restated 2013 Equity Incentive Plan (included in Appendix A to our Definitive Proxy Statement filed on January 22, 2021 and incorporated herein by reference).
10.30+
Beyond Air, Inc. 2021 Employee Stock Purchase Plan, filed as Exhibit 10.2 to our Current Report on Form 8-K, as filed with the SEC on March 9, 2021 and incorporated herein by reference.
21.1**
List of subsidiaries of Beyond Air, Inc.
31.1***
Rule 13a-14(a) / 15d-14(a) Certification of Principal Executive Officer
31.2***
Rule 13a-14(a) / 15d-14(a) Certification of Principal Financial Officer
32.1***
32.2***
+ Management contract or compensation plan arrangement
* Pursuant to Item 601(b)(10) of Regulation S-K, portions of this exhibit have been omitted as the registrant has determined that the omitted information (i) is not material and (ii) would likely cause competitive harm to the registrant if publicly disclosed.
** Filed herewith
*** Furnished herewith.<|endoftext|>Of interest that would impair the nominees ability to fulfill the responsibilities of a director.
The Nominating Committee has no formal policy on the consideration to be given to diversity in the nomination process, other than to seek candidates who have skills and experience that are appropriate to the position and complementary to those of the other board members or candidates.
### Code of Ethics
The Company has adopted a Code of Ethics applicable to all directors, officers and employees. The Company will provide to any person without charge, upon request, a copy of such Code of Ethics upon written request mailed to the Company at its main office, to the attention of the Corporate Secretary.
Board Leadership Structure
The positions of Chairman of the Board and Chief Executive Officer are currently held by different persons. The Board believes that having a separate chairman helps enable the Board to maintain an independent perspective on the activities of the Company and executive management. Periodically, the Board assesses the roles and the Board leadership structure to ensure the interests of the Company and the shareholders are best served.
### Board Risk Oversight
The Companys senior management manages the risks facing the Company under the oversight and supervision of the Board. While the full Board is ultimately responsible for risk oversight at the Company, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk in the areas of financial reporting and internal controls. Other general business risks such as economic and regulatory risks are monitored by the full Board.
ITEM 11. EXECUTIVE COMPENSATION
### Compensation of Officers
The following table provides information concerning compensation paid or accrued by the Company, to or on behalf of Giga-tronics chief executive officer and the two other most highly compensated executive officers during the last fiscal year ended March 27, 2021:
The value for Stock Option Awards in the table above represents grant date fair value of Stock Option Awards for fiscal year 2021 and 2020. For Option Awards, the dollar amount for each individual varies depending on the number of options granted, the fair value of such options, and the vesting terms of such options. See Note 1 of the audited consolidated financial statements for the fiscal year ended March 27, 2021 for information on the assumptions used to calculate the grant date fair value of Option Awards and the expense recognized under ASC 718. All options were granted under the Companys 2018 Equity Incentive Plan
Includes contributions made by Giga-tronics to its 401(k) Plan which match in part the pre-tax elective deferral contributions included under Salary made to the 401(k) plan by the executive officers.
### Stock Options
The following table sets forth information about stock options held by the named executive officers outstanding at the end of fiscal year 2021. All option exercise prices were based on market price on the date of grant.
EMPLOYMENT
CONTRACTS
AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
### Change-In-Control Arrangements
All outstanding equity awards may accelerate and become exercisable for fully vested shares of common stock upon a change in control of the Company to the extent the awards are not assumed or replaced by comparable awards of the capital stock of the successor or acquiring entity. In addition, the board of directors, either in advance of or at the effective time of a change of control, may provide for the acceleration of an employees outstanding equity awards in the event that his or her employment should subsequently terminate following the change of control.
In order to reinforce and encourage the continued attention and dedication of certain key members of management, we have entered into severance agreements with certain executive officers including Mr. Regazzi, Dr. Henckels, Mr. Pantalone, and Mr. Kirby.
Under Mr. Regazzis and Mr. Henckels agreements, each would receive such salary and other benefits described above for 15 months and acceleration of all unvested equity awards if he is terminated without cause or resigns for good reason, as defined in his agreement, within 12 months following a change of control. Each would receive 12 months of salary and payment of COBRA premiums following an involuntary termination if made prior to or after 12 months following a change in control.
Under their respective agreements, Mr. Pantalone and Mr. Kirby would be entitled to six months of base salary if heresigns for good reason, as defined in hisagreement, in connection with a change of control or is terminated without cause, whether or not in connection with a change in control.
During the most recent fiscal year, there were no such arrangements, other than compensation arrangements as described herein.
Compensation of Directors
The following table sets forth information about the compensation paid to the Companys non-employee directors in fiscal year 2021. Information regarding the compensation of the Companys Chief Executive Officer and its Chief Financial Officer and Chief Operating Officer, both of whom are directors but received no additional compensation for such service, is described in Executive Compensation above.
ITEM 12.
The following table includes information as of March 27, 2021, concerning the beneficial ownership of Giga-tronics common stock for: each person known by Giga-tronics to own beneficially more than 5% of Giga-tronics outstanding common stock and common stock equivalents; each director and nominee; each executive officer named in the Summary Compensation Table above; and all directors and executive officers of Giga-tronics as a group:
Includes 7,285 shares of common stock issuable under options exercisable within 60 days of March 27, 2021.
Includes 34,830 shares of common stock issuable under options exercisable within 60 days of March 27, 2021, 4,650 shares of common stock issuable upon conversion of 697.4 shares of Series B preferred stock, 1,573 shares of common stock issuable upon conversion of 236.0 shares of Series C preferred stock, and 2,353 shares of common stock issuable upon conversion of 353.0 shares of Series D preferred stock.
Includes 41,473 shares of common stock issuable under options exercisable within 60 days of March 27, 2021.
Includes 5,770 shares of common stock issuable under options exercisable within 60 days of March 27, 2021.
Includes 2,114 shares of common stock issuable upon conversion of 317.1 shares of Series B preferred stock, 787 shares of common stock issuable upon conversion of 118.05 shares of Series C preferred stock, and 1,174 shares of common stock issuable upon conversion of 176.1 shares of Series D preferred stock.
Includes 10,641 shares of common stock issuable under options exercisable within 60 days of March 27, 2021.
Includes 8,339 shares of common stock issuable under options exercisable within 60 days of March 27, 2021.
Includes 108,338 shares of common stock issuable under options exercisable within 60 days of March 27, 2021, 6,764 shares of common stock issuable upon conversion of 1,015 shares of Series B preferred stock, 2,360 shares of common stock issuable upon conversion of 354 shares of Series C preferred stock, and 3,527 shares of common stock issuable upon conversion of 529 shares of Series D preferred stock.
Excludes 40,200 shares of common stock issuable upon conversion of warrants which expired on January 29, 2021.
Includes 170,000 shares of common stock issuable upon conversion of 17,000 shares of Series E preferred stock.
Information is based on a Schedule 13G/A filed by Cornelis Wit on September 2, 2020. On August 27, 2020, the Reporting Person acquired 56,227 shares of Common Stock, 8,231 shares of Series B Preferred Stock of the Issuer, 3,071 shares of Series C Preferred Stock of the Issuer and 4,583 shares of Series D Preferred Stock of the Issuer. Each share of the Series B, C and D Preferred Stock provides the Reporting Person voting rights at any meeting of the stockholders of the Issuer and such shares of Series B, C and D Preferred Stock will vote together with the common stockholders of the Issuer in the amount of 6.6666 votes per Series B, C and D Preferred Stock equaling an aggregate of 105,899 votes.
Information is based on a Schedule 13G/A filed by Laurence W. Lytton on February 16, 2021.
Information is based on a Schedule 13G/A filed by AWM Investment Company, Inc. (AWM) on February 12, 2021 reporting that AWM Investment Company, is the investment adviser to Special Situations Technology Fund, L.P.(TECH) and Special Situations Technology Fund II, L.P. (TECH II), (TECH and TECH II will hereafter be referred to as the Funds). As the investment adviser to the Funds, AWM holds sole voting and investment power over 36,781 shares of Common Stock of the Issuer (the Shares) held by TECH and 200,602 Shares held by TECH II.
ITEM 13. CERTAIN RELATONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Almquist, Thompson, and Vickers, representing a majority of the Board, are independent under the independence standards of The NASDAQ Stock Market.
### ITEM 14.
The following table presents aggregate fees billed for professional services rendered by Armanino LLPin fiscal year 2021 and in fiscal year 2020 in the following categories:
Audit fees consist of fees for professional services rendered for the audit of the Companys annual consolidated financial statements, review of consolidated financial statements included in the Companys quarterly reports (on Form10-Q) and services normally provided by the independent auditor in connection with statutory and regulatory filings or engagements.
Follow on offering (S-1) fee in fiscal 2020
PART IV
ITEM 15.
(a) The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:
31.1*
Certification of Chief Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended
31.2*
Certification of Chief Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended
32.1**
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
*Filed herewith
** Furnished herewith | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
In a separate transaction, the Company acquired the Advisor's interest of affiliates of Allen Hartman in exchange for 602,842 Operating Partnership OP units with a fair value of $6,525,000. The Property Manager was acquired by the Company as a result of the HIREIT Merger. Effective July 1, 2020 the Company is self advised and self managed.
Prior to the HIREIT Merger, the Company owned 1,561,523 shares of the common stock of Hartman Income REIT, Inc., which it acquired for cash consideration of $8,978,000. The Company has cancelled the HIREIT shares in connection with the HIREIT Merger effective July 1, 2020. The receive monthly dividend distributions from Hartman Income REIT, Inc. with respect to our common stock investment.
Our consolidated financial statements include the accounts of Hartman SPE, LLC in which our membership interest is 36.16%. Our wholly owned subsidiary, Hartman SPE Management, LLC, is the sole manager of Hartman SPE, LLC.
### Advisory and Property Management
Prior to July 1, 2020 and subject to certain restrictions and limitations, Hartman Advisors LLC ("Advisor") was responsible for managing our affairs on a day-to-day basis and for identifying and making acquisitions and investments on our behalf pursuant to an advisory agreement. (the "Property Manager"), formerly a wholly-owned subsidiary of HIREIT and effective July 1, 2020, our wholly owned subsidiary.
The Company paid property management fees and reimbursable expenses and leasing commissions to the Property Manager in connection with the management and leasing of the Company's properties.
Loan to Hartman Short Term Income Properties XIX, Inc.
We had a note receivable from Hartman Short Term Income Properties XIX, Inc. in the original amount of $4,500,000. The outstanding balance of the note is $0 and $4,200,000 as of December31, 2020 and 2019, respectively. The balance of the note was eliminated on July 1, 2020 in connection with the Hartman XIX Merger.
### Loan to Hartman Retail II Holdings Company, Inc.
("TRS") has a note receivable from Hartman Retail II Holdings Company, Inc., an affiliate of the Advisor and the Property Manager, in the original amount of $7,231,000. The outstanding balance of the note is $1,726,000 and $2,476,000 as of December31, 2020 and 2019, respectively. The maturity date of the note, as amended, is December 31, 2022.
Loan to Hartman Retail III Holdings Company, Inc.
("TRS") has a note receivable from Hartman Retail III Holdings Company, Inc., an affiliate of the Advisor and the Property Manager, in the principal amount of $7,500,000. The outstanding balance of the note is $0 and $6,782,400 as of December31, 2020 and 2019, respectively. The maturity date of the note, as amended is February 29, 2021. Effective August 4, 2020, the Company conveyed this note receivable to Hartman vREIT XXI TRS, Inc.("vREIT TRS").
Loan to Hartman Ashford Bayou, LLC, a subsidiary of Hartman Total Return, Inc.
("TRS") has a note receivable from Hartman Ashford Bayou LLC, an affiliate of the Advisor and the Property Manager, in the original amount of $3,500,000. The outstanding balance of the note is $0 and $3,830,000 as of December31, 2020 and 2019, respectively. The maturity date of the note, as amended is March 31, 2021. Effective August 4, 2020, the Company conveyed this note receivable to vREIT TRS.
### Loan from Hartman vREIT XXI, Inc.
During 2019, we borrowed under an unsecured promissory note payable to Hartman vREIT XXI, Inc., an affiliate of the Advisor and the Property Manager, in the face amount of $4,400,000. The outstanding balance of the note is $2,789,000 and $4,400,000 as of December31, 2020 and 2019, respectively. The maturity date of the note, as amended, is October 31, 2022.
Other than as described above, there is no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.
Policies and Procedures for Transactions with Related Persons
In order to reduce or eliminate certain potential conflicts of interest, our charter and our Advisory Agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with our advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with our advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by our advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.
### Director Independence
As required by our charter, a majority of the members of our Board of Directors must qualify as independent directors, as such term is defined by our charter. Our charter defines independent director in accordance with the North American Securities Administrators Association, Inc.s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. As defined in our charter, an independent director is a person who is not, on the date of determination, and within the last two years from the date of determination been, directly or indirectly, associated with our sponsor or our advisor by virtue of (1) ownership of an interest in our sponsor, our advisor, or any of their affiliates; (3) service as an officer or director of our sponsor, our advisor, or any of their affiliates (other than as one of our directors); A business or professional relationship is considered material if the aggregate gross revenue derived by the director from the sponsor, the advisor, and their affiliates exceeds 5.0% of either the directors annual gross revenue during either of the last two years or the directors net worth on a fair market value basis. An indirect association with the sponsor or the advisor shall include circumstances in which a directors spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in-law, or brother- or sister-in-law is or has been associated with the sponsor, the advisor, any of their affiliates, or with us.
We have a five-member board of directors. We do not consider Mr. Hartman to be an independent director. After review of all relevant transactions or relationships between each director, or any of his family members, and our company, our senior management and our independent registered public accounting firm, our board has determined that Messrs. Tompkins, Haddock, Still and Schulze, who comprise the majority of our board, qualify as independent directors as defined in our charter.
The audit committee engaged Weaver and Tidwell, L.L.P. (Weaver) as our independent registered public accounting firm to audit our consolidated financial statements for the years ended December31, 2020 and 2019. Prior to the appointment of Weaver for the 2019 fiscal year audit, the audit committee engaged Grant Thorton, L.L.P. ("GT") to perform quarterly review procedures and other audit related services during 2019. The audit committee reserves the right to select new auditors at any time in the future in its discretion if it deems such decision to be in the best interests of our company and our stockholders.
### Pre-Approval Policies
The audit committee charter imposes a duty on the audit committee to pre-approve all auditing services performed for us by our independent auditors as well as all permitted non-audit services in order to ensure that the provision of such services does not impair the auditors independence.
All services rendered to us by Weaver for the years ended December31, 2020 and 2019, and from GT for the year ended December 31, 2019 were pre-approved in accordance with the policies and procedures described above.
Fees
The audit committee reviewed the audit and non-audit services performed by Weaver, as well as the fees charged by Weaver and GT for such services. In its review of the non-audit service fees, the audit committee considered whether the provision of such services is compatible with maintaining the independence of Weaver and GT. The aggregate fees billed to us by GT and Weaver for professional accounting services for the years ended December31, 2020 and 2019 are set forth in the tables below.
Weaver
GT
For purposes of the preceding tables, GTs and Weavers professional fees are classified as follows:
### Audit fees
These are fees for professional services performed for the audit of our annual financial statements, the required review of quarterly financial statements, registration statements and other procedures performed in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.
Audit-related fees
These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as audits and due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews, and consultation concerning financial accounting and reporting standards.
### Tax fees
These are fees for all professional services performed by professional staff in our independent auditors tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice, including federal, state, and local issues. Services may also include assistance with tax audits and appeals before the IRS and similar state and local agencies, as well as federal, state, and local tax issues related to due diligence.
PART IV
(a)Exhibits
Exhibits. The index of exhibits below is incorporated herein by reference.
(b)Financial Statement Schedules
See the Index to Consolidated Financial Statements and Schedule at page F-1 of this report.
The following financial statement schedule is included herein at pages F-24 through F-27 of this report:
Schedule III Real Estate Assets and Accumulated Depreciation
The Company has elected not to provide summary information.<|endoftext|>011-35299)
April 28, 2021
10.10 *
License and Collaboration Agreement, dated November 27, 2017, by and between Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing GmbH.
Exhibit10.10 of the Alkermes plc Annual Report on Form 10-K (File No. 011-35299)
February 16, 2018
10.10.1 *
First Amendment to License and Collaboration Agreement between Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing GmbH, effective as of October 3, 2018.
Exhibit 10.12 to the Alkermes plc Quarterly Report on Form 10-Q (File No. 011-35299)
October 23, 2018
10.10.2
Second Amendment to License and Collaboration Agreement between Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing GmbH, effective as of January 31, 2019.
011-35299)
April 25, 2019
10.10.3 **
Third Amendment to License and Collaboration Agreement between Alkermes Pharma Ireland Limited and Biogen Swiss Manufacturing GmbH, effective as of October 30, 2019.
Exhibit10.10.3 of the Alkermes plc Annual Report on Form 10-K (File No. 011-35299)
February 13, 2020
10.11
Cooperation Agreement, dated as of December 10, 2020, by and among Alkermes plc and Elliott Investment Management L.P., Elliott Associates, L.P., Elliott Advisors (UK) Limited and Elliott International, L.P.
Exhibit10.1 to the Alkermes plc Current Report on Form8-K (File No.001-35299)
December 10, 2020
10.12
Lease, dated March 23, 2018, by and between Alkermes, Inc. and PDM 900 Unit, LLC.
011-35299)
April 26, 2018
10.12.1
First Amendment to Lease, dated June 21, 2018, by and between Alkermes, Inc. and PDM 900 Unit, LLC.
001-35299)
July 26, 2018
10.12.2
Second Amendment to Lease, dated May 10, 2019, by and between Alkermes, Inc. and PDM 900 Unit, LLC.
001-35299)
July 25, 2019
10.13
Employment Agreement, dated as of December 12, 2007, by and between Richard F. Pops and Alkermes, Inc.
Exhibit10.1 to the Alkermes,Inc.
February 11, 2008
10.13.1
Amendment to Employment Agreement, dated as of October 7, 2008, by and between Alkermes, Inc. and Richard F. Pops.
October7, 2008
10.13.2
Amendment No. 2 to Employment Agreement, dated as of September 10, 2009 by and between Richard F. Pops and Alkermes, Inc.
September11, 2009
10.14
Form of Employment Agreement, as amended by the Form of Amendment to Employment Agreement set forth in 10.14.1, entered into by and between Alkermes, Inc. and each of James M. Frates, Blair C. Jackson and Michael J. Landine.
Exhibit10.3 to the Alkermes,Inc.
### February 11, 2008
Exhibit No.
### Description of Exhibit
Form
Date
10.1
Form of Amendment to Employment Agreement with Alkermes, Inc.
October7, 2008
10.15
and James M. Frates.
Exhibit10.15 to the Alkermes,Inc.
May 30, 2008
10.16
and Michael J. Landine.
Exhibit10.15(a)to the Alkermes,Inc.
May 30, 2008
10.17
Form of Employment Agreement entered into by and between Alkermes, Inc. and each of Iain M. Brown, David J. Gaffin, Craig C. Hopkinson, M.D. and Christian Todd Nichols.
011-35299)
November 2, 2016
10.17.1
Offer Letter by and between Alkermes, Inc. and Craig C. Hopkinson M.D., effective as of April 24, 2017.
Exhibit10.17.1 to the Alkermes plc Annual Report on Form 10-K (File No. 011-35299)
February 16, 2018
10.17.2
Offer Letter, dated March 29, 2019, by and between Alkermes, Inc. and Christian Todd Nichols.
011-35299)
July 29, 2020
10.18
Form of Indemnification Agreement entered into by and between Alkermes, Inc. and each of the Directors and Secretaries of Alkermes plc and its Irish subsidiaries.
Exhibit10.2 to the Alkermesplc Quarterly Report on Form 10-Q (File No. 001-35299)
April 29, 2020
10.19
Form of Deed of Indemnification entered into by and between each of the Directors, Secretaries and executive officers of Alkermes plc and its subsidiaries.
Exhibit10.1 to the Alkermesplc Quarterly Report on Form 10-Q (File No. 001-35299)
April 29, 2020
10.20
Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.1 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 001-35299)
April 27, 2017
10.20.1
Form of Stock Option Award Certificate (Non-Employee Director) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.4 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
April 28, 2016
10.20.2
Form of Restricted Stock Unit Award Certificate (Time Vesting Only Irish) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.5 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
April 28, 2016
10.20.3
Form of Restricted Stock Unit Award Certificate (Time Vesting Only U.S.) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.6 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
April 28, 2016
10.20.4
Form of Stock Option Award Certificate (Time Vesting Non-Qualified Option Irish) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.7 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
### April 28, 2016
Exhibit No.
### Description of Exhibit
Form
Date
10.2
Form Stock Option Award Certificate (Time Vesting Non-Qualified Option U.S.) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.8 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
April 28, 2016
10.20.6
Form of Stock Option Award Certificate (Incentive Stock Option U.S.) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.9 to the Alkermes plc Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 (File No. 001-35299)
April 28, 2016
10.20.7
Form of 2008 Restricted Stock Unit Award Certificate (Performance Vesting Only) under the Alkermes plc Amended and Restated 2008 Stock Option and Incentive Plan, as amended.
Exhibit 10.2 to the Alkermes, Inc. Current Report on Form 8-K (File No. 001-14131)
May 22, 2009
10.21
Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
011-35299)
May 24, 2017
10.21.1
Form of Incentive Stock Option Award Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.21.2
Form of Non-Qualified Stock Option (Employee) Award Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.21.3
Form of Restricted Stock Unit (Time-Vesting) Award Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.21.4
Form of Restricted Stock Unit (Performance-Vesting) Award Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.21.5
Form of Non-Qualified Stock Option (Non-Employee Director) Award Certificate under the Alkermes plc 2011 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.22
Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
011-35299)
May 20, 2020
10.22.1
Form of Incentive Stock Option Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
001-35299)
October 23, 2018
10.22.2
Form of Non-Qualified Stock Option (Employee) Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
Exhibit 10.7 to the Alkermes plc Quarterly Report on Form 10-Q (File No. 001-35299)
October 23, 2018
10.22.3
Form of Restricted Stock Unit (Time-Vesting) Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
Exhibit 10.8 to the Alkermes plc Quarterly Report on Form 10-Q (File No. 001-35299)
October 23 ,2018
10.22.4
Form of Restricted Stock Unit (Performance-Vesting) Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
001-35299)
### July 29, 2020
Exhibit No.
### Description of Exhibit
Form
Date
10.22.5
Form of Non-Qualified Stock Option (Non-Employee Director) Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
001-35299)
July 29, 2020
10.23.6
Form of Non-Employee Director Restricted Stock Unit (Time-Vesting) Award Certificate under the Alkermes plc 2018 Stock Option and Incentive Plan, as amended.
001-35299)
July 29, 2020
21.1
### List of subsidiaries
Exhibit21.1 to the Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
23.1
Consent of PricewaterhouseCoopers LLP, an independent registered public accounting firm
Exhibit23.1 to the Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
24.1
Power of Attorney (included on the signature page to the Alkermes plc Annual Report on Form 10-K)
### Signature pages to the
Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
31.1
Exhibit31.1 to the Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
31.2
Exhibit31.2 to the Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
31.3 #
31.4 #
32.1
Exhibit32.1 to the Alkermesplc Annual Report on Form10-K (File No. 001-35299)
February 11, 2021
101.SCH #
Inline XBRL Taxonomy Extension Schema Document.
101.CAL #
101.LAB #
101.PRE #
101.DEF #
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
#
### Filed herewith.
The information in Exhibit 32.1 shall not be deemed filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act, or the Exchange Act (including this Amendment), unless the Registrant specifically incorporates the foregoing information into those documents by reference.
*
Confidential treatment has been granted or requested for certain portions of this exhibit. Such portions have been filed separately with the SEC pursuant to a confidential treatment request.
**
In accordance with Item 601(b)(2)(ii) of Regulation S-K, certaininformation(indicated by [**]) has been excluded from this exhibit because it is both not material and would likely cause competitive harm to the Company if publicly disclosed. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
And the ordinary shares underlying such warrants, will not be transferable, assignable or salable by our Sponsor until 30days after the completion of our initial Business Combination.
Below is a table summarizing the entities to which our directors, officers and directors currently have fiduciary duties or contractual obligations:
### Individual
Entity
Entitys Business
### Affiliation
Bernardo Hees
Avis Budget Group, Inc.
### Mobility and Car Rental
Chairman of the Board
Bunge Ltd.
### Agribusiness and Food
Director
Carlos Piani
Equatorial Energia S.A.
### Utilities
Chairman of the Board
Petrobras Distribuidora S.A.
### Fuel Distribution
Director
Rodrigo Xavier
N/A
N/A
N/A
### Marcos Peigo
Scala Data Centers S.A.
Data Center Platform
### Chief Executive Officer and Board Member
Dyn DC Data Centers e Participacoes S.A.
Data Center Platform
### Chief Executive Officer
Lemniscata Ventures
Investment Advisory
### Founder
Marco Kheirallah
SIP Capital Equities Investimentos Ltda.
### Investment Advice
Managing Partner
Salete Pinheiro
BR Distribuidora S.A.
### Petroleum Derivatives and Biofuels
Fiscal Board Member
Jereissati Participaes S.A.
### HoldingCompany;Primarily Telecommunication
Audit Committee Member
HDI Seguros S.A.
### Insurance
Audit Committee Member
Icatu Seguros S.A.
### Insurance
Audit Committee Member
Item 11.
### Executive Compensation.
Commencing on the date that our securities were listed on the NYSE through the earlier of consummation of our initial Business Combination and our liquidation, we will pay our Sponsor a total of $10,000 per month for office space, administrative and support services. Our Sponsor, directors and officers, or any of their respective affiliates, are reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations. Our audit committee review on a quarterly basis all payments that are made by us to our Sponsor, directors, officers or our or any of their respective affiliates. On June25, 2020, our Sponsor transferred 20,000 founder shares to each of our independent directors at their original per-share purchase price.
### Item 12.
The following table sets forth information regarding the beneficial ownership of our ordinary shares available to us at March 23, 2021 by: each person known by us to be the beneficial owner of more than 5% of our issued and outstanding ordinary shares;
The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these warrants are not exercisable within 60days of March 23, 2021.
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is c/oHPX Corp., 1000 N.
(2)
Such ordinary shares will convert into ClassA ordinary shares on a one-for-one basis, subject to adjustment, as described in the section entitled Description of Securities in our prospectus filed with the SEC pursuant to Rule 424(b)(4) (File Nos. 333-239486 and 333-239882).
(3)
HPX Capital Partners LLC, our Sponsor, is the record holder of the ClassB ordinary shares reported herein. The managers of our Sponsor, Messrs.Hees, Piani and Xavier, by virtue of their shared control over our Sponsor, may be deemed to beneficially own shares held by our Sponsor.
(4)
According to a Schedule 13G filed with the SEC on July 24, 2020, each of Sharp Capital Gestora de Recursos Ltda. and Ivan Guetta may be deemed to have shared voting and dispositive power with regard to 2,150,000 Class A ordinary shares of the Company. The business address for each is Borges de Medeiros Avenue, Number 633, Office Number 202, Rio de Janeiro, 22430-041, Brazil.
(5)
According to a Schedule 13G filed with the SEC on October 14, 2020, SPX Equities Gestao de Recursos Ltda. is a non-US investment adviser advising upon the the 2,000,000 Class A ordinary shares of the Company beneficially owned by several non-US private investment funds, none of which holds more than 5% individually. The business address is Rua Humaita, 275, 6 floor, Humaita, CEP 22261-005, Rio de Janeiro, RJ, Brazil.
(6)
According to a Schedule 13G/A filed with the SEC on February 16, 2021, RP Investment Advisors LP may be deemed to have shared voting and dispositive power with regard to 1,256,123 Class A ordinary shares of the Company. The business address is 39 Hazelton Avenue, Toronto, Ontario, Canada, M5R 2E3.
(7)
According to a Schedule 13G filed with the SEC on February 16, 2021, each of Glazer Capital, LLC and Paul J. Glazer may be deemed to have shared voting and dispositive power with regard to 1,320,667 Class A ordinary shares of the Company. The business address for each is 250 West 55th Street, Suite 30A, New York, New York 10019.
(8)
According to a Schedule 13G filed with the SEC on February 16, 2021, Periscope Capital Inc. may be deemed to have shared voting and dispositive power with regard to 1,265,800 Class A ordinary shares of the Company. The business address is 333 Bay Street, Suite 1240, Toronto, Ontario, Canada M5H 2R2.
Our initial shareholders beneficially own 20% of the then issued and outstanding ordinary shares and have the right to appoint all of our directors prior to our initial Business Combination as a result of holding all of the founder shares.
### Item 13.
Founder Shares
On April 8, 2020, the Sponsor purchased 5,750,000 of the Companys Class B ordinary shares (the Founder Shares) for an aggregate consideration of $25,000. On June 25, 2020, the Sponsor transferred 20,000 Founder Shares to each of its independent directors at their original per-share purchase price. On July 15, 2020, the Company effected a share capitalization resulting in the initial shareholders holding an aggregate of 6,325,000 Founder Shares. The Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture by the Sponsor depending on the extent to which the underwriters over-allotment option was exercised, so that the Founder Shares would equal 20% of the Companys issued and outstanding shares after the Initial Public Offering.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Companys shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property.
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 7,060,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant from the Company in a private placement, for an aggregate purchase price of $7,060,000. Each Private Placement Warrant is exercisable for one Class A ordinary share at a price of $11.50 per share, subject to adjustment (see Note 9). If the Company does not complete a Business Combination within the Combination Period or any Extension Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
If we do not complete an Initial Business Combination within 24 months from the closing of the Public Offering or during any Extension Period, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of our public shares, subject to the requirements of applicable law, and the Private Placement Warrants will expire worthless.
### Registration Rights
Pursuant to a registration rights agreement entered into on July 15, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued on conversion of Working Capital Loans (and any Class A Ordinary Shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to the Companys Class A Ordinary Shares).
Related Party Notes
The Company entered into an agreement whereby, commencing on July 16, 2020, the Company will pay the Sponsor up to $10,000 per month for office space, administrative and support services. For the period from March 20, 2020 (inception) through December 31, 2020, the Company incurred $55,000 in fees for these services, of which such amount is included within accounts payable and accrued expenses on the balance sheet.
Advances
The Sponsor advanced the Company an aggregate of $10,000 to cover expenses related to the Initial Public Offering. The outstanding advances of $10,000 were repaid in full on June 25, 2020.
### Promissory Note
On April 8, 2020, the Company issued an unsecured promissory note (the Promissory Note) to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000. The outstanding balance under the Promissory Note of $300,000 was repaid in full at the closing of the Initial Public Offering on July 20, 2020.
Item 14.
Audit Fees
The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the period from March20, 2020 (inception) through December 31, 2020 totaled $74,000.
### Audit-Related Fees.
We did not pay Marcum for consultations concerning financial accounting and reporting standards for the period from March20, 2020 (inception) through December 31, 2020.
Tax Fees
We did not pay Marcum for tax planning and tax advice for the period from March20, 2020 (inception) through December 31, 2020.
### All Other Fees
We did not pay Marcum for other services for the period from March20, 2020 (inception) through December 31, 2020.
PART IV.
Item 15.<|endoftext|>Obligations to other entities pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Our officers and directors are also not required to commit any specified amount of time to our affairs, and, accordingly, will have conflicts of interest in allocating management time among various business activities, including identifying potential business combinations and monitoring the related due diligence. See Item 1.A. Risk Factors
Our Sponsor, officers and directors may become involved with subsequent special purpose acquisition companies similar to our company, although they have agreed not to participate in the formation of, or become an officer or director of, any special purpose acquisition company with a class of securities registered under the Exchange Act until we have entered into a definitive agreement regarding our initial Business Combination or we have failed to complete our initial Business Combination within 24 months after the Initial Public Offering.
Our initial shareholders, officers and directors have agreed to waive their redemption rights with respect to any founder shares and public shares held by them in connection with the consummation of our initial Business Combination. and (2)subsequent to our initial Business Combination (x)if the last reported sale price of our ClassA ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after our initial Business Combination or (y)the date on which we complete a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of our public shareholders having the right to exchange their ordinary shares for cash, securities or other property. With certain limited exceptions, the private placement warrants and the ClassA ordinary shares underlying such warrants, will not be transferable, assignable or salable by our sponsor until 30 days after the completion of our initial Business Combination. Since our sponsor and officers and directors may directly or indirectly own ordinary shares and warrants following the Initial Public Offering, our officers and directors may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial Business Combination.
Below is a table summarizing the entities to which our officers, directors and director nominees currently have fiduciary duties or contractual obligations:
### Individual
Entity
Entitys Business
### Affiliation
D.JamesCarpenter
Riverside Management Group, LLC
### Merchant Bank
RMG Acquisition Corp.
Chairman
RMG Acquisition Corp. III
Chairman
RMG Acquisition Corp. IV
Chairman
RMG Acquisition Corp. V
Chairman
RMG Acquisition Corp. VI
Chairman
RMG Acquisition Corp. VII
Chairman
RobertS.Mancini
RMG Acquisition Corp.
RMG Acquisition Corp. III
RMG Acquisition Corp. IV
Chief Executive Officer
RMG Acquisition Corp. V
RMG Acquisition Corp. VI
Chief Executive Officer
RMG Acquisition Corp. VII
Chief Executive Officer
Philip Kassin
RMG Acquisition Corp.
RMG Acquisition Corp. III
RMG Acquisition Corp. IV
RMG Acquisition Corp. V
RMG Acquisition Corp. VI
RMG Acquisition Corp. VII
Wesley Sima
### RMG Acquisition Corp. III
Chief Financial Officer
### RMG Acquisition Corp. IV
Chief Financial Officer
### RMG Acquisition Corp. V
Chief Financial Officer
### RMG Acquisition Corp. VI
Chief Financial Officer
### RMG Acquisition Corp. VII
Chief Financial Officer
### Craig Broderick
RMG Acquisition Corp.
### Director
RMG Acquisition Corp. III
### Director
RMG Acquisition Corp. V
### Director
RMG Acquisition Corp. VI
### Director
RMG Acquisition Corp. VII
### Director
Goldman, Sachs& Co.
Senior Director
### Stone Point Capital
Investment Bank
Senior Advisor
### Bank of Montreal
Private Equity Firm
Director
### McDermott International
Bank
Director
### Construction
W. Grant Gregory
RMG Acquisition Corp.
Director
RMG Acquisition Corp. III
Director
RMG Acquisition Corp. IV
Director
RMG Acquisition Corp. V
Director
RMG Acquisition Corp. VII
Director
Oakland Financial Services
### Financial Advisor
Chairman
Arbor Bank
### Bank
Chairman
Gregory&
### Financial Advisor
Chairman
Hoenemeyer, Inc.
### W. Thaddeus Miller
RMG Acquisition Corp.
### Director
RMG Acquisition Corp. III
### Director
RMG Acquisition Corp. IV
### Director
RMG Acquisition Corp. VI
### Director
RMG Acquisition Corp. VII
### Director
Calpine Corporation
Executive Vice Chairman and Board Member
### Catherine D. Rice
RMG Acquisition Corp. III
### Director
RMG Acquisition Corp. IV
### Director
RMG Acquisition Corp. VI
### Director
RMG Acquisition Corp. VII
### Director
Colony Real Estate
Real Estate
### Director
Store Capital Corporation
Real Estate
### Director
We are not prohibited from pursuing an initial Business Combination with a company that is affiliated with our sponsor, officers or directors, subject to certain approvals and consents.
In the event that we submit our initial Business Combination to our public shareholders for a vote, our sponsor has agreed to vote any founder shares held by it and any public shares purchased during or after the offering in favor of our initial Business Combination and our officers and directors have also agreed to vote any public shares purchased during or after the offering in favor of our initial Business Combination.
### Item11. Executive Compensation
Certain of our directors and officers have received a grant of profits interest from our sponsor. Commencing on the date that our securities are first listed on Nasdaq through the earlier of consummation of our initial Business Combination and our liquidation. Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of- pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Please see the section entitled Item 13
Item12.
The following table sets forth information available to us at March15, 2021 with respect to our ordinary shares held by: each person known by us to be the beneficial owner of more than 5% of our outstanding shares of ordinary shares;
The following table does not reflect record or beneficial ownership of the Private Placement Warrants as these are not exercisable within 60 days ofMarch 15, 2021.
*
Less than one percent.
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is c/o RMG Acquisition Corporation II, 50 West Street, Suite 40C, New York, NY 10006.
(2)
Class B ordinary shares will convert into ClassA ordinary shares on a one-for-one basis, subject to adjustment, as described in the section entitled Description of Securities in our prospectus filed with the SEC pursuant to Rule 424(b)(4) (File Nos.
333-249342 and
333-251244).
(3)
RMG Sponsor II, LLC is the record holder of the shares reported herein. Each of our officers, directors and certain members of our Advisory Board is or will be, directly or indirectly, a member of RMG Sponsor II, LLC. MKC Investments LLC is the sole managing member of RMG Sponsor II, LLC, and Messrs. Carpenter, Mancini and Kassin are the managing members of MKC Investments LLC. As such, they may be deemed to have or share beneficial ownership of the ClassB ordinary shares held directly by RMG Sponsor II, LLC.
(4)
Does not include any shares indirectly owned by this individual as a result of a profit interest in our sponsor.
Item13.
### Founder Shares
The holders of the Founder Shares agreed to forfeit up to an aggregate of 1,125,000 Founder Shares, on a pro rata basis, to the extent that the option to purchase additional units was not exercised in full by the underwriters, so that the Founder Shares would represent 20% of the Companys issued and outstanding shares after the Initial Public Offering.
30-trading day period commencing at least 150 days after the initial Business Combination or (y)the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Public Shareholders having the right to exchange their ordinary shares for cash, securities or other property.
### Private Placement
Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 7,026,807 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $10.5million.
If we do not complete an initial Business Combination within 24 months from the closing of the Initial Public Offering, the proceeds of the sale of the Private Placement Warrants will be used to fund the redemption of our public shares, subject to the requirements of applicable law, and the Private Placement Warrants will expire worthless.
### Registration Rights
Related Party Notes
As of December14, 2020, the Company borrowed approximately $151,000 under the Note.
In the event that a Business
Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
### Support Services Agreement
Item14.
### Audit Fees
The aggregate fees billed by Marcum LLP for audit fees, inclusive of required filings with the SEC for the period from July28, 2020 (inception) through December31, 2020, and of services rendered in connection with our initial public offering, totaled $50,470.
### Audit-Related Fees
We did not pay Marcum LLP any audit-related fees during the period from July28, 2020 (inception) through December31, 2020.
### Tax Fees
We did not pay Marcum LLP any tax fees during the period from July28, 2020 (inception) through December31, 2020.
All Other Fees
We did not pay Marcum LLP any other fees during the period from July28, 2020 (inception) through December31, 2020.
Fees for professional services provided by our independent registered public accounting firm from July28 (inception):
(1)
Audit Fees.
(2)
Audit-Related Fees.
(3)
Tax Fees.
(4)
All Other Fees. including permitted due diligence services related potential business combination.
### Policy on Board
### Non-Audit
PART IV.
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Indicated by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss. 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files) Yes [ ] No [X] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.: Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [X] Emerging growth company [ ] If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ] Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. Yes [ ] No [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X] The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2020 was approximately $407,000. As of May 14, 2021 the registrant had 848,357,428 outstanding shares of common stock. DOCUMENTS INCORPORATED BY REFERENCE None. EXPLANATORY NOTE The purpose of this amendment is to amend Item 13 of the 10-K report for the year ended December 31, 2020.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE In November 2015, the Company entered into an arrangement with a related party, whereby the Company borrowed $25,000 in Convertible Notes. The note was due on November 4, 2016. In December 2015 the lender loaned the Company an additional $20,000 with same terms except that it is payable upon demand. As of December 31, 2020 and December 31, 2019, the Company owed a total of $45,000 and $45,000, respectively. As of December 31, 2019 the note was currently in default. In July 2015, the Company entered into an arrangement with a related party, whereby the Company could borrow up to $500,000 in Convertible Notes. Upon the occurrence and during the continuation of an event of default, the holder may require the Company to redeem all or any portion of this Note in cash at a price equal to 150% of the principal amount. During the year ended December 31, 2017, the Company borrowed an additional $430,000. As of December 31, 2020 and December 31, 2019, the Company owed a total of $500,000 and $1,103,000, respectively. Since the debt holder has not elect the right to require the Company to redeem the note at a price equal to 150% of the principal amount, the terms stated prior to maturity are still in effect. The holder has waived the default term and the note is not considered to be in default as of December 31, 2019. During October 2015, the Company borrowed $30,000 from an entity controlled by an officer of the Company. The loan is due and payable on demand and is non-interest bearing. During the year ended December 31, 2017, the Company repaid $121,500 and borrowed an additional $184,500 from the same related party. As of December 31, 2020 the principal balance outstanding is $30,000. On July 7, 2016, the Company borrowed $73,000 from a related party. The loan was due and payable on July 7, 2017 and bore interest at 5% per annum. The principal balance owed on this loan at June 30, 2019 and December 31, 2018 was $73,000 and $73,000, respectively. As of and December 31, 2020 and December 31, 2019 the note is currently in default. On August 8, 2016, the Company entered into a promissory note with Hypur Inc., a Nevada Corporation which is a related party pursuant to which the Company to borrow $52,000. The loan was due and payable on August 10, 2017 and bore interest at 18% per annum. The principal balance owed on this loan at June 30, 2019 and December 31, 2018 was $52,000 and $52,000, respectively. On October 1, 2017, it was determined this note had derivative. Upon default, if the default has not been remedied within 30 days, the redemption price would be 150% of the principal amount. The notes were in default as of December 31, 2019, but the holder has agreed to waive the 150% redemption price default term.
On October 29, 2018, the Company borrowed $100,000 from Hypur Inc., which is a related party. The loan is due and payable on January 28, 2019 and bears interest at 18% per annum. The principal balance owed on this loan at June 30, 2019 and December 31, 2018 was $100,000 and $100,000, respectively. The note was discounted for a derivative (see note 8 for details) and the discount of $89,350 is being amortized over the life of the note using the effective interest method resulting in $89,350 of interest expense for the year ended December 31, 2019. On November 21, 2018, the Company borrowed $70,000 from Hypur Inc., which is a related party. The loan is due and payable on February 19, 2019 and bears interest at 18% per annum. The principal balance owed on this loan at September 30, 2019 and December 31, 2018 was $70,000 and $70,000, respectively. The note was discounted for a derivative (see note 8 for details) and the discount of $55,830 is being amortized over the life of the note using the effective interest method resulting in $55,830 of interest expense for the year ended December 31, 2019. On November 26, 2018, the Company borrowed $75,000 from Hypur Inc., which is a related party. The loan is due and payable on February 24, 2019 and bears interest at 18% per annum. The principal balance owed on this loan at September 30, 2019 and December 31, 2018 was $75,000 and $75.000, respectively. The note was discounted for a derivative (see note 8 for details) and the discount of $58,913 is being amortized over the life of the note using the effective interest method resulting in $58,913 of interest expense for the year ended nine December 31, 2019.
On May 10, 2019, the Company borrowed $75,000 from Hypur Inc., which is a related party. The loan is due and payable on May 12, 2020 and bears interest at 18% per annum. The principal balance owed on this loan at December 31, 2020 was $75,000. On September 3, 2019, the Company borrowed $21,000 from Hypur Inc., which is a related party. The loan is due and payable on December 3, 2019 and bears interest at 18% per annum. The principal balance owed on this loan at December 31, 2020 was $21,000. May 26, 2017, the Company borrowed $100,000 from CGDK, a related party. The loan is due 360 days from May 26, 2017 and bears interest at 5% per annum. The loan is convertible into shares of the Company's common stock at a price of $.025 per share. The principal balance owed on this loan at December 31, 2019 and December 31, 2018 was $100,000 and $100,000, respectively. As of December 31, 2020 and December 31, 2019 the note is currently in default. On July 13, 2017, the Company borrowed $150,000 from CGDK, a related party. The loan is due 360 days from July 13, 2017, and bears interest at 5% per annum. The principal balance owed on this loan at December 31, 2020 and December 31, 2019 was $150,000. The conversion feature has been waved through October 15, 2019. As of December 31, 2020 and December 31, 2019, the note is currently in default. On April 13, 2018, the Company borrowed $130,000 from CGDK, a related party. The loan is due 360 days from April 13, 2018, bears interest at 12% per annum. The Company recorded a discount of $101,272 due to derivative. The Company amortized $72,694 in debt discounts during the year ended December 31, 2018. The Company amortized $27,560 in debt discounts during the nine months ended September 30, 2019. The principal balance owed on this loan at December 31, 2020 and December 31, 2019 is $130,000 and $130,000, respectively. On November 5, 2019 CGDK waived the default provision until April 13, 2020. On June 14, 2018, the Company issued a $30,217 promissory note to CGDK, a related party, for previous expenses paid on behalf of the Company. The loan is due 360 days from June 18, 2018, bears interest at 12% per annum. The Company recorded a debt discount of $10,292 due to derivative. During the year ended December 31, 2018 the Company amortized $5,639 of the discount. The Company amortized $3,697 in debt discounts during the nine months ended December 31, 2019. The principal balance owed on this loan at December 31, 2020 and December 31, 2020 is $30,217 and $30,217, respectively. On November 5, 2019 CGDK waived the default provision until June 14, 2020.
On July 2, 2018, the Company borrowed $150,000 from CGDK, a related party. The Company recorded a debt discount of $19,779 due to derivative. During the year ended December 31, 2018 the Company amortized $9,862 of the discount. The Company amortized $7,390 in debt discounts during the year ended December 31, 2019. On November 5, 2019 CGDK waived the default provision until July 2, 2020. On August 6, 2018, the Company borrowed $150,000 from CGDK, a related party. The Company recorded a debt discount of $20,095 due to derivative. During the year ended December 31, 2018 the Company amortized $8,093 of the discount. The Company amortized $7,793 in debt discounts during the year ended December 31, 2019. On November 5, 2019 CGDK waived the default provision until August 6, 2020. During the years ended December 31, 2019 and 2020 the Company paid UBIX Global, Inc., a related party, $16,000 and $127,500 respectively for consulting services provided by UBIX. Christopher Galvin, a director of the Company, is a controlling person of UBIX. ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Exhibit Number Name and/or Identification of Exhibit --------- -------------------------------------------------------------------- 3 Articles of Incorporation & By-Laws (a) Articles of Incorporation (1) (b) By-Laws (1) 31 Rule 13a-14(a)/15d-14(a) Certifications 32 Certification under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350) (1)Incorporated by reference to the Registration Statement on Form 10-SB, previously filed with the SEC on November 28, 2007.<|endoftext|>The Exchange Act and, if not, stating the respects in which it does not agree.
### ITEM 9A. CONTROLS AND PROCEDURES
Based on our managements evaluation (with the participation of our Principal Executive Officer and Principal Financial Officer) of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), our Principal Executive Officer and Principal Financial Officer have concluded that, as of December 31, 2020, in light of the material weaknesses described below, certain of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective to ensure that the information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosure as of December 31, 2020. See the material weaknesses discussed below in Managements Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting, as such term is defined in Rule13a-15(f) under the Exchange Act. Based on our managements evaluation (with the participation of our Principal Executive Officer and Principal Financial Officer), of the effectiveness of our internal controls over financial reporting as ofDecember 31, 2020, which was based on the framework in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, our Principal Executive Officer and Principal Financial Officer have concluded that, as of December 31, 2020, in light of the material weaknesses described below, our internal control over financial reporting was not effective as of December 31, 2020.
As a result of the assessment described above, we identified control deficiencies that constitute material weaknesses in the design and operation of our internal control over financial reporting.
The following material weaknesses, which were discovered to be material during 2020, were present at December 31, 2020: (a) segregation of duties (resulting from the small number of individuals performing the accounting functions), including the lack of a formal journal entry review and approval process; and (c) our overall closing and financial reporting processes, including accounting for significant and unusual transactions. In light of the restatement discussed herein, the Company has reassessed the effectiveness of its internal controls over its financial reporting processes as of December 31, 2020, and has concluded that its remediation plan of its previously disclosed material weaknesses will be expanded to address controls in the determination of the appropriate accounting for complex financial instruments. Our remediation plans regarding the material weaknesses are addressed below.
### Remediation
To remediate the remaining material weaknesses described above, we are implementing and/or plan to implement the following:
To alleviate the information technology controls issue, the Company plans to implement NetSuite, an Oracle cloud-based ERP and financial solution. This solution will allow personnel to implement workflow controls.
To alleviate the segregation of duties issue, the Company plans to leverage NetSuite configuration and workflow while expanding the accounting team and reviewing roles;
To alleviate the lack of a formal journal entry review and approval process, the Company will be implementing workflow steps within NetSuite to ensue all journal entries are approved before posting to the general ledger;
To alleviate the weakness in the overall closing and financial reporting processes, including accounting for significant and unusual transactions, the Company has hired additional internal legal and accounting support, as well as engaging RSM US LLP to assist with technical matters during 2020; and
To alleviate the financial reporting issue over complex financial instruments, the Company will enhance our processes to identify and appropriately apply applicable accounting requirements for complex accounting standards, including providing enhanced access to accounting literature, research materials and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications.
When fully implemented and operational, we believe the measures described above will remediate the remaining material weaknesses we have identified and strengthen our internal control over financial reporting, however, the material weakness will not be considered remediated until management has concluded, through testing, that these controls are effective. Notwithstanding the identified material weaknesses, management believes that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented in accordance with U.S. GAAP.
As discussed above, we are implementing certain measures to remediate the material weaknesses identified in the design and operation of our internal control over financial reporting. Other than those measures, there have been no changes in our internal control over financial reporting (as such term is defined in Rules13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
### ITEM 9B. OTHER INFORMATION
The Company currently plans to hold its 2021 Annual Meeting of Stockholders on June 8, 2021. Pursuant to the terms of the Companys Bylaws, for any stockholder to bring business (other than pursuant to and in compliance with Exchange Act Rule 14a-8) or make a nomination before the annual meeting, the stockholder must deliver notice to the Secretary of the Company not later than the close of business on the 90th day nor earlier than the close of business on the 120th day before the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so received no earlier than the close of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the annual meeting is first made by the Company. Because the Company did not hold an annual meeting last year, the Company has determined that the date by which stockholders must deliver such notice for the purposes of the 2021 Annual Meeting of Stockholders is March 10, 2021, which is 90 days prior to the anticipated date of the 2021 Annual Meeting of Stockholders. Pursuant to Rule 14a-8, for a stockholder to submit a proposal for inclusion in the Companys proxy materials for the 2021 Annual Meeting of Stockholders, the stockholder must comply with the requirements set forth in Rule 14a-8 including with respect to the subject matter of such proposal and must deliver the proposal and all required documentation to the Company a reasonable time before the Company begins to print and sent its proxy materials for the meeting. For the purposes of the 2021 Annual Meeting of Stockholders, the Company has determined that March 6, 2021 is a reasonable time before the Company plans to begin printing and mailing its proxy materials. The public announcement of an adjournment or postponement of the 2021 Annual Meeting date will not commence a new time period (or extend any time period) for giving such notice under the Companys Bylaws or submitting a proposal pursuant to Rule 14a-8.
Part III
ITEM 10.
The information required by Item 10 will be contained in, and is hereby incorporated by reference to, our definitive proxy statement for the 2021 Annual Meeting of Stockholders (the 2021 Proxy Statement), which we will file pursuant to Regulation 14A with the Commission within 120 days after the close of the year ended December 31, 2020. This includes information regarding our Code of Business Conduct and Ethics.
### ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be contained in, and is hereby incorporated by reference to, the 2021 Proxy Statement, which we will file pursuant to Regulation 14A with the Commission within 120 days after the close of the year ended December 31, 2020.
ITEM 12.
The information required by Item 12 will be contained in, and is hereby incorporated by reference to, the 2021 Proxy Statement, which we will file pursuant to Regulation 14A with the Commission within 120 days after the close of the year ended December 31, 2020.
ITEM 13.
The information required by Item 13 will be contained in, and is hereby incorporated by reference to, the 2021 Proxy Statement, which we will file pursuant to Regulation 14A with the Commission within 120 days after the close of the year ended December 31, 2020.
### ITEM 14.
The information required by Item 14 will be contained in, and is hereby incorporated by reference to, the 2021 Proxy Statement, which we will file pursuant to Regulation 14A with the Commission within 120 days after the close of the year ended December 31, 2020.
Part IV
ITEM
15.
(a)(1) and (a)(2) Financial Statements and Financial Statement Schedules:
Reference is made to the Index to Financial Statements of the Company under Item 8 of Part II. All financial statement schedules are omitted because they are not applicable, or the amounts are immaterial, not required, or the required information is presented in the financial statements and notes thereto in Item 8 of Part II above.
(b) Exhibits
Exhibits: The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report on Form 10-K. Exhibits not incorporated by reference to a prior filing are designated by an asterisk (*); all exhibits not so designated are incorporated by reference to a prior filing as indicated.
*
### Filed herewith.
Indicates a management contract or compensatory plan or arrangement, as required by Item 15(a)(3).
+
The schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Regulation S-K.
### ITEM 16. FORM 10-K SUMMARY
None. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Bifurcated from the notes and accounted for separately as a combined derivative liability. We would then be required to remeasure the combined derivative liability to its then fair value at each subsequent balance sheet date, through an adjustment to current earnings.
Warrant liabilities:
We account for the warrants which we assumed in connection with our Business Combination in accordance with ASC 815-40, Derivatives and HedgingContracts in Entitys Own Equity (ASC 815), under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities.
We will be an emerging growth company under the Jumpstart Our Business Startups Act (the JOBS Act). We may elect 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, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard, until such time we are no longer considered to be an emerging growth company. See Note 3 of the accompanying audited consolidated financial statements for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ending December31, 2020 and 2019.
Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, we intend to rely on such exemptions, we will not be required to, among other things: (a)provide an auditors attestation report on our system of internal control over financial reporting pursuant to Section404(b) of the Sarbanes-Oxley Act;
We will remain an emerging growth company under the JOBS Act until the earliest of (a)December 31, 2024 (the last day of the fiscal year following the fifth anniversary of the consummation of Pivotals initial public offering), (b)the last date of our fiscal year in which it has total annual gross revenue of at least $1.1billion, (c)the date on which we are deemed to be a large accelerated filer under the rules of the SEC with at least $700.0million of outstanding securities held by non-affiliates or (d)the date on which we have issued more than $1.0billion in non-convertible debt securities during the previous three years.
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are applicable to us as of the specified effective date.
See
Recent Accounting Pronouncements issued, not yet adopted under Note 3Summary of Significant Accounting Policies in the notes to the audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for more information about the recent accounting pronouncements, the timing of their adoption and our assessment, to the extent it has made one, of their potential impact on our financial condition and results of operations. As an emerging growth company, we can elect to opt out of the extended transition period and comply with the requirements that apply tonon-emerginggrowth companies but any such election to opt out is irrevocable.
Not required.
###
We have no significant known off balance sheet arrangements.
Item 7A.
### Not required.
Item 8.
Our financial statements are contained in pages F-1 through F-40 which appear at the end of this Annual Report on Form 10-K.
Item 9.
There have been no changes in or disagreements with accountants on accounting and financial disclosure.
### Item 9A. Controls and Procedures.
We maintain disclosure controls and procedures (as defined in paragraph (e) of Rules 13a-15 and 15d-15 under the Exchange Act) designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified under the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as appropriate to allow timely decisions regarding required disclosures.
Based on this evaluation, including the presence of material weaknesses as discussed below, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2020.
(b) Managements Report on Internal Controls over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our principal executive officer and principal financial officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting cannot provide absolute assurance of achieving their objectives. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgement and breakdowns resulting from human failures. Due to their inherent limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. It is possible to design safeguards to reduce, but not eliminate, this risk.
Management has used the framework set forth in the report entitled Internal ControlIntegrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), known as COSO, to evaluate the effectiveness of our internal control over financial reporting.
In the course of preparing the Companys financial statements, we have identified material weaknesses in internal control over financial reporting, which relate to insufficient technical accounting resources and lack of segregation of duties. Furthermore, subsequent to the filing of our Annual Report on Form 10-K, on March 31, 2021, management, including our Chief Executive Officer and Chief Financial Officer, identified a material weakness in internal controls related to the accounting for warrants assumed in connection with our Business Combination, as described in Note 2 to the Notes to Consolidated Financial Statements entitled Restatement of Previously Issued Financial Statements.
Our management has concluded that these material weaknesses in our internal control over financial reporting are due to the fact that, prior to this Annual Report on Form 10-K, we were a private company with limited resources. We did not have the necessary business processes and related internal controls, or the appropriate resources or level of experience and technical expertise, that would be required to oversee financial reporting processes or to address the accounting and financial reporting requirements. Our management has prepared a remediation plan instituted in 2021 that involves hiring additional qualified personnel, further documentation and implementation of control procedures and the implementation of control monitoring. The material weaknesses will not be considered fully remediated until these additional controls and procedures have operated effectively for a sufficient period of time and management has concluded, through testing, that these controls are effective.
If not remediated, these material weaknesses could result in material misstatements to our annual or interim financial statements that would not be prevented or detected on a timely basis, or in delayed filing of required periodic reports.
Notwithstanding the identified material weaknesses, management believes that the consolidated financial statements included in this Annual Report on Form 10-K/A present fairly, in all material respects, our financial position, results of operations, and cash flows as of and for the periods present in accordance with U.S. GAAP.
This Annual Report on Form 10-K/A does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits us to provide only managements report in this Annual Report on Form 10-K.
Other than those measures, there have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None.
### PART III
Item 10.
The information required by this Item and not set forth below will be set forth in the section headed
### Election of Directors and
Information Regarding the Board of Directors and Corporate Governance in our definitive Proxy Statement for our 2021 Annual Meeting of Stockholders to be filed with the SEC on or before April 29, 2021 (our Proxy Statement) and is incorporated in this report by reference.
We have adopted a code of ethics for directors, officers (including our principal executive officer) and employees, known as Our Corporate Code of Conduct and Ethics and Whistleblower Policy. A copy of Our Corporate Code of Conduct and Ethics and Whistleblower Policy is available on our website at www.xlfleet.com under the Governance, Documents and Charters section of our Investors page. We will promptly disclose on our website (i) the nature of any amendment to the policy that applies to our principal executive officer or persons performing similar functions and (ii) the nature of any waiver, including an implicit waiver, from a provision of the policy that is granted to one of these specified individuals, the name of such person who is granted the waiver and the date of the waiver.
### Item 11. Executive Compensation.
Item 12.
Security Ownership of Certain Beneficial Owners and Management in our Proxy Statement and is incorporated in this report by reference.
Information regarding our equity compensation plans will be set forth in the section headed
Item 13.
Certain Relationships and Related Person Transactions in our Proxy Statement and is incorporated in this report by reference.
### Item 14.
Ratification of Selection of Independent Registered Public Accounting Firm in our Proxy Statement and is incorporated in this report by reference.
### PART IV
Item 15.<|endoftext|>[
Mcewen Mining Inc
]
McEwen Mining Inc. 1 on Form 10-K/A (this Amendment) to its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (SEC) on March 10, 2021 (the Original Filing) to amend Item 15 of Part IV of the Original Filing, pursuant to Rule 3-09 of Regulation S-X, to include the financial statements and related notes of Minera Santa Cruz S.A (MSC), a significant equity investee in which the Company holds a 49% equity ownership interest. In addition, the Company is filing the consent of the independent auditors of MSC and, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), new certifications by the Companys Chief Executive Officer and Chief Financial Officer.
Rule 3-09 of Regulation S-X provides that if a 50%-or-less-owned person accounted for by the equity method meets the first or third condition of the significant subsidiary tests set forth in Rule 1-02(w) of Regulation S-X, substituting 20% for 10%, separate financial statements for such 50%-or-less-owned person shall be filed. These financial statements shall be prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) or International Financial Reporting Standards (IFRS). MSC met the significant subsidiary test described above for the Companys fiscal years ending December 31, 2020, 2019 and 2018 and accordingly, the Company has included in this Amendment the required Statements of Financial Position as of December 31, 2020 and 2019, and the related Statements of Profit (Loss) and Other Comprehensive Profit (Loss), Statements of Changes in Equity, and Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018, and the accompanying Notes to the Financial Statements of MSC, prepared in accordance with IFRS. We caution readers that the MSC financial results included in our Annual Report on Form 10-K are presented in accordance with US GAAP and may therefore differ from the MSC results presented as separate financial statements reported under IFRS.
No attempt has been made in this Amendment to modify or update the disclosures in the Original Filing except as required to reflect the effect of the revisions discussed herein. Except as otherwise noted herein, this Amendment continues to describe conditions as of the date of the Original Filing and the disclosures contained herein have not been updated to reflect events, results or developments that occurred after the date of the Original Filing, or to modify or update those disclosures affected by subsequent events. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that occurred or facts that became known to us after the date of the Original Filing, and such forward-looking statements should be read in conjunction with our filings with the SEC subsequent to the filing of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and the Companys other filings with the SEC subsequent to March 10, 2021. Furthermore, readers are cautioned to review the reliability of information disclosure, contained in our Annual Report on Form 10-K, pertaining to the disclosure of MSC results.
PART IV
ITEM 15.
The exhibits listed in the accompanying exhibit index are filed (except where otherwise indicated) as part of this report:
EXHIBIT INDEX
3.1.1*
Second Amended and Restated Articles of Incorporation of the Company as filed with the Colorado Secretary of State on January20, 2012 (incorporated by reference from the Current Report on Form8-K filed with the SEC on January24, 2012, Exhibit3.1, File No.001-33190)
3.1.2*
Articles of Amendment to the Second Amended and Restated Articles of Incorporation of the Company as filed with the Colorado Secretary of State on January 24, 2012 (incorporated by reference from the Current Report on Form8-K filed with the SEC on January24, 2012, Exhibit3.2, File No.001-33190)
3.2*
Amended and Restated Bylaws of the Company (incorporated by reference from the Current Report on Form8-K filed with the SEC on March12, 2012, Exhibit3.2, File No.001-33190)
4.1*
Description of Capital Stock (incorporated by reference from the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 10, 2021, Exhibit 4.1, File No. 001-33190)
4.2*
Form of Warrant issued by the Company in connection with November 2019 financing (incorporated by reference from the Current Report on Form 8-K filed with the SEC on November 22, 2019, Exhibit 4.1, File No. 001-33190)
4.3*
Form of Warrant issued by the Company in connection with March 2019 financing (incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 29, 2019, Exhibit 4.1, File No. 001-33190)
10.1*+
Amended and Restated Equity Incentive Plan dated as of March 17, 2015 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on May 29, 2015, Exhibit 4.1, File No.001-33190)
10.2*+
Form of Stock Option Agreement for executives of the Company (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 11, 2016, Exhibit 10.3, File No. 001-33190)
10.3*
Form of Indemnification Agreement between the Company and its officers and directors (incorporated by reference from the Current Report on Form8-K dated December7, 2005, Exhibit10.1, File No.000-09137)
10.4*
Amended and Restated Credit Agreement among the Company, as Borrower, the Lenders party to the Agreement and Sprott Private Resource Lending II (Collector), LP, as Administrative Agent, dated June 25, 2020 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on June 29, 2020, Exhibit 10.1, File No. 001-33190)
10.5*+
Employment Agreement between the Company and Anna Ladd-Kruger, dated October 2, 2020 (incorporated by reference from the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2020 filed with the SEC on October 29, 2020, Exhibit 10.1, File No. 001-33190)
10.6*
Placement Agency Agreement among the Company, Cantor Fitzgerald & Co, and Roth Capital Partners dated February 5, 2021 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on February 9, 2021, Exhibit 10.1, File No. 001-33190)
10.7*
Form of Securities Purchase Agreement, dated as of February 5, 2021 between the Company and Certain Purchasers (incorporated by reference from the Current Report on Form 8-K filed with the SEC on February 9, 2021, Exhibit 10.2, File No. 001-33190)
10.9.1*
Option and Joint Venture Agreement, by and among Minera Andes Inc., Minera Andes S.A., and Mauricio Hochschild & CIA. LTDA., dated March 15, 2001 (the OJVA) (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 1, 2017, Exhibit 10.12, File No. 001-33190)
10.9.2*
First Amendment to OJVA, dated May 14, 2002 (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 1, 2017, Exhibit 10.12.1, File No. 001-33190)
10.9.3*
Second Amendment to OJVA, dated August 27, 2002 (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 1, 2017, Exhibit 10.12.2, File No. 001-33190)
10.9.4*
Third Amendment to OJVA, dated September 10, 2004 (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 1, 2017, Exhibit 10.12.3, File No. 001-33190)
10.9.5*
Fourth Amendment to OJVA, dated September 17, 2010 (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 1, 2017, Exhibit 10.12.4, File No. 001-33190)
10.13*
Form of Securities Purchase Agreement between the Company and the purchaser in the March 2019 offering (incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 29, 2019, Exhibit 10.2, File No. 001-33190)
21*
List of subsidiaries of the Company (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 21, File No. 001-33190)
23.1*
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm (incorporated by reference from the Annual Report Form 10-K filed with the SEC on March 10, 2021, Exhibit 23.1, File No. 001-33190)
23.2*
Consent of P&E Mining Consultants Inc., Mining Engineers (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 23.2, File No. 001-33190)
23.3*
Consent of Independent Mining Consultants Inc. (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 23.3, File No. 001-33190)
23.4*
Consent of Mine Technical Services Ltd. (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 23.4, File No. 001-33190)
23.5**
Consent of Pistrelli, Henry Martin Y Asociados S.R.L, Independent Auditors, regarding report in Exhibit99.1.
31.1**
Certification pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Robert R. McEwen, principal executive officer.
31.2**
Certification pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Anna Ladd-Kruger, principal financial officer.
32**
Certification pursuant to Section906 of the Sarbanes-Oxley Act of 2002 for Robert R. McEwen and Anna Ladd-Kruger.
95*
Mine safety disclosure (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 95, File No. 001-33190).
99.1**
Audited Financial Statements of Minera Santa Cruz SA. for the years ended December 31, 2020, 2019 and 2018, with Report of Independent Auditor.
101*
The following materials from the Companys Annual Report on Form10-K for the year ended December31, 2020 are filed herewith, formatted in Inline XBRL (Extensible Business Reporting Language): (i)the Audited
Consolidated Statements of Operations and Other Comprehensive (Loss) for the years ended December31, 2020, 2019 and 2018, (ii)the Audited
Consolidated Balance Sheets as of December31, 2020 and 2019, (iii)the Audited
Consolidated Statement of Changes in Shareholders Equity for the years ended December31, 2020, 2019 and 2018, (iv)the Audited
Consolidated Statements of Cash Flows for the years ended December31, 2020, 2019 and 2018, and (v)the Notes to the Audited Consolidated Financial Statements (incorporated by reference from the Annual Report on Form 10-K filed with the SEC on March 10, 2021, Exhibit 101, File No. 001-33190).
104*
*Previously filed with or incorporated by reference in the original filing filed on March 10, 2021.
**Filed with this amendment.
+Indicates management compensatory plan, contract, or arrangement. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Ms. Kono, will expire at our first annual meeting of stockholders. The term of office of the Class II of directors, consisting of Messrs. Norris and Lehmann, will expire at the second annual meeting of stockholders. The term of office of the Class III directors, consisting of Mr. Kabot, will expire at the third annual meeting of stockholders.
### Director Independence
Lehmann and Hofmockel and Ms.
Commencing with our initial public offering in November 2019, we have agreed to pay an affiliate of our sponsor a total of $10,000 per month for office space, utilities and administrative support. Other than as set forth elsewhere in this report, no compensation of any kind, including any finders fee, reimbursement, consulting fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers, directors or advisors or any affiliate of our sponsor, officers, directors or advisors, prior to, or in connection with any services rendered in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is). Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers or directors, advisors or our or their affiliates. Any such payments prior to an initial business combination will be made using funds to be held outside the trust account.
Audit Committee
Messrs. Lehmann and Hofmockel and Ms. Kono serve as members of our audit committee, and Mr. Lehmann chairs the audit committee. Each of Messrs. Lehmann and Hofmockel and Ms. Kono meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Lehmann qualifies as an audit committee financial expert as defined in applicable SEC rules.
### Compensation Committee
Ms. Kono and Messrs. Lehmann and Hofmockel serve as members of our compensation committee. Ms. OKeefe and Messrs. Lehmann and Hofmockel are independent and Ms. Kono chairs the compensation committee.
Notwithstanding the foregoing, as indicated above, other than the payment to an affiliate of our sponsor of $10,000 per month, for up to 18 months, for office space, utilities and administrative support and reimbursement of expenses, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, officers, directors or any of their respective affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination.
### Director Nominations
Lehmann and Hofmockel and Ms. Kono.
Item 11. Executive Compensation.
### Executive
We pay an affiliate of our sponsor a total of$10,000 per month for office space, utilities and administrative support.
Item 12.
(1)
SRC-NI Holdings, LLC, our sponsor, is the record holder of the shares reported herein. The business address of our sponsor is 1345 Abbot Kinney Blvd., Venice, California 90291. Our sponsors board of managers is comprised of Edward K. Freedman, Brian Kabot and Juan Manuel Quiroga. Consequently, each of these individuals may be deemed the beneficial owner of the founder shares held by our sponsor and shares voting and dispositive control over such securities.
(2)
Interests shown consist solely of founder shares, classified as shares of Class B common stock, as well as placement shares.
(3)
Includes 176,471 founder shares held by SRAC PIPE Partners LLC (SRAC Partners). Stable Road Capital LLC is the managing member of SRAC Partners, and Edward Freedman is the sole member of Stable Road Capital LLC. As such, Mr. Freedman may be deemed to possess beneficial ownership of the securities held directly by SRAC Partners. Mr. Freedman disclaims any beneficial ownership of the securities held directly by SRAC Partners other than to the extent of any pecuniary interest he may have therein.
(4)
HGC Investment Management Inc. serves as the investment manager to HGC Arbitrage Fund LP, an Ontario limited partnership (the Fund), with respect to the Class A common stock held by HGC Investment Management Inc. on behalf of the Fund.
(5)
According to a Schedule 13G/A filed with the SEC on February 16, 2021 by 683 Capital Management, LLC, 683 Capital Partners, LP and Ari Zweiman. The business address of each of the foregoing is 3 Columbus Circle, Suite 2205, New York, NY 10019.
(6)
According to a Schedule 13G filed with the SEC on February 16, 2021 by Susquehanna Securities, LLC. The business address of the foregoing is 401 E. City Avenue Suite 220, Bala Cynwyd, PA 19004.
Item 13.
In June 2019, we issued an aggregate of 4,312,500 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately $0.006 per share. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of our initial public offering (excluding the placement units and underlying securities).
There will be no redemption rights or liquidating distributions from the trust account with respect to the founder shares, placement shares or placement warrants, which will expire worthless if we do not consummate a business combination within the allotted 18 month period.
We pay Stable Road Capital, LLC, an affiliate of our sponsor, a total of $10,000 per month for office space, utilities and administrative support.
In the event that the initial business combination does not close, we may use a portion of the working capital to be held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment.
The holders of the founder shares, placement units, and units that may be issued upon conversion of working capital loans (and in each case holders of their component securities, as applicable) will have registration rights to require us to register a sale of any of our securities held by them.
Agreements in Connection with Proposed Business Combination with Momentus
Concurrently with the execution of the Merger Agreement, our sponsor, SRAC Partners, Momentus and SRAC entered into a letter agreement (the Sponsor Agreement), pursuant to which, among other things, our sponsor agreed to (a) waive certain anti-dilution rights set forth in Section 4.3(b)(ii) of our amended and restated certificate of incorporation, (b) surrender to SRAC, immediately prior to the consummation of the Mergers and for no consideration, up to 1,437,500 shares of Class B common stock in the event that the amount in our trust account (for the avoidance of doubt, prior to giving effect to the any redemptions by our stockholders and the payment of any transaction costs by us), minus the aggregate amount of cash proceeds that will be required to satisfy any redemptions by our stockholders, is less than $100,000,000, (c) subject to potential forfeiture 1,437,000 shares of Class A common stock (the Sponsor Earnout Shares) in accordance with the terms of the Merger Agreement, such that one-third of such Sponsor Earnout Shares will be respectively forfeited in the event that the Class A common stock does not achieve trading prices of at least $12.50, $15.00 and $17.50 (as such trading prices may be adjusted for any dividend, subdivision, stock split or similar event, and as determined by reference to the volume-weighted average price achieved for at least 20 out of 30 consecutive trading days) prior to the fifth (5th) anniversary of the Closing (and provided that, in connection with any change of control of SRAC prior to such five-year anniversary, such Sponsor Earnout Shares shall become no longer subject to forfeiture based upon the value received by holders of Class A common stock being at least such trading prices in connection with such change of control), (d) support the transactions contemplated by the Merger Agreement, including agreeing to vote in favor of the adoption of the Merger Agreement at the special meeting of stockholders and (e) not to transfer any shares of Class A common stock for a period of six months following the Closing (or, if earlier, the date that the Class A common stock trades at or above $12.00 per share for any 20 trading days in a 30 trading day period after Closing).
In addition, at the consummation of the Mergers, SRAC, our sponsor, certain existing holder(s) of our common stock (including SRAC Partners) and certain stockholders of Momentus, in each case who will receive Class A common stock pursuant to the Merger Agreement and the transactions contemplated thereby will enter into an Amended and Restated Registration Rights Agreement (the Registration Rights Agreement) in respect of the shares of Class A common stock issued to our sponsor and such Momentus stockholders in connection with the Proposed Transaction. Pursuant to such agreement, such holders and their permitted transferees will be entitled to certain customary registration rights, including, among other things, demand, shelf and piggy-back rights, subject to cut-back provisions. Pursuant to the Registration Rights Agreement, our sponsor and SRAC Partners will agree not to sell, transfer, pledge or otherwise dispose of shares of Class A common stock or other securities exercisable therefor for certain time periods specified therein.
### Related Party Policy
### Director Independence
Lehmann and Hofmockel and Ms.
### Item 14
### Audit Fees
For the year ended December 31, 2020 and for the period from May 28, 2019 (inception) through December 31, 2019, fees for our independent registered public accounting firm were $71,530 and $43,775, respectively, for the services Withum performed in connection with our Initial Public Offering and the audits of our consolidated financial statements.
Audit-Related Fees.
For the year ended December 31, 2020 and for the period from May 28, 2019 (inception) through December 31, 2019, our independent registered public accounting firm did not render assurance and related services related to the performance of the audit or review of consolidated financial statements.
### Tax Fees
For the year ended December 31, 2020, fees for our independent registered public accounting firm were approximately $5,500 for services Withum performed relating to tax compliance, tax advice and tax planning. For the period from May 28, 2019 (inception) through December 31, 2019, our independent registered public accounting firm did not render services to us for tax compliance, tax advice and tax planning.
All Other Fees
For the year ended December 31, 2020 and for the period from May 28, 2019 (inception) through December 31, 2019, there were no fees billed for products and services provided by our independent registered public accounting firm other than those set forth above.
### Pre-Approval Policy
PART IV
Item 15.<|endoftext|>(OCGH and, together with EB Holdings, OCM, Holdings and OCG, the Oaktree Reporting Persons), solely as the duly elected manager of OCG. The members of OCGH are Howard S. Marks, Bruce A. Karsh, Jay S. Wintrob, John B. Frank and Sheldon M. Stone, who, by virtue of their membership interests in OCGH, may be deemed to share voting and dispositive power with respect to the shares of common stock held by EB Holdings. Each of the general partners, managing members, directors and managers described above disclaims beneficial ownership of any shares of common stock beneficially or of record owned by the Oaktree Reporting Persons, except to the extent of any pecuniary interest therein. The address of the beneficial owners is c/o Oaktree Capital Group Holdings GP, LLC, 333 South Grand Avenue, 28th Floor, Los Angeles, California 90071. Shares listed consist of (i) 4,047,975 shares of common stock, and (ii)
52 shares of common stock issuable upon exercise of the warrants issued and distributed by the Company to the Oaktree Reporting Persons in connection with the Companys restructuring in October 2014.
(8)
Based solely on information provided to us on March 17, 2021 on behalf of (i) GoldenTree Asset Management LP (the Advisor), (ii) GoldenTree Asset Management LLC (the General Partner) and (iii) Steven A. Tananbaum (collectively, the GoldenTree Reporting Persons), GoldenTree, GoldenTree Asset Management LLC and Mr. Tananbaum have beneficial ownership of the securities listed. The Advisor is the investment manager or advisor to GoldenTree Distressed Fund 2014 LP (GDF), GoldenTree Distressed Master Fund 2014 Ltd. (GDMF), GoldenTree Master Fund, Ltd. (GMF), GoldenTree 2004 Trust (GT), and GoldenTree NJ Distressed Fund 2015 LP (GNJ and together with GDF, GTNM, GDMF, GT and GNJ the Funds) and certain separate accounts managed by the Advisor (the Managed Accounts) and may be deemed to have a beneficial ownership of the Common Stock directly held by the Funds and held in the Managed Accounts. Includes 24 shares of Common Stock issuable upon exercise of warrants and excludes shares of Common Stock that may be issuable upon conversion of convertible notes. The General Partner is the general partner of the Advisor and may be deemed to have beneficial ownership of the Common Stock reported above. Steven A. Tananbaum is the managing member of the General Partner and may be deemed to have a beneficial ownership of the Common Stock reported above. Each Fund disclaims beneficial ownership of the shares held directly by each other Fund and the Managed Accounts. The address of the beneficial owners is 300 Park Avenue, 21st Floor, New York, New York 10022.
Item 13.
### Related Person Transaction Approval Policy
It is the Companys policy to enter into or ratify Related Person Transactions only when the Board of Directors, acting through the Audit Committee or another independent committee established by the Board of Directors, determines that the Related Person Transaction in question is in, or is not inconsistent with, the best interests of the Company and its shareholders. A Related Person Transaction is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which the Company is, was or will be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for fiscal years 2020 and 2019, and in which any Related Person (as defined in relevant SEC rules) had, has or will have a direct or indirect material interest. A Related Person Transaction includes, but is not limited to, situations where the Company may obtain products or services of a nature, quantity or quality, or on other terms, that are not readily available from alternative sources or when the Company provides products or services to Related Persons on an arms length basis on terms comparable to those provided to unrelated third parties or on terms comparable to those provided to employees generally. The transactions discussed below were entered into in accordance with the terms of the Companys Related Persons Transactions policy.
On May 13, 2016, the Company entered into an Amended and Restated Registration Rights Agreement (the A&R Registration Rights Agreement) with OCM and GoldenTree (and their respective affiliates), which the A&R Registration Rights Agreement provides them, among other things, demand and piggyback registration rights with respect to certain securities of the Company held by them, subject to the requirement that such securities qualify as Registrable Securities, as defined therein.
Equity Offering
On December 18, 2020, the Company entered into a subscription agreement with GoldenTree Asset Management LP, on behalf of certain funds and accounts for which it serves as investment manager (together with such funds and accounts, GoldenTree), pursuant to which the Company sold GoldenTree 1,091,160 shares of the Companys Common Stock in a registered direct offering at a purchase price of $18.10 per share, subject to an availability premium of $0.85 per share purchased by GoldenTree.
### Convertible Bonds
On July 29, 2019, the Company issued $114.12 million in aggregate principal amount of 5.00% Convertible Senior Notes due 2024 (the Convertible Bond Debt) in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to certain non-U.S. persons in offshore transactions outside of the United States in reliance on Regulation S under the Securities Act, of which $45.5 million was purchased by affiliates of Oaktree Capital Management, L.P. and $23.7 million was purchased by affiliates of Golden Tree Asset Management LP. After deducting debt discount of $1.6 million, the Company received net proceeds of approximately $112.5 million.
Nominating Agreement
The Company entered into a nominating agreement on March 30, 2016, as amended (the
### Nominating Agreement
), with GoldenTree, acting in its capacity as investment manager or advisor to certain private investment funds and managed accounts (the
GoldenTree Funds
) in connection with the GoldenTree Funds participation as a lender under the Second Lien Loan Agreement, pursuant to which the Company agreed that the GoldenTree Funds will have the right to designate one individual to serve as a member of the Board of Directors and on a committee of the Board of Directors selected by the GoldenTree Funds (subject to any independence requirement imposed by law or by the rules of any national securities exchange on which the Companys Common Stock may be listed or traded) so long as the GoldenTree Funds and its affiliates beneficially own a number of shares of Common Stock equal to or greater than 5% of the Companys Common Stock at any one time outstanding and 80% of the number of shares of Common Stock it owned as of the effective date of the Nominating Agreement, as adjusted to give effect to the issuance and delivery of the shares of Common Stock under the Second Lien Loan Agreement and equitable adjustment for certain transactions. While the GoldenTree Funds does not currently have a designee on the Board of Directors, the GoldenTree Fund have reserved their right under the Nominating Agreement with the Company to designate, in the future, one representative to serve as a member of the Companys Board and on a committee of the Board, subject to the terms and conditions of the Nominating Agreement. At this time, GoldenTree has not designated an individual to serve as a member of the Board.
### Item 14.
As outlined in the table below, we incurred the following fees for the fiscal years ended December 31, 2020, and 2019 for professional services rendered by Deloitte & Touche for the audit of the Companys annual financial statements and for audit-related services, tax services and all other services, as applicable.
(1) Audit fees represent fees for professional services provided by our principal accountant in connection with the audit of our consolidated financial statements, the quarterly reviews of financial statements included in our Form10-Q filings, the reviews of other statutory or regulatory filings and assistance with and review of documents filed with the SEC.
(2) Audit-related fees are fees for assurance and related services that are reasonably related to the performance by our principal accountant of the audit or review of our financial statements that are not audit fees.
(3) Tax fees include fees for professional services performed by our principal accountant for tax compliance, including the preparation of tax returns, and tax advice and tax planning.
(4) All other fees include the aggregate fees for products and services provided by our principal accountant that are not reported under Audit Fees, Audit-Related Fees or Tax Fees.
Pre-Approval Policy for Services Performed by Independent Auditor
The Audit Committee has responsibility for the appointment, compensation and oversight of the work of the Companys independent auditor. As part of this responsibility, the Audit Committee must pre-approve all permissible services to be performed by the independent auditor.
The Audit Committee has adopted an auditor pre-approval policy which sets forth the procedures and conditions pursuant to which pre-approval may be given for services performed by the independent auditor. Under the policy, the Audit Committee must give prior approval for any amount or type of service within four categories: audit, audit-related, tax services or, to the extent permitted by law, other services that the independent auditor provides. Prior to the annual engagement, the Audit Committee may grant general pre-approval for independent auditor services within these four categories at maximum pre-approved fee levels. During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services not contemplated in the original pre-approval and, in those instances, such service will require separate pre-approval by the Audit Committee if it is to be provided by the independent auditor. For any pre-approval, the Audit Committee will consider whether such services are consistent with the SECs rules on auditor independence, whether the auditor is best positioned to provide the most cost effective and efficient service and whether the service might enhance the Companys ability to manage or control risk or improve audit quality. The Audit Committee may delegate to one or more of its members authority to approve a request for pre-approval provided the member reports any approval so given to the Audit Committee at its next scheduled meeting. The Audit Committee pre-approved 100% of the services, if applicable, described above under the captions Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees for the years ended December 31, 2020 and 2019.
Item 15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Straight-line basis over the lease term. The accounting applied by a lessor is largely unchanged from that applied under previous GAAP. The Company adopted Topic 842 on January 1, 2019 and there was no material impact on theCompany s financial statements.
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
### Note 3
Common Stock
### Note 4
Related Party Transactions
As at December 31, 2020, the Company owed $20,225 (2019 - $5,865) to the Chief Executive Officer and Director of the Company. The amount owing is unsecured, non-interest bearing, and due on demand.
### LOVARRA
(Expressed in U.S. dollars)
### Note 5
Income Taxes
The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company s income tax expense as reported is as follows:
$
$
### Income tax recovery at statutory rate
Change in valuation allowance
(5,465)
(2,334)
### Income tax provision
$
$
### Net operating losses carried forward
Valuation allowance
(7,928)
(2,463)
### Net deferred income tax asset
The Company has net operating losses carried forward of $37,750 which may be carried forward to apply against future years taxable income, subject to the final determination by taxation authorities, and commence expiration in the year 2038.
Item 9.
### None
Item 9A(T) Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in the Company s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to the Company s management, as appropriate, to allow timely decisions regarding required disclosure.
The Company s management, with the participation of our principal executive and principal financial officer evaluated the effectiveness of the Company s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our principal executive and principal financial officer concluded that, as of the end of the period covered by this report, the Company s disclosure controls and procedures were not effective.
An evaluation was conducted under the supervision and with the participation of our management of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2020.
Management has determined that, as of December 31, 2020, there were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter then ended that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm is not required to, and has not, perform formal testing of our internal controls or policies and has not issued an independent opinion as to the quality of our internal controls.
Item 9B. Other Information.
None.
### PART III
Item 10.
Officers and Directors
At each annual meeting of stockholders, qualified directors will be elected to hold office until the next annual meeting of stockholders. Each director will hold office until the expiration of the term for which elected and until a qualified successor has been elected. The officers of our company are appointed by our board of directors and may hold office for such term as prescribed by our board of directors or until such person's death or removal from office.
The name, address, age, and position of our present officer(s) and director(s) is set forth below:
NAME AND ADDRESS
AGE
### POSITION(S)
Vadim Rata
Str. Petru Rares bl. V1 sc. D, et. 4, ap. 17, Tirgu Frumos, 705300 Romania
### President and Director
Nicolai Moldovanu
Str. Nicolae Iorga 61, Vaslui 730036 Romania
### Secretary, Treasurer and Director
On April 2, 2018, Vadim Rata was appointed as our Director, Secretary and Treasurer.On September 10, 2020, Vadim Rata resigned as a Secretary and Treasurer of the Company and appointed Nicolai Moldovanu as Secretary, Treasurer and Director of the Company.
Background of Officer(s) and Director(s)
Mr. Rata, aged 27, is a national and citizen of Romania. He graduated from Bucharest Academy of Economic Studies in June 2014.In August 2014, Mr. Rata started his employment at DiraIT, a Bucharest IT firm, where he held a position of junior IT manager. The processes Mr. Rata oversaw included communicating with clients of the company, drafting agreements of engagement and services provision. In May 2016, Mr. Vadim Rata terminated his employment with DiraIT. Later in June 2016, he was hired by Kwiftol and got a position of a business analyst. The responsibilities there included predicting the IT market tendencies for the next quarter and adjusting the company s business directions accordingly. Mr. Rata quit from Kwiftol in March 2018. Since April 20, 2018, Mr. Rata has served full-time as a President, Treasurer, Secretary and Director of Lovarra and has not been engaged in other kinds of business activities.
Nicolai Moldovanu has worked in the area of developing mobile applications for more than 10 years on a freelance basis. His experience includes overseeing projects of various complexity and engaging in the process of development on all the stages. Also, Nicolai Moldovanu has an economical degree which provides him with deep understanding on financial management. The Company is intending to use his proficiency on the matter for enhancing its product.
Neither Mr. Rata, our president and director, nor Mr. Moldovanu, our secretary, treasurer and director, has been involved in any of the following events during the past 5 years:
1.
Any bankruptcy petition filed by or against any business of which he was a general partner or executive officer either at the time of the bankruptcy or within 2 years prior to that time;
2.
3.
or,
4.
Being found by a (i) court of competent jurisdiction (in a civil action), (ii) the Securities and Exchange Commission, or (iii) the Commodity Futures Trading Commission, to have violated a federal or state securities or commodities law, where the judgment has not been reversed, suspended, or vacated.
### Item11. Executive Compensation
Summary of Compensation
Since the incorporation we have made no provisions for paying cash and/or non-cash compensation to our officers and directors.
The following table sets forth the compensation paid by us for the years ended December 31, 2020 and 2019. The compensation addresses all compensation awarded to, earned by, or paid to our named executive officer(s) up to the effective date of this prospectus.
SUMMARY COMPENSATION TABLE FOR THE FISCAL YEAR ENDING
Name and Principal Position
Salary
($)
Bonus
($)
Stock Awards
($)
Option Awards
($)
($)
Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
All Other Compensation
($)
Total
($)
### Vadim Rata
President,
Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
### Nicolai Moldovanu, Secretary, Treasurer, Director
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
We have not paid any other salaries. There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our officers and directors other than as described herein.
There are no long-term incentive plans that provide compensation intended to serve as an incentive for performance.
Employment Agreements
At this moment, we have no employees other than our president and director, Vadim Rata, and our secretary, treasurer and director, Nicolai Moldovanu. We do not have any formal employment agreements with them or with any other individual. If there is sufficient cash flow available from our future operations, we may in the future enter into a written employment agreement with our officers and directors or enter into employment agreements with future key staff members.
### Director Compensation
We do not compensate Mr. Rata or Mr. Moldovanu for their services.
Item12.
The following table sets forth, as of the date of this prospectus, the total number of shares owned beneficially by Vadim Rata, our president and director, and the present owners (if any) of 5% or more of our total outstanding shares.
(1)
The person named above may be deemed to be a "parent" and "promoter" of our company, within the meaning of such terms under the Securities Act of 1933, as amended, by virtue of his share ownership. Mr. Rata is the only "promoter" of our company.
### CHANGES IN CONTROL
We are unaware of any contract, or other arrangement or provision in our articles of incorporation or bylaws, which would result in a change of control of our company.
Item13.
Except as described below, none of the following parties have, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that have or will materially affect us, other than as noted in this section:
1.
2.
3.
Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
4.
Any of our promoters; and,
5.
Any member of the immediate family (including spouse, parents, children, step-parents, step-children, siblings and in-laws) of any of the foregoing persons.
On April 20, 2018, we issued a total of 4,500,000 shares of common stock to Vadim Rata, our officer and director, for total cash consideration of $4,500. This was accounted for as a purchase of common stock.
Mr. Rata made a formal additional financial commitment to loan up to $40,000, if required, for the further development of the business.
Our directors are not independent because they are executive officers of our company. The determination of the independence of a director has been made using the definition of "independent director" contained under NASDAQ Marketplace Rule 4200(a)(15).
### Item14.
During the year ended December 31, 2020, the total audit fees billed was $9,000, for audit-related services was $0, for tax services was $0 and for all other services was $0.
During the year ended December 31, 2019, the total audit fees billed was $8,500, for audit-related services was $0, for tax services was $0 and for all other services was $0.
Audit fees are charged by the auditor for providing its audit report. Fees for audit-related services might be charged by lawyers or valuers providing third party expertise or opinions required to prepare or provide the audit report
### PART IV
Item15.<|endoftext|>(i)the completion of our initial business combination and (ii)a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A)that would modify the substance or timing of our obligation to provide holders of our ClassA ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24months from the Initial Public Offering or (B)with respect to any other provision relating to the rights of holders of our ClassA ordinary shares or pre-initial business combination activity.
With certain limited exceptions, private placement warrants and the ClassA ordinary shares underlying such warrants, will not be transferable until 30days following the completion of our initial business combination.
Further, we also reimburse our sponsor for office space, secretarial and administrative services provided to us in the amount of $10,000 per month.
Item11.
### Executive Compensation
Commencing on the date that our securities are first listed on the NYSE through the earlier of consummation of our initial business combination and our liquidation, we will reimburse our sponsor for office space, secretarial and administrative services provided to us in the amount of $10,000 per month.
### Item12.
The following table
In the table below, percentage ownership is based on 32,408,414 ClassA ordinary shares (which includes ClassA ordinary shares that are underlying the units) and 8,102,103 ClassB ordinary shares outstanding as of the completion of our Initial Public Offering. The table below does not reflect the private placement warrants held by our sponsor as these warrants are not exercisable within 60days of the date of this Annual Report on Form
10-K.
*
Less than one percent.
(1)
The business address of each of the following entities and individuals is 123 E San Carlos Street, Suite 12, San Jose, California 95112.
(2)
(3)
Does not include 5,721,122 ClassA ordinary shares underlying the private placement warrants.
(4)
Our sponsor is governed by two managers, Michael Cordano and Mark Long. As such, Michael Cordano and Mark Long have voting and investment discretion with respect to the ClassB ordinary shares held of record by our sponsor and may be deemed to have shared beneficial ownership of the ClassB ordinary shares held directly by our sponsor.
(5)
Includes shares held as Magnetar Constellation Master Fund, Ltd (983,151), Magnetar Constellation Fund II, Ltd (280,899), Magnetar Xing He Master Fund Ltd (347,151), Magnetar SC Fund Ltd (262,350), Magnetar Capital Master Fund Ltd, (57,448), Magnetar Systematic Multi-Strategy Master Fund Ltd (231,000), Purpose Alternative Credit Fund Ltd (124,551), Magnetar Structured Credit Fund, LP, (386,899), Magnetar Lake Credit Fund LLC (201,399), and Purpose Alternative Credit Fund T LLC (63,600), collectively (the Magnetar Funds). Magnetar Financial serves as the investment adviser to the Magnetar Funds, and as such, Magnetar Financial exercises voting and investment power over the shares held for the Magnetar Funds accounts. Litowitz, a US citizen. Magnetar Financial, Magnetar Capital Partners, Supernova Management and Mr.Litowitz held 2,938,448 shares. The address of the principal business office of each of the reporting persons is 1603Orrington Avenue, 13 th
(6)
Includes ClassA ordinary shares owned by Integrated Core Strategies (US) LLC (730,500), Riverview Group LLC (750,000), ICS Opportunities, Ltd (1,050,000). Millennium Management LP is the investment manager to ICS Opportunities and may be deemed to have shared voting control over securities owned by ICS Opportunities. Millennium Management LLC is the general partner of the managing member of Integrated Core Strategies and Riverview Group and may deemed to have shared voting control over securities owned by Integrated Core Strategies and Riverview Group. Millennium Management is also the general partner of the 100% owner of ICS Opportunities and may also be deemed to have shared voting control over securities owned by ICS Opportunities. Millennium Group Management LLC, is the managing member of Millennium Management and may also be deemed to have shared voting control over securities owned by Integrated Core Strategies and Riverview Group. Millennium Group Management is also the general partner of Millennium International Management and may also be deemed to have shared voting control over securities owned by ICS Opportunities. Englander, a United States citizen, currently serves as the sole voting trustee. The address of the principal business office of each of the reporting persons is 666 Fifth Avenue, New York, NY 10103.
(7)
Includes shares held by Linden Capital L.P., Linden Advisors LP, Linden GP LLC, and Mr.Siu Min (Joe) Wong, a citizen of China (Hong Kong) and the US. Linden Advisors and Mr.Wong may be deemed the beneficial owner of 2,000,000 shares. This amount consists of 1,788,954 Shares held by Linden Capital and 211,046 shares held by separately managed accounts. Each of Linden GP and Linden Capital may be deemed the beneficial owner of the 1,788,954 Shares held by Linden Capital. The address of the principal business office of each of the reporting persons is Victoria Place, 31 Victoria Street, Hamilton HM10, Bermuda.
(8)
Includes shares held by Sculptor Capital LP, Sculptor Capital Holding Corporation and Sculptor Capital Management, Inc. with a principal business office of 9 West 57 th
Street, 39 Floor, New York, NY 10019; and Sculptor Master Fund, Ltd., Sculptor Special Funding, LP with a principal business office of State Street (Cayman) Trust, Limited, PO Box 896, Suites 3307, Gardenia Court, 45 Market Street, Caman Bay, Grand Cayman, Cayman Islands
KY1-1103.
(9)
Our sponsor and our founding team have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares purchased during or after the Initial Public Offering in connection with (i)the completion of our initial business combination and (ii)a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A)that would modify the substance or timing of our obligation to provide holders of our ClassA ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24months from the closing of the Initial Public Offering or (B)with respect to any other provision relating to the rights of holders of our ClassA ordinary shares or pre-initial business combination activity. Further, our sponsor and each member of our founding team have agreed to vote their founder shares and public shares purchased during or after the Initial Public Offering in favor of our initial business combination.
The founder shares, private placement warrants and any ClassA ordinary shares issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock- up provisions in the agreement entered into by our sponsor and our founding team. Our sponsor and our founding team have agreed not to transfer, assign or sell (i)any of their founder shares until the earliest of (A)one year after the completion of our initial business combination and (B)subsequent to our initial business combination, (x)if the closing price of our ClassA ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
, and (ii)any of their private placement warrants and ClassA ordinary shares issued upon conversion or exercise thereof until 30days after the completion of our initial business combination. (e)by private sales or transfers made in connection with the consummation of a business combination at prices no greater than the price at which the founder shares, private placement warrants or ClassA ordinary shares, as applicable, were originally purchased; provided, however, that in the case of clauses(a) through (f)these permitted transferees must enter into a written agreement agreeing to be bound by these transfer restrictions and the other restrictions contained in the letter agreement.
### Changes in Control
None.
Item13.
On July23, 2020, our sponsor paid $25,000, or approximately $0.003 per share, to cover for certain offering costs in consideration for 8,625,000 founder shares. On September3, 2020, our sponsor transferred 20,000 founder shares to each of Cathleen Benko. Roger Crockett, Dixon Doll, Keyur Patel and Joanna Strober. On October27, 2020, 522,897 founder shares held by our sponsor were forfeited by our sponsor due to the failure of the underwriters to fully execute their over-allotment option.
Our sponsor has purchased 5,400,000 private placement warrants for a purchase price of $8,100,000 in a private placement that occurred simultaneously with the closing of our Initial Public Offering. In addition, our sponsor purchased an additional 321,122 warrants on October6, 2020 simultaneously with the underwriters partial exercise of their over-allotment option for a total of 5,721,122 private placement warrants. As such, our sponsors interest in is valued at $8,581,683.
Our sponsor loaned us approximately $98,000 under a $300,000 promissory note for a portion of the expenses of the Initial Public Offering. These loans were non-interest bearing and unsecured. The loan was repaid on September16, 2020 out of the offering proceeds that has been allocated to the payment of offering expenses and not held in the trust account
Further, our sponsor, upon and following consummation of an initial business combination, will be entitled to nominate three individuals for appointment to our board of directors, as long as the sponsor holds any securities covered by the registration and shareholder rights agreement which is described under the section of this Annual Report on Form
10-K entitled Description of Securities-Registration and Shareholder Rights..
### Director Independence
### Item14
### Audit Fees
The aggregate fees billed by Withum for audit fees, inclusive of required filings with the SEC for the period from July21, 2020 (inception) through December31, 2020, and of services rendered in connection with our initial public offering, totaled $74,160.
### Audit-Related Fees
We did not pay Withum any audit-related fees during the period from July21, 2020 (inception) through December31, 2020.
### Tax Fees
We did not pay Withum any tax fees during the period from July21, 2020 (inception) through December31, 2020.
All Other Fees
We did not pay Withum any other fees during the period from July21, 2020 (inception) through December31, 2020.
### PART IV
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Or other stockholder of more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
### Loans by Related Persons
In January 2020, we entered into revolving line of credit agreement with Dr. Yutaka Niihara. Under the agreement, at our request from time to time, Dr. Niihara may, but is not obligated to, loan or re-loan to us up to $1,000,000, including $600,000 loaned to us in December 2019. Outstanding amounts under the agreement are due and payable upon demand and bear interest, payable monthly, at a variable annual rate equal to the Prime Rate in effect from time to time plus 3%. In addition to the payment of interest, we agreed to pay Dr. Niihara an amount, which we refer to as a tax gross-up, intended to make him whole for federal and state income taxes payable by him with respect to interest paid to him the previous year. As of December 31, 2020, the outstanding balance under the revolving line of credit agreement of $800,000 was reflected on our consolidated balance sheet. With the tax-gross up, the effective interest rate on the outstanding balance as of December 31, 2020 was 10.4%. The revolving line of credit agreement will expire on November 22, 2022.
The following table sets forth information relating to loans from related parties evidenced by promissory notes payable and convertible promissory notes payable to related persons outstanding at any time during the fiscal year ended December31, 2020 (amounts in thousands).
(1)
Dr.Niihara, our Chairman and Chief Executive Officer, is the Chief Executive Officer, and he and his wife, Soomi Niihara, are co-owners and directors, of Hope International Hospice, Inc.
(2)
Officer or former officer.
(3)
### Director
The proceeds of the above loans were used working capital purposes.
Prior to the reverse capitalization transaction completed in July 2019, there were outstanding approximately $34.5 million principal amount of promissory notes convertible into shares of common stock of EMI Holding at conversion prices ranging from $3.05 to $10.00 per share. None of the convertible promissory notes originally provided for their conversion into Emmaus common stock or assumption by Emmaus connection with the reverse capitalization transaction. In order to facilitate the transaction and to satisfy its covenants in the merger agreement, EMI entered into negotiations with the holders of the convertible promissory notes to amend the terms thereof to provide that they would be converted automatically into shares of EMI common stock at their respective conversion prices immediately prior to the effective time of the reverse capitalization transaction, which shares would be outstanding immediately prior to the reverse capitalization transaction and would be converted into shares of Emmaus common stock in the same manner as other outstanding shares of EMI common stock based the exchange ratio. In connection with such amendments, the conversion price of approximately $15.1 million principal amount of EMI convertible promissory notes, including $14.4 million principal amount of EMI convertible promissory notes held by Wei Peu Zen, an Emmaus director and a note holder affiliated with Mr. Zen, were reduced from $10 a share to $8.25 a share.Also, in conjunction with the reverse capitalization transaction, approximately $357,000 principal amount and accrued interest under a promissory note held by Dr. Niihara was converted into shares of Emmaus commons stock at a conversion price of $10 per share.
The Audit Committee of our Board of Directors is responsible for reviewing and approving all related party transactions.
Board Independence
Our board of directors has determined that each of Ian Zwicker, Masaharu Osato, M.D., Wei Peu Zen, Robert Dickey IV and Jane Pine Wood is an independent director as defined by The NASDAQ Marketplace Rules currently in effect and all applicable rules and regulations of the SEC.
ITEM 14.
The following table presents all fees, including reimbursements for expenses, billed for professional services rendered by Baker Tilly US, LLP (Baker Tilly), our independent registered public accounting firm for the years ended December31, 2020 and 2019 (in thousands):
The engagement of Baker Tilly was approved by the Audit Committee of our Board of Directors on September10, 2020.
The Audit Committee has adopted a formal policy on auditor independence requiring the advance approval by the Audit Committee of all audit and non-audit services provided by our independent registered public accounting firm. In determining whether to approve any services by our independent registered public accounting firm, the Audit Committee reviews the scope of and estimated fees for the services and considers whether the proposed services may adversely affect the firms independence. On an annual basis, our management reports to the Audit Committee all audit services performed during the previous 12 months and all fees billed by our independent registered public accounting firm for such services.
In fiscal 2020 and 2019, all audit services and the corresponding fees were approved by the Audit Committee.
PART IV
ITEM 15.
1.
Financial Statements: See Index to Consolidated Financial Statements on pageF1 of this Annual Report.
2.
Financial Statement Schedule: See Notes to Consolidated Financial Statements starting on pageF8 of this Annual Report.
3.
Exhibits: The exhibits listed in the following Exhibit Index are filed or incorporated by reference as part of this Annual Report.
### Exhibit Index
Incorporated by Reference
Exhibit
### Number
Exhibit Description
Form
File No.
### Exhibit
Filing Date
Filed/
### Furnished
Second Amendment to Securities Purchase Agreement entered into October 1, 2018 among EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.) and the Purchasers thereunder.
8-K/A
000-142031
10.6
October 5, 2018
10.15
Form of Security Agreement among EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.), Emmaus Medical, Inc., Newfield Nutrition Corporation and the holders of 10% Senior Secured Debentures
8-K
000-142031
10.2
September 17, 2018
10.16
Form of Subsidiary Guarantee among Emmaus Medical, Inc., Newfield Nutrition Corporation and the holders of 10% Senior Secured Debentures.
8-K
000-142031
10.3
September 17, 2018
10.17
Security Amendment Agreement dated as of March 5, 2019 among EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.) and the Holders thereunder.
8-K
000-142031
10.1
March 11, 2019
10.18
Securities Amendment Agreement dated as of February 21, 2020 among EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.) and the Holders thereunder, including Exhibits.
8-K
000-142031
10.1
February 27, 2020
10.19
Securities Amendment Agreement dated as of September 22, 2020 among EMI Holding, Inc.
8-K
001-35527
10.1
September 24, 2020
10.20
Office Lease dated October 20, 2014 by and between EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.) and Bixby Torrance LLC.
10-K
001-35527
10.23(F)
March 31, 2015
10.21
First Amendment to Office Lease Agreement dated February1, 2018 between EMI Holding, Inc.
10-K
000-142031
10.24a
March 21. 2019
10.22
Second Amendment to Office Lease Agreement dated December, 2018 between EMI Holding, Inc.
10-K
000-142031
10.24b
March 21. 2019
10.23
Third Amendment to Office Lease Agreement dated September 10, 2019 between EMI Holding, Inc.
10-K
001-35527
10.23
### January 25, 2021
Incorporated by Reference
Exhibit
### Number
Exhibit Description
Form
File No.
### Exhibit
Filing Date
Filed/
### Furnished
Revised Management Control Acquisition Agreement dated September29, 2017 by and among the registrant, Telcon Holdings,Inc. and Telcon,Inc. (now known as Telcon RF Pharmaceutical Inc.)
10-Q
000-142031
10.3
November 14, 2017
10.25
Distributor agreement entered into as of June 15, 2017 between Telcon Inc. ( now known as Telcon RF Pharmaceutical Inc.) and Emmaus Life Sciences, Inc.
10-K
001-35527
10.25
January 25, 2021
10.26
Amendment for Distributor Agreement entered into as of January 11, 2018 between Telcon Inc.
10-K
001-35527
10.26
January 25, 2021
10.27
Raw Material Supply Agreement dated July 12, 2017 between Telcon Inc.
10-K
001-35527
10.27
January 25, 2021
10.28
API Supply Agreement made as of June 16, 2017 between Telcon Inc.
10-K
001-35527
10.28
January 25, 2021
10.29
Additional Agreement made as of July 2, 2018 between Telcon Inc. and add asterixis in Filed/Furnished column.
10-K
001-35527
10.29
January 25, 2021
10.30
Agreement dated December 23, 2019 between Telcon RF Pharmaceutical Inc. and Emmaus Life Sciences, Inc.
10-K
001-35527
10.30
January 25, 2021
10.31
Registration Rights Agreement dated as of February 28, 2020 between Emmaus Life Sciences, Inc. and Lincoln Park Capital Fund, LLC
8-K
001-35527
10.1
March 3, 2020
10.32
Letter of Commitment dated December 23, 2019 between EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc)
10-K
001-35527
10.33
January 25, 2021
10.33
Convertible Bond Purchase Agreement between Emmaus Life Sciences, Inc.
10-K
001-35527
10.34
January 25, 2021
10.34
Right to Sell (Call Option) Agreement between Emmaus Life Sciences, Inc.
10-K
001-35527
10.35
### January 25, 2021
Incorporated by Reference
Exhibit
### Number
Exhibit Description
Form
File No.
### Exhibit
Filing Date
Filed/
Furnished
10.35
Loan Agreement Dated October 28, 2020 Between Emmaus Life Sciences, Inc. and EJ Holdings, Inc
8-K
001-35527
10.1
November 13, 2020
10.36+
Credit Access and Loan Agreement dated as of January 10, 2020 by and between Emmaus Life Sciences, Inc. and Yutaka Niihara, M.D., M.P.H.
10-K
001-35527
10.37
January 25, 2021
10.37
Amendment No. 2 to Convertible Promissory Note of EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.) dated as of January 15, 2020
10-K
001-35527
10.37
May 4, 2021
10.38
Amendment No. 3 to Convertible Promissory Note as of June 15, 2020 of EMI Holding, Inc. (formerly, Emmaus Life Sciences, Inc.)
10-K
001-35527
10.38
May 4, 2021
21.1
List of Subsidiaries.
10-K
001-35527
21.1
January 25, 2021
23.1
Consent of Independent Registered Public Accounting Firm Baker Tilly US, LLP
*
31.1
Certification of Chief Executive Officer pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*
31.2
Certification of Chief Financial Officer pursuant of Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*
32.1
Certification of Chief Executive Office and Chief Financial Officer Pursuant to 18 U.S.C.
*
101.INS
Inline XBRL Instance Document the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
__________________________________
* Filed herewith.<|endoftext|>(SEC File No. 1-8399)
10.63
Amendment No.6, dated as of January 19, 2012, to Purchase and Sale Agreement, dated as of November30, 2000, among the various originators listed therein
### NOTE
Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2012 (SEC File No. 1-8399)
### Exhibit
Description of Exhibit
Location
10.64
Amendment No.7, dated as of January 16, 2015, to Purchase and Sale Agreement, dated as of November30, 2000, among the various originators listed therein, Advanced Component Technologies, Inc., Worthington Cylinders Mississippi, LLC, The Worthington Steel Company (North Carolina), Worthington Steel of Kentucky, L.L.C.
### NOTE
Incorporated herein by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015 (SEC File No. 1-8399)
10.65
Amendment No.8, dated as of February 18, 2015, to Purchase and Sale Agreement, dated as of November30, 2000, among the various originators listed therein
### NOTE
Incorporated herein by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2015 (SEC File No. 1-8399)
10.66
Amendment No. 9, dated as of November 30, 2018, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various originators listed therein, Worthington Torch, LLC
### NOTE
Incorporated herein by reference to Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)
10.67
Amendment No. 10, dated as of January 14, 2019, to Purchase and Sale Agreement, dated as of November 30, 2000, among the various Remaining Originators listed therein, Worthington Industries Engineered Cabs, Inc., Worthington Industries Engineered Cabs, LLC, AMTROL Inc., Westerman, Inc.
### NOTE
Incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2019 (SEC File No. 1-8399)
10.68
Amendment No. 11, dated as of January 13, 2020, to Purchase and Sale Agreement, dates as of November 30, 2000, among the various Remaining Originators listed therein, Structural Composites Industries LLC and Worthington Receivables Corporation [NOTE:The Purchase and Sale Agreement was terminated by the parties thereto on July 22, 2020.]
I ncorporated herein by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended February 29, 2020 (SEC File No. 1-8399)
10.69
Summary of Annual Base Salaries Approved for Named Executive Officers of Worthington Industries, Inc.*
Previously filed as Exhibit 10.69 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
10.70
Summary of Annual Cash Performance Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Shares granted in Fiscal 2012 for then Named Executive Officers*
Incorporated herein by reference to Exhibit10.47 to the Registrants Annual Report on Form 10-K for the fiscal year ended May31, 2011 (SEC File No. 1-8399)
10.71
Summary of Annual Cash Performance Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Shares granted in Fiscal 2013 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.56 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2012 (SEC File No. 1-8399)
### Exhibit
Description of Exhibit
Location
10.72
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2014 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.62 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2013 (SEC File No. 1-8399)
10.73
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2015 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.71 to the Registrants Annual Report on Form 10-K for the fiscal year ended May31, 2014 (SEC File No. 1-8399)
10.74
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2016 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.74 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2015 (SEC File No. 1-8399)
10.75
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2017 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.71 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2016 (SEC File No. 1-8399)
10.76
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2018 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.74 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2017 (SEC File No. 1-8399)
10.77
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2019 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.74 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2018 (SEC File No. 1-8399)
10.78
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2020 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.80 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2019 (SEC File No. 1-8399)
10.79
Summary of Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2021 for then Named Executive Officers*
Incorporated herein by reference to Exhibit 10.77 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2020 (SEC File No. 1-8399)
10.80
### Summary of
Annual Cash Incentive Bonus Awards, Long-Term Performance Awards, Stock Options and Restricted Common Shares granted in Fiscal 2022 for Named Executive Officers *
Previously filed as Exhibit 10.80 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
10.81
Retirement and Non-Competition Agreement Mark A. Russell, made and entered between Mark A. Russell and Worthington Industries, Inc. (executed on August 27, 2018)*
Incorporated herein by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2018 (SEC File No. 1-8399)
10.82
with B. Andrew Rose in order to evidence the grant, effective as of September 26, 2018, of 175,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc.
Incorporated herein by reference to Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)
### Exhibit
Description of Exhibit
Location
10.83
with Geoffrey G. Gilmore in order to evidence the grant, effective as of September 26, 2018, of 50,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc.
Incorporated herein by reference to Exhibit 10.2 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended November 30, 2018 (SEC File No. 1-8399)
10.84
and each executive officer of Worthington Industries, Inc. *
Incorporated herein by reference to Exhibit 10.33 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (SEC File No. 1-8399)
10.85
and each non-employee director of Worthington Industries, Inc. *
Incorporated herein by reference to Exhibit 10.32 to the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2008 (SEC File No. 1-8399)
10.86
and Geoffrey G. Gilmore in order to evidence the grant, effective as of June 25, 2020, of 25,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc.
Incorporated herein by reference to Exhibit 10.3 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)
10.87
and Jeff Klingler in order to evidence the grant, effective as of June 25, 2020, of 10,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc.
Incorporated herein by reference to Exhibit 10.4 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)
10.88
and Eric M. Smolenski in order to evidence the grant, effective as of June 25, 2020, of 10,000 performance-based restricted common shares pursuant to the Worthington Industries, Inc.
Incorporated herein by reference to Exhibit 10.5 to the Registrants Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2020 (SEC File No. 1-8399)
### Subsidiaries of Worthington Industries, Inc.
Previously filed as Exhibit 21 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
23.1
Consent of Independent Registered Public Accounting Firm (KPMG LLP)
Filed herewith
23.2
Consent of Independent Auditors (KPMG LLP) with respect to consolidated financial statements ofWorthington Armstrong Venture
### Filed herewith
Powers of Attorney of Directors and Certain Executive Officers of Worthington Industries, Inc.
Previously filed as Exhibit 24 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
31.1
Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Executive Officer)
Filed herewith
31.2
Rule 13a - 14(a) / 15d - 14(a) Certifications (Principal Financial Officer)
Filed herewith
32.1
Certifications of Principal Executive Officer Pursuant to 18 U.S.C.
Previously filed as Exhibit 32.1 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
32.2
Certifications of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes
-Oxley Act of 2002
Previously filed as Exhibit 32.2 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
99.1
Worthington Armstrong Venture Consolidated Financial
Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 201
Previously filed as Exhibit 99.1 with the Registrants Annual Report on Form 10-K for the fiscal year ended May 31, 2021 (SEC File No. 1-8399)
### Cover Page Interactive Date File
Embedded within the Inline XBRL document
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Trading day of that fiscal year.
### Employment Agreements
We have not entered into employment agreements with any of our Named Executive Officers.
Annual Base Salary
Base salaries for our Named Executive Officers have generally been set at levels deemed necessary to attract and retain individuals with superior talent. The following table presents the annual base salaries for each of our Named Executive Officers for 2020, as determined by the Board and the Compensation Committee.
### Annual Bonus
Our discretionary bonus plan motivates and rewards our Named Executive Officers for achievements relative to our goals and expectations for each fiscal year. Our Named Executive Officers are eligible to receive discretionary annual bonuses based on our Compensation Committee and Boards assessment of their individual performance and our Companys results of operations and financial condition.
In 2020, as recommended by the Compensation Committee and approved by the Board, our Named Executive Officers employed with the Company at end of the fiscal year ended December31, 2020 earned a bonus relative to achievement of goals for fiscal year 2020.
### Equity-Based Awards
Our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our Named Executive Officers. Our Compensation Committee is generally responsible for approving equity grants. Vesting of equity awards is generally tied to continuous service with us and serves as an additional retention measure. Our executives generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize executives.
Our Board adopted, and our stockholders approved, our 2019 Omnibus Stock Incentive Plan (the "2019 Plan"), which replaced our 2017 Stock Plan. The 2017 Plan became effective on May11, 2017. The 2019 Plan became effective on August9, 2019.
The purpose of our 2019 Plan is to attract and retain employees, non-employee directors and consultants and advisors. Our 2019 Plan authorizes us to make grants to eligible recipients of non-qualified stock options, incentive stock options, restricted stock awards, restricted stock units and stock-based awards.
### Other Compensation
Our Named Executive Officers did not participate in, or otherwise receive any benefits under, any pension or deferred compensation plan sponsored by us during 2020 or 2019.
Item 12.
### EQUITY INCENTIVE PLANS
The following table sets forth the indicated information as of December31, 2020 with respect to our equity compensation plans:
Our equity compensation plans consist of the Fathom Holdings Inc. 2017 Stock Plan and the 2019 Omnibus Stock Incentive Plan, which were each approved by our shareholders. We do not have any equity compensation plans or arrangements that have not been approved by our shareholders.
We no longer plan to grant awards under the 2017 Stock Plan.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March31, 2021 unless otherwise noted below for the following: each person or entity known to own beneficially more than 5% of our outstanding common stock as of the date indicated in the corresponding footnote; each director; and all current directors and executive officers as a group.
Applicable percentage ownership is based on 13,979,556 shares of our common stock outstanding as of March31, 2021, unless otherwise noted below, together with applicable options for each shareholder. Beneficial ownership is determined in accordance with the rulesof the SEC, based on factors including voting and investment power with respect to shares. Common stock subject to options currently exercisable or exercisable within 60 days after March31, 2021 are deemed outstanding for the purpose of computing the percentage ownership of the person holding those securities, but are not deemed outstanding for computing the percentage ownership of any other person. Unless otherwise indicated, the address for each listed shareholder is c/o Fathom Holdings Inc., 2000 Regency Parkway Drive, Suite300, Cary, North Carolina 27518.
*Represent beneficial ownership of less than 1% of the shares of common stock outstanding.
(1)
Based on a Schedule 13G filed with the SEC on March29, 2021. Patrick Lees address reported in his Schedule 13G is PO Box 274, Brea, CA 92822.
(2)
Includes an aggregate of 1,700,000 shares held by three trusts for which Mr.Harley serves as a trustee and one of which he is a beneficiary. Also includes 9,558 shares under a restricted stock award that will vest on March4, 2024.
(3)
Includes 8,359 shares under a restricted stock award that will vest on March4, 2024. Does not include 150,000 shares held by a trust for the benefit of the reporting persons children. The reporting persons spouse is trustee of the trust. Also, does not include 329 shares of restricted stock held by the reporting persons spouse, which will vest on March4, 2024. The reporting person disclaims beneficial ownership of these securities.
(4)
Includes 4,837 shares owned by Ms.Giuggios husband. Also includes 3,043 shares under a restricted stock award that will vest on March4, 2024.
(5)
Consists of options to purchase 5,304 shares of common stock that have vested in full.
(6)
Consists of options to purchase 8,487 shares of common stock that have vested in full.
Item 13.
Set forth below is a description of certain relationships and related person transactions since January1, 2019 between us or our subsidiaries, and our directors, executive officers and holders of more than 5% of our voting securities that involve the lower of $120,000 or 1% of the average of total assets in the last two fiscal years. We believe that all of the following transactions were entered into with terms as favorable as could have been obtained from unaffiliated third parties.
### Hometown Heroes Holdings, LLC
Hometown Heroes Holdings, LLC (HTH) is a real estate portal that generates real estate leads. HTH is fully-owned by Joshua Harley, Marco Fregenal, and Glenn Sampson. Messrs.Harley and Fregenal currently serve as our officers and all three individuals are directors and shareholders of our company.
During the period between September2013 through March2019, we loaned a total of$609,408 to HTH.
HTH paid the full balance of its loan in Julyof 2019.
We also contract with HTH for generated real estate leads. For each of the years ended December31, 2019 and 2020, HTH paid us a total of $467,000 and $287,000, respectively, for these leads.
### Real Deal Branding LLC
In the year ended December31, 2020, the Company paid Real Deal Branding LLC approximately $175,000 for agent marketing materials. Real Deal Branding LLC is a marketing firm which is co-owned by Jennifer Stertz and Geoffrey Stertz, Mr.Harleys sister and brother-in-law. Mr.Stertz is also the Companys current Director of Marketing. Previously, the disinterested members of the Board, after discussion and review of the material facts, approved entering into a contract with Real Deal Branding LLC, and believed it to be in the best interests of the Company.
Director Independence
The Board has established an audit committee, compensation committee, and nominating and governance committee. Our audit committee consists of independent directors Messrs.Hood (Chair), Coats and Ms.Venable. Our compensation committee consists of independent directors Messrs.Coats (Chair), Bennett, and Hood. Our nominating and governance committee consists of independent directors Ms.Venable (Chair) and Messrs.Bennett and Coats. The audit committee, compensation committee, and nominating and governance committee were established in February2019 in anticipation of our initial public offering.
The Board has undertaken a review of the independence of our directors and has determined that Messrs.Bennett, Coats, Hood, Ms.Gupta and Ms.Venable are independent within the meaning of the NASDAQ Stock Market listing rules. In addition, the board has determined that Mr.Hood meets the additional test for independence for audit committee members and Messrs.Bennett, Coats and Hood meet the additional test for independence for compensation committee members imposed by SEC regulation and the NASDAQ Stock Market listing rules.
### Family Relationships
There is no family relationship between any director, executive officer or person nominated to become a director or executive officer of our Company other than Mr.Sampson who is Mr.Harleys father-in-law.
Item 14.
BDO USA, LLP (BDO) has served as our independent registered public accounting firm since 2018 and audited our consolidated financial statements for the years ended December31, 2018 through December31, 2020.
### Summary of Fees
The following table summarizes the aggregate fees billed for professional services rendered to us by BDO in 2020 and 2019. A description of these various fees and services follows the table.
### Audit Fees
The aggregate fees billed to us by BDO in connection with the annual audit of our financial statements, for the review of our financial statements included in our Quarterly Report on Form10-Q and Annual Report on Form10-K and for other services normally provided in connection with statutory and regulatory filings, were $410,638 and $327,138 for the years ended December31, 2020 and 2019, respectively. The increase in audit fees in 2020 relates primarily to additional Audit Fees incurred for the review of our financial statements and the related notes thereto included in our FormS-1 for our initial public offering and increased fees related to being a public company.
Audit-Related Fees
No aggregate audit-related fees were billed to us by BDO for the years ended December31, 2020 or 2019.
### Tax Fees
Tax fees billed to us by BDO for professional services for taxcompliance, tax advice, and tax planning were $27,850 and $24,000 for the years ended December31, 2020 and 2019, respectively.
All Other Fees
There were no other fees billed to us by BDO for the year ended December31, 2020 and 2019.
### PRE-APPROVAL POLICIES AND PROCEDURES\
The Audit Committee has determined that the rendering of services other than audit services by BDO is compatible with maintaining the principal accountants independence.
### PARTIV
Item 15.
(1)Financial Statements
The financial statements and report of the independent registered public accounting firm are filed as part of this Report (see Index to Consolidated Financial Statements at Item 8).
The financial statements schedules are omitted because they are not applicable, or the required information is shown in the consolidated financial statements or notes thereto.
(b)Exhibits.
(1)
### Previously filed with our Original 10-K.
* The schedules to the Purchase Agreement have been omitted pursuant to Item 601(b)(2)of Regulation S-K. The Company agrees to furnish a copy of any schedule omitted from the Purchase Agreement to the SEC upon request.
# Management contract or compensatory plan.<|endoftext|>Share weighted-average exercise price of $16.02. Also includes 21,057 restricted stock units and 12,229 performance-based restricted stock units with no exercise price.
(3)
Includes 59,435 shares of common stock available for purchase under the ESPP as of March 31, 2021.
(4)
Includes the Inducement Award Agreements and the Inducement Plan
(5)
Includes 104,410 stock options with a per share exercise price of $54.60 pursuant to the Inducement Award Agreements granted to our former Chief Executive Officer upon commencement of his employment. While outside the 2012 Plan, the terms and conditions of the award pursuant to the Inducement Award Agreements is consistent with awards granted to the Companys executive officers pursuant to the 2012 Plan.
(6)
Includes 750,000 shares of common stock reserved for issuance pursuant to the Inducement Plan.
Item13.
### Director Independence
Our shares of common stock are listed for trading on the Nasdaq Capital Market. As a result, our Board utilizes the definition of independence as that term is defined by the listing standards of the Nasdaq Stock Market and the rules and regulations of the SEC, including the additional independence requirements for members of our Audit Committee and the Compensation Committee. Our Board considers a director independent when the director is not an officer or employee of the Company or its subsidiaries, does not have any relationship which would, or could reasonably appear to, materially interfere with the independent judgment of such director, and the director otherwise meets the independence requirements under the listing standards of the Nasdaq Capital Market and the rules and regulations of the SEC. Our Board has reviewed the materiality of any relationship that each of our directors has with the Company, either directly or indirectly. Based on this review, our Board has affirmatively determined that the following four of our five current directors qualify as independent directors: Douglas Jay Cohen, David Gobel, Alison Tjosvold Milhous and Adam Stern. Keith Murphy does not qualify as an independent director due to his current service as our Executive Chairman and his service as Chief Executive Officer of Viscient, which has made payments to the Company in sufficient amounts to qualify as related party transactions leading to director non-independence.
Since April 1, 2020, there have not been any transactions or series of similar transactions to which we were or are a party in which the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at fiscal year-end for the last two completed fiscal years, and in which any of our directors or executive officers, any holder of more than 5% of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than (i) the transactions described below and (ii) the compensation arrangements with our executive officers and non-employee directors described in Executive Compensation and Director Compensation, respectively.
### Collaboration Agreement with Viscient
In November 2019, the Company entered into an agreement with Viscient. Mr. Murphy, our Executive Chairman and member of our Board, is the Chief Executive Officer, Chairman and principal stockholder of Viscient, and Dr.
Mr. Murphy is also a 10% or greater stockholder of Viscient. Under this agreement, the Company agreed to sell certain bioprinting equipment and a non-exclusive license to certain intellectual property for approximately $171,000, of which $101,000 was recognized as other income and $70,000 was recognized as revenue in the year ended March 31, 2020. In addition to the services provided by Organovo, Viscient purchased primary human cell-based products from our former subsidiary, Samsara. Pursuant to the terms of multiple Quotes, $128,000 and $96,000 was recognized as revenue in the year ended March 31, 2020 and 2019, respectively. The Company had no revenue activity with Viscient for the year ended March 31, 2021. There was $0 of accounts receivable outstanding as of March 31, 2021, and approximately $111,000 of accounts receivable outstanding as of March 31, 2020. The balance owing at March 31, 2020 was several months past due (as of that date). The Company and Viscient entered into a Settlement Agreement on June 15, 2020, under which Viscient agreed to pay the full amount due on the invoices in a series of payments to be made by or before October 22, 2020, of which Viscient has paid in full. The agreements and quotes with Viscient do not require the Company to make any payments to Viscient or Mr. Murphy.
### Messrs.
The Company entered into the agreement with Viscient in the ordinary course of business and on terms and conditions it believes are as fair as those it offers and receives from non-related third parties. In addition, the Audit Committee approved the Companys transactions with Viscient in accordance with the Related Party Transaction Policy and Procedures described below.
### Cooperation Agreement with Keith Murphy
On July 14, 2020, we entered into the Cooperation Agreement with Mr. Murphy.Pursuant to the Cooperation Agreement, the Board appointed Mr. Murphy and Adam Stern as directors on the Board, with terms expiring at our 2020 Annual Meeting of Stockholders, which was held on September 15, 2020.The Board also agreed, in connection with the 2020 Annual Meeting of Stockholders, to recommend, support and solicit proxies for (i) the re-election of Messrs. Murphy and Stern and (ii) an advisory stockholder vote to appoint three individuals, Douglas Jay Cohen, David Gobel and Alison Tjosvold Milhous (collectively, the Advisory Nominees), to the Board. Mr. Murphy identified each of the Advisory Nominees.
In accordance with the Cooperation Agreement, we filed a definitive proxy statement for the 2020 Annual Meeting of Stockholders with the SEC on August 6, 2020, in which the Board recommended, supported and solicited proxies for the re-election of Messrs. Murphy and Stern and in favor of the Advisory Nominee Proposal.
### Intercompany Agreement with Viscient
On December 28, 2020, we entered into an intercompany agreement (the Intercompany Agreement) with Viscient and Organovo, Inc., our wholly-owned subsidiary, which included an asset purchase agreement for certain lab equipment. Pursuant to the Intercompany Agreement, we agreed to provide Viscient certain services related to 3D bioprinting technology which includes, but is not limited to, histology services, cell isolation, and proliferation of cells and Viscient agreed to provide us certain services related to 3D bioprinting technology, including bioprinter training, bioprinting services, and qPCR assays, in each case on payment terms specified in the Intercompany Agreement and as may be further determined by the parties. In addition, we and Viscient each agreed to share certain facilities and equipment and, subject to further agreement, to each make certain employees available for specified projects for the other party at prices to be determined in good faith by the parties.
As noted above, Mr. Murphy, our Executive Chairman and member of the Board, is the Chief Executive Officer, Chairman and principal stockholder of Viscient, and Dr. In addition, Messrs.
### Related Party Transaction Policy and Procedures
Pursuant to our written Related Party Transaction Policy and Procedures, our executive officers, directors, and principal stockholders, including their immediate family members and affiliates, are prohibited from entering into a related party transaction with us without the prior consent of our Audit Committee or a committee of our independent directors. Any request for us to enter into a transaction with an executive officer, director, principal stockholder, or any of such persons immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented to our Audit Committee for review, consideration and approval. In approving or rejecting the proposed agreement, our Audit Committee will consider the relevant facts and circumstances available and deemed relevant, including, but not limited, to the risks, costs and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products, and, if applicable, the impact on a directors independence. Our Audit Committee shall approve only those agreements that, in light of known circumstances, are in, or are not inconsistent with, our best interests, as our Audit Committee determines in the good faith exercise of its discretion.
Item14.
### Audit and Non-Audit Fees
Our Audit Committee is responsible for, and has approved, the engagement of Mayer Hoffman McCann P.C. (MHM) as our independent registered public accounting firm for the fiscal year ending March31, 2022. Substantially all of MHMs personnel, who work under the control of MHMs shareholders, are employees of wholly-owned subsidiaries of CBIZ, Inc., which provides personnel and various services to MHM in an alternative practice structure.
The Audit Committee has and intends to continue to meet with MHM on a quarterly or more frequent basis. At such times, the Audit Committee has and will continue to review the services performed by MHM, as well as the fees charged for such services.
The following table sets forth the fees for services provided and billed by MHM and its associated entity CBIZ MHM, LLC, relating to Fiscal 2021 and Fiscal 2020.
### Audit Fees
: For the fiscal years ended March31, 2021 and 2020, the aggregate audit fees billed by our independent auditors were for professional services rendered for audits and quarterly reviews of our consolidated financial statements, and assistance with reviews of registration statements and documents filed with the SEC.
Audit-Related Fees
: For the fiscal years ended March31, 2021 and 2020, there were no audit-related fees billed by our independent auditors, other than the fees described above.
### Tax Fees
: For the fiscal years ended March31, 2021 and 2020, the tax-related fees billed by an associated entity of our independent auditors pertained to services related to tax return preparation and tax planning services.
All Other Fees
: For the fiscal years ended March31, 2021 and 2020, there were no fees billed by our independent auditors for other services, other than the fees described above.
Policy on Audit Committee Pre-Approval of Audit and Permitted Non-Audit Services of Independent Auditors
The Audit Committee has determined that all services provided by MHM to date are compatible with maintaining the independence of such audit firm. The charter of the Audit Committee requires advance approval of all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by our independent registered public accounting firm, subject to any exception permitted by law or regulation.
P
### ART IV
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
50% of the lowest Trading Price during the 15 Trading Day period prior to the Conversion Date. The maturity date for each tranche funded is twelve months from the effective date of each payment.
(CC) On December 1, 2017, the Company issued a $50,000 Convertible Promissory Note to a vendor in settlement of certain accrued consulting fees of $50,000. The note bears interest at a rate of 10% per annum, is due on demand, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 60% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(DD) On March 5, 2018, the Company issued a $35,000 Convertible Promissory Note to a lender for net loan proceeds of $33,000. The note bears interest at a rate of 10% per annum, was due on March 5, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(EE) On April 4, 2018, the Company issued a $37,500 Convertible Promissory Note (Tranche 2 of (AA) above) to a lender for net loan proceeds of $35,500. The note bears interest at a rate of 10% per annum, was due on April 4, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
THE MARQUIE GROUP, INC.
May 31, 2021
(FF) On September 18, 2018, the Company issued a $22,500 Convertible Promissory Note (Tranche 3 of (AA) above) to a lender for net loan proceeds of $17,500.
(GG) On September 18, 2018, the Company issued a $18,000 Convertible Promissory Note to a lender for net loan proceeds of $14,000.
(HH) On December 19, 2018, the Company issued a $200,000 Convertible Promissory Note to a lender for net loan proceeds of $169,000. The note bears interest at a rate of 10% per annum, was due on September 19, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (i) the lowest Trading Price during the 25 Trading Day period prior to December 19, 2018 or (ii) 50% of the lowest Trading Price during the 25 Trading Day period prior to the Conversion Date.
(II) On February 4, 2019, the Company issued a $170,000 Convertible Promissory Note to a lender for net loan proceeds of $149,955. The note bears interest at a rate of 10% per annum, was due on August 4, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior to the Conversion Date.
(JJ) On February 13, 2019, the Company issued a $75,000 Convertible Promissory Note to a lender for net loan proceeds of $67,500. The note bears interest at a rate of 10% per annum, was due on November 13, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(KK) On November 15, 2018, the Company issued a $20,000 Convertible Promissory Note (Tranche 4 of (AA) above) to a lender for net loan proceeds of $20,000. The note bears interest at a rate of 10% per annum, was due on November 15, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(LL) On November 30, 2018, the Company issued a $5,000 Convertible Promissory Note (Tranche 5 of (AA) above) to a lender for net loan proceeds of $5,000. The note bears interest at a rate of 10% per annum, was due on November 30, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(MM) On December 6, 2018, the Company issued a $3,000 Convertible Promissory Note (Tranche 6 of (AA) above) to a lender for net loan proceeds of $3,000. The note bears interest at a rate of 10% per annum, was due on December 6, 2019, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
THE MARQUIE GROUP, INC.
May 31, 2021
(NN) On December 11, 2018, the Company issued a $10,000 Convertible Promissory Note (Tranche 7 of (AA) above) to a lender for net loan proceeds of $10,000. The note bears interest at a rate of 10% per annum, was due on December 11, 2019, and was convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(OO) On June 10, 2019, the Company issued a $58,750 Convertible Promissory Note to a lender for net loan proceeds of $50,000. The note bears interest at a rate of 12% per annum (24% per annum default rate), was due on March 10, 2020, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior to the Conversion Date.
(PP) On September 5, 2019, the Company issued a $12,500 Convertible Promissory Note to a lender for net loan proceeds of $10,000. The note bears interest at a rate of 10% per annum, was due on September 5, 2020, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 20 Trading Day period prior to the Conversion Date.
(QQ) On October 23, 2019, the Company issued a $260,000 Convertible Promissory Note to a lender for net loan proceeds of $234,000. The note bears interest at a rate of 10% per annum, was due on April 23, 2020, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to 50% of the lowest Trading Price during the 25 Trading Day period prior to the Conversion Date.
(RR) On August 20, 2020, the Company issued a $385,000 Convertible Promissory Note to a lender which paid off the principal and accrued interest for the note described in (QQ) above. The note bears interest at a rate of 10% per annum, is due on August 20, 2021, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the higher of (1) the closing bid price of the Common Stock on the Trading Day immediately preceding the date of the conversion, or (2) the par value of the Common Stock.
(SS) On November 30, 2020, the Company issued a $170,000 Convertible Promissory Note to a lender which paid off some of the accrued interest for the note described in (RR) above. The Company received net proceeds of $32,500. The note bears interest at a rate of 12% per annum, is due on November 30, 2021, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the lesser of (1) 105% of the closing bid price of the Common Stock on the Issue Date, or (2) the closing bid price of the Common Stock on the Trading Day immediately preceding the date of the conversion.
(TT) On December 30, 2020, the Company issued a $50,000 Promissory Note. The note bears interest at a rate of 12% per annum and is due on December 30, 2021.
(UU) On April 15, 2021, the Company issued a $55,000 Convertible Promissory Note to a lender for net loan proceeds of $45,000. The note bears interest at a rate of 12% per annum, is due on April 15, 2022, and is convertible at the option of the lender into shares of the Company common stock at a Conversion Price equal to the higher of (1) $0.0009, or (2) the par value of the Common Stock.
THE MARQUIE GROUP, INC.
May 31, 2021
Concentration of Notes Payable:
The principal balance of the notes payable was due to:
### NOTE 8 NOTES PAYABLE RELATED PARTIES
Notes payable related parties consisted of the following:
THE MARQUIE GROUP, INC.
May 31, 2021
NOTE 9 - DERIVATIVE LIABILITY
The derivative liability at May 31, 2021 and 2020 consisted of:
THE MARQUIE GROUP, INC.
May 31, 2021
The above convertible notes contain a variable conversion feature based on the future trading price of the Company common stock. Therefore, the number of shares of common stock issuable upon conversion of the notes is indeterminate. Accordingly, we have recorded the fair value of the embedded conversion features as a derivative liability at the respective issuance dates of the notes and charged the applicable amounts to debt discounts and the remainder to other expense. The increase (decrease) in the fair value of the derivative liability from the respective issuance dates of the notes to the measurement dates is charged (credited) to other expense (income). The fair value of the derivative liability of the notes is measured at the respective issuance dates and quarterly thereafter using the Black Scholes option pricing model.
Assumptions used for the calculations of the derivative liability of the notes at May 31, 2021 include (1) stock price of $0.0006 per share, (2) exercise prices ranging from $0.0001 to $0.0005 per share, (3) terms ranging from 0 days to 183 days, (4) expected volatility of 996% and (5) risk free interest rates ranging from 0.01% to 0.03%.
Assumptions used for the calculations of the derivative liability of the notes at May 31, 2020 include (1) stock price of $0.0005 per share, (2) exercise prices ranging from $0.00012 to $0.00018 per share, (3) terms ranging from 0 days to 97 days, (4) expected volatility of 863% and (5) risk free interest rates ranging from 0.13% to 0.14%.
THE MARQUIE GROUP, INC.
May 31, 2021
Concentration of Derivative Liability:
The derivative liability relates to convertible notes payable due to:
### NOTE 10 - EQUITY TRANSACTIONS
On October 3, 2016, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock from 500,000,000 to 2,000,000,000 shares and to change the par value of both the common stock and preferred stock from $0.001 per share to $0.0001 per share.
The Series A Preferred Stock has no conversion, liquidation, or dividend rights.
On August 16, 2018, the Company entered into a Merger Agreement by and among the Company, and The Marquie Group, Inc., a Utah Corporation (TMG), pursuant to which the Company merged with TMG. The Company is the surviving corporation.
TMG was incorporated on August 3, 2018. The merger provides the Company with certain registered trademarks and intellectual property of TMG with respect to health, beauty, and social networking products. The three stockholders of TMG prior to the merger who received the 100,000 shares are (1) Marc Angell (CEO of the Company) and Jacquie Angell (50,000 shares), (2) The OZ Corporation (holder of $103,250 of Company notes payable at May 31, 2020 and<|endoftext|>FC Merger Subsidiary IX, Inc., and CIT Group Inc. (incorporated by reference to Exhibit 2.1 to Form
8-K filed October20, 2020).
3.1
Fourth Restated Certificate of Incorporation of the Company, as filed with the Office of the Secretary of State of the State of Delaware on May17, 2016 (incorporated by reference to Exhibit 3.1 to Form
8-K filed May17, 2016).
3.2
### Amended and Restated
By-laws of the Company, as amended through April15, 2020 (incorporated by reference to Exhibit 3.2 to Form
10-Q filed May5, 2020).
3.3
### Certificate of Designation of
Fixed-to-Floating
Rate
### Non-Cumulative
Perpetual Preferred Stock, Series A of CIT Group Inc., dated June6, 2017 (incorporated by reference to Exhibit 3.1 to Form
8-K filed June7, 2017).
3.4
### Certificate of Designation of 5.625%
Non-Cumulative
Perpetual Preferred Stock, Series B of CIT Group Inc. (incorporated by reference to Exhibit 3.3 to our Form
8-A filed November12, 2019).
4.1
Indenture, dated as of January20, 2006, between CIT Group Inc. and The Bank of New York Mellon (as successor to JPMorgan Chase Bank N.A.) for the issuance of senior debt securities (incorporated by reference to Exhibit 4.3 to Form
S-3 filed January20, 2006).
4.2
Indenture, dated as of March15, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.1 of Form
8-K filed March16, 2012).
4.3
Third Supplemental Indenture, dated as of August3, 2012, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.25% Senior Unsecured Note due 2017 and the Form of 5.00% Senior Unsecured Note due 2022) (incorporated by reference to Exhibit 4.2 to Form
8-K filed August3, 2012).
4.4
Fourth Supplemental Indenture, dated as of August1, 2013, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 5.00% Senior Unsecured Note due 2023) (incorporated by reference to Exhibit 4.2 to Form
8-K filed August1, 2013).
-49-
4.5
Seventh Supplemental Indenture, dated as of March9, 2018, by and among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.125% Senior Unsecured Notes due 2021 and Form of 5.250% Senior Unsecured Notes due 2025) (incorporated by reference to Exhibit 4.2 to Form
8-K filed March12, 2018).
4.6
Subordinated Indenture, dated as of March9, 2018, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (incorporated by reference to Exhibit 4.3 to Form
8-K filed March12, 2018).
4.7
First Supplemental Indenture, dated as of March9, 2018, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 6.125% Subordinated Notes due 2028) (incorporated by reference to Exhibit 4.4 to Form
8-K filed March12, 2018).
4.8
Eighth Supplemental Indenture, dated as of August17, 2018 by and among CIT Group Inc., Wilmington Trust National Association as trustee and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.750% Senior Unsecured Notes due 2024) (incorporated by reference to Exhibit 4.2 of Form
8-K filed August17, 2018)
4.9
Second Supplemental Indenture, dated as of November13, 2019, between CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 4.125%
### Fixed-to-Fixed
Rate Subordinated Notes due 2029) (incorporated by reference to Exhibit 4.2 on Form
8-K filed November13, 2019).
4.10
Description of CIT Group Inc.s Securities Registered under Section12 of the Exchange Act Certain instruments defining the rights of holders of long-term debt securities of CIT and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii)(A) of Regulation
S-K
(incorporated by reference to Exhibit 4.10 to Form
10-K filed on February20, 2020). CIT hereby undertakes to furnish to the SEC, upon request, copies of such instruments.
4.11
Ninth Supplemental Indenture, dated as of June19, 2020, among CIT Group Inc., Wilmington Trust, National Association, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, security registrar and authenticating agent (including the Form of 3.929% Senior Unsecured
### Fixed-to-Floating
Rate Note due 2024). (incorporated by reference to Exhibit 4.2 to Form
8-K filed June19, 2020).
10.1*
CIT Group Inc. Omnibus Incentive Plan (incorporated by reference to exhibit 10.1 to Form
10-Q filed November2, 2018).
10.2*
CIT Group Inc. Supplemental Retirement Plan (As Amended and Restated Effective as of January1, 2008) (incorporated by reference to Exhibit 10.27 to Form
10-Q filed May12, 2008).
10.3*
CIT Group Inc. Supplemental Savings Plan (As Amended and Restated Effective as of January1, 2008) (incorporated by reference to Exhibit 10.28 to Form
10-Q filed May12, 2008).
10.4*
New Executive Retirement Plan of CIT Group Inc. (As Amended and Restated as of January1, 2008) (incorporated by reference to Exhibit 10.29 to Form
10-Q filed May12, 2008).
10.5*
Form of CIT Group Inc. Long-term Incentive Plan Restricted Stock Unit Director Award Agreement (Annual Grant) (incorporated by reference to Exhibit 10.40 to Form
10-Q filed August9, 2010).
10.6
Stockholders Agreement, by and among CIT Group Inc. and the parties listed on the signature pages thereto, dated as of July21, 2014 (incorporated by reference to Exhibit 10.1 to Form
8-K filed July25, 2014).
10.7*
Offer Letter, dated October26, 2015, between CIT Group Inc. and Ellen R. Alemany, including Attached Exhibits. (incorporated by reference to Exhibit 10.39 to Form
10-Q filed November13, 2015).
10.8
CIT Employee Severance Plan (As Amended and Restated Effective January1, 2017) (incorporated by reference to Exhibit 10.40 to Form
10-Q filed November9, 2016).
10.9
Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Director Award Agreement (Three Year Vesting) (incorporated by reference to Exhibit
10-48 to Form
10-K filed on March16, 2017).
-50-
10.10
Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2017) (with ROTCE Performance Measure and TSR Modifier) (incorporated by reference to Exhibit 10.39 to Form
10-Q filed May8, 2017).
10.11
Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with Performance Based Vesting) (2017) (incorporated by reference to Exhibit 10.40 to Form
10-Q filed May8, 2017).
10.12
Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2018) (incorporated by reference to Exhibit 10.23 to Form
10-Q filed May4, 2018).
10.13
Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2018) (incorporated by reference to Exhibit 10.24 to Form
10-Q filed May4, 2018).
10.14
Amendment No.4 to Second Amended and Restated Revolving Credit and Guaranty Agreement, dated as of March9, 2020, among CIT Group Inc., certain subsidiaries of CIT Group Inc., as Guarantors, the Lenders party thereto from time to time and Bank of America, N.A., as Administrative Agent and L/C Issuer (incorporated by reference to Exhibit 10.14 to Form
10-Q filed May5, 2020).
10.15
Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2019) (incorporated by reference to Exhibit 10.19 to Form
10-Q filed May3, 2019).
10.16
Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2019) (incorporated by reference to Exhibit 10.20 to Form
10-Q filed May3, 2019).
10.17
Form of CIT Group Inc. Omnibus Incentive Plan Performance Share Unit Award Agreement (2020) (incorporated by reference to Exhibit 10.17 to Form
10-Q filed May5, 2020)
10.18
Form of CIT Group Inc. Omnibus Incentive Plan Restricted Stock Unit Award Agreement (with performance Based Vesting) (2020) (incorporated by reference to Exhibit 10.18 to Form
10-Q filed May5, 2020)
10.19
Voting Agreement, dated as of October15, by and among CIT Group Inc., Frank B. Holding, Jr., Hope H. Bryant, Peter M. Bristow, and Claire H. Bristow (incorporated by reference to Exhibit 10.1 to Form
8-K filed October20, 2020).
10.20
Form of Severance Amendment Letter, dated October19, 2020, from CIT Group, Inc. (incorporated by reference to Exhibit 99.1 to Form
8-K filed October20, 2020).
10.21
Form of CIT Group Inc. Retention Award Agreement (incorporated by reference to Exhibit 10.21 to Form
10-K filed February19, 2021).
21.1
Subsidiaries of CIT Group Inc. (incorporated by reference to Exhibit 21.1 to Form
10-K filed February19, 2021).
23.1
Consent of Deloitte& Touche LLP. (incorporated by reference to Exhibit 23.1 to Form
10-K filed February19, 2021).
24.1
Powers of Attorney. (incorporated by reference to Exhibit 24.1 to Form
10-K filed February19, 2021).
31.1
Certification of Ellen R. Alemany pursuant to Rules
13a-14(a) and
(filed herein).
31.2
13a-14(a) and
(filed herein).
31.3
Certification of Ellen R. Alemany pursuant to Rules
13a-14(a) and
(incorporated by reference to Exhibit 31.1 to Form
10-K filed February19, 2021).
31.4
13a-14(a) and
(incorporated by reference to Exhibit 31.2 to Form
10-K filed February19, 2021).
-51-
32.1**
Certification of Ellen R. Alemany pursuant to 18 U.S.C. (incorporated by reference to Exhibit 32.1 to Form
10-K filed February19, 2021).
32.2**
Certification of John Fawcett pursuant to 18 U.S.C. (incorporated by reference to Exhibit 32.2 to Form
10-K filed February19, 2021).
101.1
The following materials from CIT Group Inc.s Annual Report on Form
10-K for the year ended December31, 2020, formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii)the Consolidated Statements of Operations, (iii)the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Stockholders Equity, (v)the Consolidated Statements of Cash Flows, and (vi)Notes to Consolidated Financial Statements.
The cover page from CIT Group Inc.s Form
10-K for the annual period ended December31, 2020, formatted inline XBRL (contained in exhibit 101.1).
*
Indicates a management contract or compensatory plan or arrangement.
**
This information is furnished and not filed for purposes of Section18 of the Securities Exchange Act of 1934 and is not incorporated by reference into any filing under the Securities Act of 1933.
-52-
-53- | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Operating activities was $109,922. Net income of $1,903,455 was affected by interest earned on marketable securities held in the Trust Account of $1,027,157, a noncash charge for the fair value of warrant liabilities of $137,400, an unrealized gain on marketable securities held in our Trust Account of $1,438,240 and a deferred income tax provision of $274,962. Changes in operating assets and liabilities provided $314,458 of cash from operating activities.
For the year ended December 31, 2019, cash used in operating activities was $1,634,432. Net income of $3,394,659 was affected by interest earned on marketable securities held in the trust account of $4,912,346, a non-cash charge for the fair value of warrant liabilities of $27,480, an unrealized gain on marketable securities held in our trust account of $128,899 and a deferred income tax provision of $27,069. Changes in operating assets and liabilities provided $12,565 of cash from operating activities.
For the nine months ended September 30, 2019, cash used in operating activities was $1,115,949. Net income $2,355,418 was affected by interest earned on marketable securities held in the trust account of $3,657,526, a noncash charge for the fair value of warrant liabilities of $89,310, an unrealized loss on marketable securities held in our trust account of $35,094 and a deferred income tax provision of $7,370. Changes in operating assets and liabilities provided $69,125 of cash from operating activities.
For the six months ended June 30, 2019, cash used in operating activities was $279,358. Net income $1,445,084 was affected by interest earned on marketable securities held in the trust account of $2,080,258, a noncash charge for the fair value of warrant liabilities of $103,050, an unrealized gain on marketable securities held in our trust account of $152,212 and a deferred income tax provision of $31,965. Changes in operating assets and liabilities provided $373,013 of cash from operating activities.
For the three months ended March 31, 2019, cash used in operating activities was $27,594. Net income $235,235 was affected by interest earned on marketable securities held in the Trust Account of $409,539, a non-cash charge for the fair value of warrant liabilities of $48,090, an unrealized gain on marketable securities held in our Trust Account of $19,142 and deferred income taxes of $4,020. Changes in operating assets and liabilities provided $113,742 of cash from operating activities.
We intend to use substantially all of the funds held in the trust account, to acquire a target business and to pay our expenses relating thereto, including fees payable to EarlyBirdCapital and Morgan Stanley, upon consummation of our initial business combination for assisting us in connection with our initial business combination.
As of December 31, 2020, we had cash of $135,961. As of September 30, 2020, we had cash of $255,886. As of June 30, 2020, we had cash of $144,474. As of March 31, 2020, we had cash of $195,979. As of December 31, 2019, we had cash of $140,303. As of September 30, 2019, we had cash of $440,786. As of June 30, 2019, we had cash of $1,027,377. As of March 31, 2019, we had cash of $809,141 We intend to use the funds held outside the trust account for identifying and evaluating prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices, plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target businesses, selecting the target business to acquire and structuring, negotiating and consummating the business combination.
On April20, 2020, the Sponsor committed to provide us an aggregate of $500,000 in loans. The loans shall be non-interestbearing, unsecured and due upon the consummation of a business combination.
On April21, 2020, we issued an unsecured promissory note to the Sponsor in the aggregate amount of $300,000 (the Sponsor Note), of which $200,000 was drawn upon on such date. The Sponsor Note is non-interestbearing and payable upon the consummation of a business combination. The Sponsor Note is convertible, at the lenders option, into units of the post-businesscombination entity at a price of $10.00 per unit. If a business combination is not consummated, the Sponsor Notes will not be repaid by us and all amounts owed thereunder by us will be forgiven except to the extent that we have funds available to us outside of our Trust Account. As of December 31, 2020, there was $200,000 outstanding under the Sponsor Note.
In order to fund working capital deficiencies or finance transaction costs in connection with a business combination, the Sponsor or our officers and directors or their affiliates may, but are not obligated to, loan us funds on a non-interest basis as may be required, except as described above. If we complete our initial business combination, we will repay such loaned amounts. Up to $1,500,000 of notes may be convertible into private units, at a price of $10.00 per unit.
As described above, our Sponsor committed to loan us a total of $1.5 million (inclusive of amounts currently outstanding) in aggregate principal amount prior to the consummation of the proposed business combination with Microvast. Other than the $1.5 million loan (inclusive of amounts currently outstanding) committed to us by our Sponsor, our Sponsor, officers, directors, or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet our working capital needs. If we are unable to raise such additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. These conditions raise substantial doubt about our ability to continue as a going concern through April 30, 2021 (or July 31, 2021, if our stockholders approve an amendment to our charter), the date that we will be required to cease all operations, except for the purpose of winding up, if a business combination is not consummated. The financial statements included in this Form 10-K do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an agreement to pay an affiliate of our Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on March 5, 2019 and will continue to incur these fees monthly until the earlier of the completion of the business combination and our liquidation.
We have engaged EarlyBirdCapital to act as an advisor in connection with a business combination, to assist us in holding meetings with our shareholders to discuss the potential business combination and the target business attributes, introduce us to potential investors that are interested in purchasing our securities in connection with a business combination, assist us in obtaining shareholder approval for the business combination and assist us with our press releases and public filings in connection with the business combination. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of a business combination in an amount equal to $9,660,000 (exclusive of any applicable finders fees which might become payable); provided that up to 30% of the fee may be allocated at our sole discretion to other FINRA members that assist us in identifying and consummating a business combination.
We engaged Morgan Stanley to provide financial advisory services in connection with the Microvast business combination, and, upon consummation of the transaction with Microvast, we must pay that firm a transaction fee of $5.5 million, plus expenses. Morgan Stanley also acted as placement agent in connection with the PIPE Financing, and we are obligated to pay Morgan Stanley a placement fee equal to (i) 3.5% of the sum of (x) the aggregate gross proceeds raised in the PIPE Financing up to $300 million (not including funds from the sale of certain excluded securities) and (y) any borrowings pursuant to a bridge financing provided in connection with the proposed business combination by investors introduced by Morgan Stanley, and (ii) 2.5% of the aggregate gross proceeds raised in the PIPE Financing above $300 million.
Warrant Liability
We account for warrants in accordance with the guidance contained in ASC 815-40-15-7D under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, we classify the Private Warrants as liabilities at their fair value and adjust the Private Warrants to fair value at each reporting period. The Private Warrants for periods where no observable traded price was available are valued using a binomial lattice model. For periods subsequent to the detachment of the Private Warrants from the Units, the Public Warrant quoted market price was used as the fair value as of each relevant date (see Note 12).
Our statement of operations includes a presentation of income per share for common shares subject to possible redemption in a manner similar to the two-class method of loss per share. Net income per common share, basic and diluted, for Common stock subject to possible redemption is calculated by dividing the proportionate share of income on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Common stock subject to possible redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income, adjusted for income on marketable securities attributable to Common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock participates in the income on marketable securities based on non-redeemable common stock shares proportionate interest.
On March 25, 2021, we filed our Original 10-K.
This material weakness resulted in a material misstatement of our warrant liability, change in fair value of warrant liability, additional paid-in capital and retained earnings as of and for the years ended December 31, 2020.
On May 28, 2021, we revised our prior position on accounting for warrants and concluded that our previously issued financial statements as of and for the years ended December 31, 2020 and 2019, as of and for the periods ended March 31, 2019, June 30, 2019, September 30, 2019, March 31, 2020, June 30, 2020 and September 30, 2020, and as of March 7, 2019 should not be relied on because of a misapplication in the guidance on warrant accounting.
ITEM 15.
(1) Financial Statements:
None.
(b)<|endoftext|>Put or call transaction that would result in the economic disposition of the securities. Additionally, the option may not be sold, transferred, assigned, pledged or hypothecated for a one-year period (including the foregoing 180-day period) following September 11, 2020 except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners. The option grants to holders demand and piggy-back rights for periods of five and seven years, respectively, from the effective date of the registration statement with respect to the registration under the Securities Act of the securities directly and indirectly issuable upon exercise of the option. The Company will bear all fees and expenses attendant to registering the securities, other than underwriting commissions which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the option may be adjusted in certain circumstances including in the event of a stock dividend, or the Companys recapitalization, reorganization, merger or consolidation. However, the option will not be adjusted for issuances of shares of Class A common stock at a price below its exercise price. The Company will have no obligation to net cash settle the exercise of the purchase option or the warrants underlying the purchase option. The holder of the purchase option will not be entitled to exercise the purchase option or the warrants underlying the purchase option unless a registration statement covering the securities underlying the purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the purchase option or underlying warrants, the purchase option or warrants, as applicable, will expire worthless.
Right of First Refusal
Subject to certain conditions, the Company will grant Maxim, for a period of 12 months after the date of the consummation of a Business Combination, a right of first refusal to act as lead underwriters or minimally as a co-manager, with at least 75% of the economics; or, in the case of a three-handed deal 50% of the economics, for any and all future public and private equity and debt offerings. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement.
### Representatives Common Stock
On September 11, 2020, the Company issued to Maxim Partners LLC and/or its designees, 150,000 shares of Class A common stock (the representative shares). On October 13, 2020, the Company issued to Maxim Partners LLC and/or its designees additional 1,236 representative shares. The Company estimated the fair value of the stock to be $2,016 based upon the price of the founder shares issued to the Sponsor. The stock were treated as underwriters compensation and charged directly to stockholders equity.
Maxim has agreed not to transfer, assign or sell any such shares until the completion of the Companys initial Business Combination. In addition, Maxim has agreed (i) to waive its redemption rights with respect to such shares in connection with the completion of the Companys initial Business Combination and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete its initial Business Combination within 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a Business Combination).
The shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of 180 days immediately following the date of the effectiveness of the registration statement pursuant to Rule 5110(g)(1) of FINRAs NASD Conduct Rules. Pursuant to FINRA Rule 5110(g)(1), these securities will not be the subject of any hedging, short sale, derivative, put or call transaction that would result in the economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement, nor may they be sold, transferred, assigned, pledged or hypothecated for a period of 180 days immediately following the effective date of the registration statement except to any underwriter and selected dealer participating in the offering and their bona fide officers or partners.
Preferred Stock
### ClassA Common Stock
The Company is authorized to issue a total of 100,000,000 shares of ClassA common stock at par value of $0.0001 each. At December 31, 2020, the Company has issued an aggregate of 2,195,955 shares of Class A common stock, excluding 5,578,881 shares of Class A common stock subject to possible redemption.
ClassB Common Stock
At June 24, 2020, the Company issued 1,725,000 shares of Class B common stock to its initial stockholder, Industrial Tech Partners, LLC, for $25,000, or approximately $0.014 per share. The founder shares include an aggregate of up to 225,000 shares subject to forfeiture if the over-allotment option is not exercised by the underwriters in full. On August 13, 2020, the Company effected a 0.25 for 1 stock dividend for each share of Class B common stock outstanding, resulting in the initial stockholder holding an aggregate of 2,156,250 shares of Class B common stock (up to 281,250 shares of which are subject to forfeiture depending on the extent to which the underwriters over-allotment option is exercised). As of December 31, 2020, there were 1,905,900 shares of Class B common stock issued and outstanding.
The Companys initial stockholders have agreed not to transfer, assign or sell any of their founder shares until the earlier of (i) one year after the date of the consummation of the Companys initial Business Combination or (ii) the date on which the Company consummates a liquidation, merger, stock exchange or other similar transaction which results in all of the stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property. Notwithstanding the foregoing, if the closing price of the Companys Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing 150 days after the Companys initial Business Combination, the founder shares will no longer be subject to such transfer restrictions.
The shares of Class B common stock will automatically convert into shares of the Companys Class A common stock at the time of its initial Business Combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the IPO (not including the shares of Class A common stock issuable to Maxim) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination or any private placement-equivalent units issued to the Sponsor, its affiliates or certain of officers and directors upon conversion of Working Capital Loans made to the Company).
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the Companys stockholders, with each share of common stock entitling the holder to one vote.
### Note 10 Income Tax
As of December 31, 2020, the Company has $101,681 of U.S.
For the period from June 2, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $62,505.
On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security CARES Act into law. The CARES Act includes several significant business tax provisions that, among other things, would eliminate the taxable income limit for certain net operating losses (NOL) and allow businesses to carry back NOLs arising in 2018, 2019 and 2020 to the five prior years, suspend the excess business loss rules, accelerate refunds of previously generated corporate alternative minimum tax credits, generally loosen the business interest limitation under IRC section 163(j) from 30 percent to 50 percent among other technical corrections included in the Tax Cuts and Jobs Act tax provisions. The Company does not believe that the CARES Act will have a significant impact on Companys financial position or statement of operations.
On March 19, 2021, the Company entered into a definitive business combination agreement (the Business Combination Agreement) with Arbe Robotics Ltd. Pursuant to the Business Combination Agreement. Pursuant to the Business Combination Agreement, among other things, a newly formed subsidiary of Arbe will merge with the company, with the company surviving as a wholly-owned subsidiary of Arbe.
Simultaneously with the execution of the Business Combination Agreement, the Company and Arbe entered into PIPE subscription agreements with PIPE investors pursuant to which the PIPE investors would purchase 10,000,000 shares of Class A common stock at a price of $10.00 per share, or a total of $100,000,000 (or at Arbes sole election, Arbe could sell the PIPE investors 10,000,000 ordinary shares of Arbe at a price of $10.00 per share). The PIPE financing will be consummated simultaneously with the closing of the transaction under the Business Combination Agreement. The consummation of the transactions contemplated by the PIPE subscription agreements is conditioned on the concurrent closing of the transaction and other customary closing conditions. The PIPE investors include Texas Ventures, an affiliate of the Company, which subscribed for $3,400,000 in the PIPE financing. E. Scott Crist, who is chief executive officer and a director of the Company and the managing member of the Sponsor, is a partner of Texas Ventures.
EXHIBIT INDEX
*
Filed herewith.
**
Furnished herewith.
(1)
Incorporated by reference to the Companys Form S-1, originally filed with the SEC on August 7, 2020 (File No. 333-242339), as amended.
(2)
Incorporated by reference to the Companys Form 8-K, filed with the SEC on September 11, 2020.
(3)
Incorporated by reference to the Companys Annual Report on Form 10-K, filed with the SEC on March 31, 2021. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Or consulting arrangements with the post-transaction company after our initial business combination.
ITEM 12.
The following table sets forth information regarding the beneficial ownership of our common stock as of March 30, 2021, by: each person known by us to be a beneficial owner of more than 5% of our outstanding common stock of, on an as-converted basis;
The following table is based on 43,125,000 shares of common stock outstanding at March 30, 2021, of which 34,500,000 shares were Class A common stock and 8,625,000 shares were Class B common stock. Unless otherwise indicated, it is believed that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them.
*
Less than one percent
(1)
Unless otherwise noted, the business address of each of our stockholders listed is 660 Madison Avenue, 12 th
Floor, New York, NY 10065.
(2)
Interests shown consist solely of Founder Shares, classified as Class B common stock. Such shares will automatically convert into shares of Class A common stock at the time of our initial business comination on a one-for-one basis, subject to adjustment, as described elsewhere herein.
(3)
Falcon Equity Investors LLC is the record holder of the shares reported herein. Eagle Falcon JV Co LLC, which is controlled by Mr. Mnuchin, is the managing member of Falcon Equity Investors LLC and has voting and investment discretion with respect to the FCAC Class B common stock held of record by Falcon Equity Investors LLC. Eagle Falcon JV Co LLC and Mr. Mnuchin each disclaims any beneficial ownership of the securities held by Falcon Equity Investors LLC other than to the extent of any pecuniary interest each may have therein, directly or indirectly.
(4)
Pursuant to Amendment No.1 to Schedule 13G filed by such persons as a group with the SEC on February 2, 2021, each of Millennium Management LLC, Millennium Group Management LLC and Mr. Englander may be deemed the beneficial owner of 2,552,008 shares of the Class A common stock, as a result of holding directly or indirectly, 2,109,396 shares of Class A common stock and 442,612 units (each consisting of one share of Class A common stock and one-third of one public warrant of the Company), with shared voting power and shared dispositive power with respect to such shares of Class A common stock. This amount includes: (A) 1,602,008 shares of Class A common stock beneficially owned by Integrated Core Strategies (US) LLC as a result of holding 1,484,397 shares of Class A common stock and 117,611 units; (B) 625,000 shares of Class A common stock beneficially owned by Riverview Group LLC, as a result of holding 624,999 shares of FCAC Class A common stock and 1 unit; and (C) 325,000 shares of Class A common stock beneficially owned by ICS Opportunities, Ltd., as a result of holding 325,000 units. The principal business address for each of these stockholders is 666 Fifth Avenue, New York, New York 10103.
(5)
Pursuant to a Schedule 13G filed by such persons as a group with the SEC on February 12, 2021, each of Magnetar Financial, Magnetar Capital Partners, Supernova Management and Mr. Litowitz may be deemed the beneficial owner of 2,216,257 units of the Company (each consisting of one share of Class A common stock and one-third of one public warrant of the Company) with shared voting power and shared dispositive power with respect to 2,216,257 units. This amount includes: (A) 725,772 units held for the account of Magnetar Constellation Master Fund, Ltd.; (B) 208,756 units held for the account of Magnetar Constellation Fund II, Ltd; (C) 34,257 units held for the account of Magnetar Capital Master Fund Ltd.; (D) 255,582 units held for the account of Magnetar Xing He Master Fund Ltd.; (E) 284,844 units held for the account of Magnetar Structured Credit Fund, LP; (F) 231,000 units held for the account of Magnetar Systematic Multi-Strategy Master Fund Ltd.; (G) 193,149 units held for the account of Magnetar SC Fund Ltd.; (H) 146,325 units held for the account of Magnetar Lake Credit Fund LLC; (I) 91,698 units held for the account of Purpose Alternative Credit Fund Ltd.; and (J) 44,874 units held of the account of Purpose Alternative Credit Fund T LLC. The principal business address for each of these stockholders is 660 Madison Avenue, 12th Floor New York, NY 10065.
(6)
According to a Schedule 13G filed on February 16, 2021, on behalf of HGC Investment Management Inc., the Class A common stock reported above are held of record by HGC Investment Management Inc. on behalf of HGC Arbitrage Fund LP. HGC Investment Management Inc. Accordingly, HGC Arbitrage Fund LP may be deemed to beneficially own the Class A common stock reported above. The business address for this stockholder is 366 Adelaide, Suite 601, Toronto, Ontario M5V 1R9, Canada.
(7)
According to a Schedule 13G filed on February 16, 2021 on behalf of UBS OConnor LLC (UBS). UBS acts as an investment manager to Nineteen77 Global Multi-Strategy Alpha Master Limited and Nineteen 77 Global Merger Arbitrage Master Limited, MA Hedge Fund Strategies Limited and Nineteen77 Global Merger Arbitrage Opportunity Fund. In such capacity, UBS may be deemed to have beneficial ownership of such Class A common stock. The business address of this stockholder is One North Wacker Drive, 32 nd
Floor, Chicago, Illinois 60606.
(8)
According to a Schedule 13G filed on March 10, 2021, on behalf of such persons, Columbia Management Investment Advisers, LLC (CMIA) and Ameriprise Financial, Inc. (AFI) do not directly own any shares of common stock of Columbia Small Cap Growth Fund I (the Fund) is the record holder of 2,364,963 shares of common stock. As the investment adviser to the Fund and various other unregistered and registered investment companies and other managed accounts, CMIA may be deemed to beneficially own the shares reported herein by the Fund. Accordingly, the shares reported herein by CMIA include those shares separately reported herein by the Fund. As the parent holding company of CMIA, AFI may be deemed to beneficially own the shares reported herein by CMIA, and CMIA and AFI share voting and dispositive power with regard to the 3,568,245 shares. Accordingly, the shares reported herein by AFI include those shares separately reported herein by CMIA. Each of AFI and CMIA disclaims beneficial ownership of any shares reported.
ITEM 13.
### Founder Shares
On June 5, 2020, the Sponsor purchased 8,625,000 Founder Shares in exchange for a capital contribution of $25,000, or $.003 per share. On August26, 2020, our Sponsor transferred 20,000 founder shares to each of Edgar Bronfman Jr., Karen Finerman and Michael Ronen, three of our directors, resulting in our Sponsor holding 8,565,000 founder shares.
The Founder Shares are identical to the shares of ClassA Common Stock included in the Units sold in the Public Offering except that the Founder Shares are subject to certain transfer restrictions, as described in more detail below.
The initial stockholders have agreed not to transfer, assign or sell any of their Founder Shares until the earlier of (A)one year after the completion of the Companys initial Business Combination, or earlier if, subsequent to the Companys initial Business Combination, the closing price of the Companys common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-tradingday period commencing at least 150days after the Companys initial Business Combination, and (B)the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction after the initial Business Combination that results in all of the Companys stockholders having the right to exchange their common stock for cash, securities or other property.
The Sponsor purchased an aggregate of 5,933,334 private placement warrants at a price of $1.50 per private placement warrant (approximately $8,900,000 in the aggregate) in a private placement that occurred simultaneously with the closing of the Public Offering.
A portion of the purchase price of the private placement warrants was added to the proceeds from the Public Offering to be held in the Trust Account such that at closing of the Public Offering, $345,000,000 was placed in the Trust Account.
The private placement warrants (including the shares of common stock issuable upon exercise of the private placement warrants) are not transferable, assignable or salable until 30days after the completion of the initial Business Combination and they are non-redeemablefor cash so long as they are held by the initial purchasers of the private placement warrants or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers of the private placement warrants or their permitted transferees, the private placement warrants will be redeemable for cash by the Company and exercisable by such holders on the same basis as the warrants included in the units sold in the Public Offering. Otherwise, the private placement warrants have terms and provisions that are identical to those of the warrants sold as part of the units in the Public Offering and have no net cash settlement provisions.
### Registration Rights
The initial stockholder and holders of the private placement warrants will be entitled to registration rights pursuant to a registration rights agreement signed on September 21, 2020. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable Lock Up Period.
Related Party Loans
The Note was payable without interest on the earlier of December31, 2020 or the completion of the Public Offering. As of December 31, 2020, there was no amount outstanding under the Note.
The terms of such loans have not been determined and no written agreements exist with respect to such loans. To date, the Company had no working capital loans outstanding..
The Company entered into an administrative services agreement in which the Company will pay an affiliate of the Sponsor for office space, utilities and secretarial and administrative services provided to members of the Companys management team in an amount not to exceed $15,000 per month. For the period from June5, 2020 (inception) through December 31, 2020 and for the year ended December 31, 2020, the Company incurred $48,000 in administrative services expenses under the arrangement.
ITEM 14.
(1)
Audit Fees. Audit fees consist of fees billed for professional services rendered in connection with our initial public offering and for the audit of our year-end financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings.
(2)
Audit-Related Fees.
(3)
Tax Fees.
(4)
All Other Fees.
Our audit committee was formed upon the consummation of our initial public officering.
PART IV
ITEM 15.
(a)
(1)
### Financial Statements
(2)
(3)
### Exhibits
We hereby file as part of this report the exhibits listed in the attached Exhibit Index.<|endoftext|>To the shares held by the USVP VII Funds. Irwin Federman, a member of our board of directors, is a managing member of PMG VII with additional rights with respect to the shares held by the USVP VII Funds, and may be deemed to have sole voting and dispositive power with respect to such shares. Casey M. Tansey, the sole managing partner of PMG VII, may be deemed to have sole dispositive power and shared voting power over the shares held by the USVP VII Funds. Each of the foregoing persons disclaims beneficial ownership of such securities, except to the extent of any pecuniary interest therein. The address for each of these entities is 1460El Camino Real, Suite 100, Menlo Park, California 94025.
(2)
Canaan Extend Fund L.P., or Canaan Extend Fund, is the sole owner of Canaan Equity. Canaan Extend Fund, LLC is the general partner of the Canaan Extend Fund and may be deemed to have sole investment and voting power over the shares held by the Canaan Extend Fund. Deepak Kamra, a managing member of Canaan Extend Fund, LLC, disclaims beneficial ownership of the shares held by the Canaan Extend Fund except to the extent of his pecuniary interest in the shares. The mailing address for Canaan Equity is 1624 Market Street, Suite 226 PMB 29471 Denver, CO 80202.
(3)
The shares are held of record by Special Situations Investing Group II, LLC, which is an affiliate of Goldman Sachs& Co. LLC, a New York limited liability company and a broker-dealer. Goldman Sachs& Co. LLC is a member of the New York Stock Exchange and other national exchanges. Goldman Sachs& Co. LLC is a direct and indirect wholly-owned subsidiary of The Goldman Sachs Group, Inc., or GS Group. GS Group is a public entity and its common stock is publicly traded on the New York Stock Exchange. The shares of common stock held by Special Situations Investing Group II, LLC were acquired in the ordinary course of its investment business and not for the purpose of resale or distribution. GS Group may be deemed to beneficially own the securities held by Special Situations Investing Group II, LLC. GS Group disclaims beneficial ownership of such securities except to the extent of its pecuniary interest therein. The mailing address for Special Situations Investing Group II, LLC is 200 West Street, New York, New York 10282.
(4)
Rho Capital Partners LLC is the managing member of Rho Ventures III Holdings LLC or Rho Ventures, and may be deemed to have sole investment and voting power over the shares held by Rho Ventures. Habib Kairouz, Mark Leschly and Joshua Ruch are the managing members of Rho Capital Partners LLC and disclaim beneficial ownership of the shares held by Rho Ventures except to the extent of their pecuniary interest in the shares. The mailing address for Rho Ventures is 152 West 57th Street, 23rd Floor, New York, NY 10019.
(5)
Consists of (i) 2,097,172 shares of common stock held directly by Sharat Sharan, which includes the issuance of 187,500 shares of common stock upon settlement of a restricted unit that vested in connection with our initial public offering (ii) 92,500 shares held by Mr.Sharans daughter and (iii)2,058,391 shares of common stock issuable upon exercise of options exercisable within 60 days of February 28, 2021 held directly by Mr. Sharan.
(6)
Consists of (i) 15,625 shares of common stock issuable upon the exercise of options exercisable within 60 days of February 28, 2021 and (ii)7,368,405 shares held by USVP VII, (iii)153,508 shares held by Associates VII, (iv) 76,755 shares held by USVP VII-A and (v)76,755 shares held by USVP VII-B. Mr. Federman is a managing member of PMG VII with additional rights with respect to the shares held by the USVP VII Funds, and may be deemed to have sole voting and dispositive power with respect to such shares. Mr. Federman disclaims beneficial ownership of such securities held by the USVP VII Funds, except to the extent of any pecuniary interest therein.
Item13.
Other than the compensation agreements and other arrangements described in the Executive Compensation section of this Report and the transactions described below, since January1, 2020, there has not been and there is not currently proposed, any transaction or series of similar transactions to which we were, or will be, a party in which the amount involved exceeded, or will exceed, $120,000 and in which any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest.
### Loan Agreements with Messrs. Trempont and Sharan
In February 2020, we loaned Mr.Trempont, a member of our board of directors, $194,600 pursuant to a promissory note, or the Trempont Note, bearing interest at a rate of 2.1% per annum and maturing on various events not later than the fifth day prior to the date on which we file an initial registration statement under the Securities Act. The Trempont Note was repaid in full in November 2020.
In February 2020, we loaned Mr.Sharan, our President and Chief Executive Officer and a member of our board of directors, $240,000 pursuant to a promissory note, or the Sharan Note, bearing interest at a rate of 2.1% per annum and maturing on various events not later than the fifth day prior to the date on which we file an initial registration statement under the Securities Act
The Sharan Note was repaid in full in December 2020.
### Consulting Agreement
InfoHorizon, LLC provides information technology software development to us. Nitin Jain, thebrother-in-lawof our executive officer Jayesh Sahasi, is the chief executive officer of InfoHorizon, LLC.
### Eric Federmans Employment
Eric Federman, the son of our director Irwin Federman, is one of our employees. His annual base salary is $160,000 and he is eligible to participate in our equity incentive and other employee benefit plans and programs.
Indemnification Agreements
This policy covers, with certain exceptions set forth in Item404 ofRegulationS-Kunder the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships in which we were or are to be a participant, where the amount involved exceeds $120,000 and a related person had or will have a direct or indirect material interest, including, without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arms length transaction with an unrelated third party and the extent of the related persons interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.
### Director Independence
Our board of directors has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise that director's ability to exercise independent judgment in carrying out that director's responsibilities. Our board of directors has affirmatively determined that Irwin Federman, Denise Persson, Holger Staude, Dominique Trempont and Barry Zwarenstein are each an "independent director," as defined under the rules of the NYSE. In making these determinations, our board of directors considered all relevant facts and circumstances known to it in evaluating the independence of these directors, including their current and historical employment, any compensation we have given to them, any transactions we have with them, their beneficial ownership of our capital stock, their ability to exert control over us, all other material relationships they have had with us and the same facts with respect to their immediate families. Mr.Sharan is not independent because he is our Chief Executive Officer.
Board Leadership Structure
Our board of directors recognizes that one of its key responsibilities is to evaluate and determine its optimal leadership structure so as to provide effective oversight of management. Our Bylaws and corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chair of the Board and Chief Executive Officer.
If the Chair of the Board is also a director who does not otherwise qualify as an independent director, the independent directors may elect from among themselves a Lead Independent Director who calls and chairs the regularly scheduled executive sessions of the independent directors and serves as a non-exclusive liaison among the independent directors and the other members of our board of directors.
Subsequent to our IPO, our board of directors determined to appoint Sharat Sharan as both our Chief Executive Officer and Chair of the Board, and to appoint Dominique Trempont as Lead Independent Director. Our board of directors believes that combining the positions of Chair of the Board and Chief Executive Officer is appropriate at this time, in light of Mr. Sharans extensive experience in overseeing our day-to-day business, supervising our management, regularly communicating with all of our directors, and designing and executing our business strategies since our formation. Mr. Sharan has demonstrated the ability to manage effectively the competing demands for his time such that our board of directors believes he can effectively lead our board of directors. Meanwhile, Mr. Trempont has served on our board of directors since April 2010, has served in several board leadership positions for public companies, has served as Chief Executive Officer of two global software companies, and is one of our independent director and a member of our audit committee, thereby providing a strong, experienced voice for our independent directors. Our board of directors believes this leadership structure provides the appropriate balance of authority between independent andnon-independentdirectors and is an effective governance model for us and for our stockholders at this time.
### Item14.
The following table summarizes the fees of KPMGLLP, our independent registered public accounting firm, billed to us in each of the last two fiscal years for audit services and billed to us in each of the last two fiscal years for other services:
Audit Fees
Audit fees consist of fees for the audit of our consolidated financial statements, the review of the unaudited interim financial statements included in our registration statement in connection with our IPO and other professional services provided in connection with statutory and regulatory filings or engagements.
### Audit-Related Fees
Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit or review of the registrant's financial statements, including for assurance reporting on our historical financial information included in our registration statement in connection with our IPO.
Tax Fees
Tax fees consist of fees for tax compliance services.
### PART IV
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Capital and other operating assets and liabilities.
### Investing Cash Flows
Net cash provided by (used for) investing activities was $18 and $(174) in 2020 and 2019, respectively.
Cash flows from investing activities increased in 2020 due to a reduction in capital spending of $1,528 and cash proceeds of
$750 from the sale of the Companys eSite shares that were repurchased by eSite in the third quarter of 2020. The Company reduced its capital spending plan for 2020 in response to the financial impact of COVID-19 as discussed above.
Cash flows used for investing activities decreased in 2019 compared to 2018
, due to a reduction in capital spending of $3,241 and cash proceeds of $4,597 from the sale of real estate previously used as the Companys headquarters, partially offset by the acquisition of Cubic Creative for $2,356.
### Financing Cash Flows
Net cash used for financing activities was $5,139 and $7,718 in 2020 and 2019, respectively.
Cash used for financing activities included total dividends paid of $5,139 and $6,876 in 2020 and 2019, respectively.
In 2019, t he Company purchased 216,490 shares of its Series A common stock at a total cost of $842 under its board-authorized repurchase authority.
### Financing Arrangements
None.
### PAGE
Contractual Obligations
As of December31,2020, the Company had contractual obligations, in aggregate, of $16,436 for the next five years and $19,691 thereafter, for operating leases, primarily for office space and other distribution centers, some of which include escalating lease payments. See
Note5 Leases for future lease payments by year. In addition, the Company had expected purchase obligations of $117 related to capital expenditures.
InDecember2017, AHC Dallas Properties, LLC, a wholly-owned subsidiary of the Company, assumed a 12-year lease agreement for office space that serves as the headquarters of the
### Denton Record-Chronicle.
In connection with the sale of Denton Publishing Company, owner of the
Denton Record-Chronicle
, to Denton Media Company, Inc., the Company entered into a sublease with Denton Publishing Company for a term ending on
### July30, 2023
While it is anticipated that lease payments will be made on a timely basis there is not a guarantee. If Denton Publishing Company is not able to meet the obligation, the Company may look to alternative sublease arrangements.
In December 2016, the Dallas Morning News, Inc., a wholly-owned subsidiary of the Company, entered into a 16-year lease agreement for office space for the Companys new corporate headquarters. The Company recognizes rent expense on a straight-line basis. Per the amended lease agreement, rent payments began in November 2018.
The Company currently does not expect to make contributions to the A.H. Belo Pension Plans in 2021 and no contributions are required to these plans in 2021 under the applicable tax and labor laws governing pension plan funding.
On March 4, 2021, the Companys board of directors declared a $0.04 per share dividend to shareholders of record as of the close of business on May 14, 2021, which is payable on June 4, 2021.
It em 8.
The consolidated financial statements, together with the Report of Independent Registered Public Accounting Firms, are included herein starting on page
28 of this Annual Report on Form10-K.
It em 9.
None.
### Ite m 9A. Controls and Procedures
Disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) underthe Exchange Act, are controlsthat are designed to ensure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to management, including the Companys Chief Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.In designing disclosure controls and procedures, managementisrequired to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
The Companys management, with the participation of its Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of December31, 2020. Based on that evaluation, management concluded that, as of such date, the Companys disclosure controls and procedures were effective.
The management of A.H.Belo is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act.
The Companys internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Under the supervision and with the participation of management, including the Chief Executive Officer and Principal Financial Officer, an assessment of the effectiveness of internal control over financial reporting was conducted as ofDecember31,2020. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)in Internal Control Integrated Framework (2013).
Based on this assessment using the criteria set forth by COSO in Internal Control Integrated Framework (2013), management concluded that the Companys internal control over financial reporting was effective as of December31, 2020.
### PAGE
Except as related to the material weaknesses and mitigation activities described below
, there have been no changes in the Companys internal control over financial reporting that occurred during the fourth fiscal quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
### Remediation of Prior Year Material Weaknesses
As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, the Company identified material weaknesses in its internal control over financial reporting, which resulted from control deficiencies related to certain process-level controls over the accuracy and occurrence of revenue. In addition, certain process-level controls that were implemented during 2019 to remediate the previously reported material weaknesses related to occurrence of revenue were not operating for a sufficient period of time as of December31, 2019
T he Companys management, with oversight from the Audit Committee of the Board of Directors of the Company, actively engaged in remediation efforts to address these material weaknesses. Management has taken a number of actions to remediate the 2019 material weaknesses including the following:
Enhanced certain process-level controls over the accuracy and occurrence of revenue.
Reviewed the design of all process-level revenue controls and added controls or enhanced controls, as needed.
Completed enhanced training of personnel who have financial reporting or internal control responsibilities in conjunction with the review of the design and operating effectiveness of all revenue controls.
During the fourth quarter of 2020, the Company completed its testing of the new or enhanced controls. Based on the foregoing remediation activities and testing of controls, management determined that the material weaknesses were remediated and the Companys internal control over financial reporting was effective as of December 31, 2020.
### PAGE
PARTIII
Ite m 10.
The information set forth under the headings A.H.Belo Corporation Stock Ownership, ProposalOne: Election of Directors, Corporate Governance Committees of the Board
### Audit Committee,
Corporate Governance Committees of the Board
Nominating and Corporate Governance Committee, and Information About Our Executive Officers contained in the definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be held on May 13, 2021, is incorporated herein by reference.
A.H.Belo has adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees, which can be found at the Companys website, www.ahbelo.com
The Company will post any amendments to the Code of Business Conduct and Ethics, as well as any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, on the Companys website. Information on A.H.Belos website is not incorporated by reference into this Annual Report on Form10-K.
The Companys board of directors adopted Corporate Governance Guidelines and charters for the Audit, Compensation and Management Development, and Nominating and Corporate Governance Committees of the Board of Directors. These documents can be found at the Companys website, www.ahbelo.com
Shareholders can also obtain, without charge, printed copies of any of the materials referred to above by contacting the Company at the following address:
### A.H.Belo Corporation
P. O. Box 224866
Dallas, Texas 75222-4866
### Attn: Investor Relations
Telephone:
(214)977-7342
### Ite m 11. Executive Compensation
The information set forth under the headings Corporate Governance Committees of the Board
Compensation and Management Development Committee,
Executive Compensation Summary Compensation Table, Change in Control Arrangements and Other Agreements Upon Termination of Employment, Potential Payments on Change in Control or Upon Termination of Employment at December31,2020, Corporate Governance Director Compensation contained in the definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be held on May 13, 2021, is incorporated herein by reference.
Ite m 12.
The information set forth under the headings A.H.Belo Corporation Stock Ownership of Directors and Executive Officers and Equity Compensation Plan Information contained in the definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be held on May 13, 2021, is incorporated herein by reference.
Information regarding the number of shares of common stock authorized for issuance under the Companys equity compensation plans is included in the Notes to the Consolidated Financial Statements,
Ite m 13.
The information set forth under the heading Certain Relationships and Related Party Transactions and Corporate Governance Director Independence contained in the definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be held on May13, 2021, is incorporated herein by reference.
### Ite m 14.
The information set forth under the heading ProposalTwo: Ratification of the Appointment of Independent Registered Public Accounting Firm contained in the definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be held on May13,2021, is incorporated herein by reference.
### PAGE
PARTIV
It em 15.<|endoftext|>On investments were as follows:
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of December31, 2020 and 2019, the Company had $141,850 and $83,433, of capital loss carryforwards, respectively, of which $21,448 and $11,142 were short-term capital loss carryforwards, respectively, and $120,402 and $72,291 were long-term capital loss carryforwards, respectively.
### PART IV
Item15.
(a) Documents filed as part of this annual report
The following reports and consolidated financial statements are set forth in Part II, Item8 of the Original Form 10-K:
Consolidated Statements of Assets and Liabilities as of December31, 2020 and 2019
Consolidated Statements of Changes in Net Assets for the years ended December31, 2020, 2019 and 2018
Consolidated Schedules of Investments as of December 31, 2020 and 2019
(b) Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously field with the SEC:
2.1
Contribution Agreement, dated November 3, 2020, by and between TCG BDC, Inc. and Middle Market Credit Fund II, LLC.
(27)
3.1
Articles of Amendment and Restatement
(1)
3.2
Articles of Amendment
(2)
3.3
Articles Supplementary of TCG BDC, Inc.
(28)
3.4
Amended and Restated Bylaws
(3)
3.5
First Amendment to the Amended and Restated Bylaws
(4)
4.1
Form of Subscription Agreement for Private Offerings
(5)
4.2
(31)
4.3
Registration Rights Agreement, dated as of May 5, 2020, by and between TCG BDC, Inc. and Carlyle Investment Management L.L.C.
(29)
10.1
Indenture, dated as of June 26, 2015, between Carlyle GMS Finance MM CLO 2015-1 LLC, as issuer, and State Street Bank and Trust Company, as trustee
(6)
10.2
Dividend Reinvestment Plan for TCG BDC, Inc.
(7)
10.3
Second Amended and Restated Investment Advisory Agreement, dated August 6, 2018, by and between the Company and Carlyle Global Credit Investment Management L.L.C.
(8)
10.4
Custodian Agreement, dated March 21, 2012, between Carlyle GMS Finance, Inc. and State Street Bank and Trust Company, as custodian
(9)
10.5
Administration Agreement, dated as of April 3, 2013 by and between Carlyle GMS Finance, Inc. and Carlyle GMS Finance Administration L.L.C., as administrator
(10)
10.6
(11)
10.7
Loan and Servicing Agreement, dated as of May 24, 2013, among Carlyle GMS Finance SPV LLC, as borrower, Carlyle GMS Finance, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agent and Institutional Lenders party thereto, Citibank, N.A.
(12)
10.8
Senior Secured Revolving Credit Agreement, dated as of March 21, 2014 and Conformed through Amendment No. 5 dated as of June 14, 2019, among Carlyle GMS Finance, Inc., as borrower, the Lenders party thereto, Suntrust Bank, as administrative agent, and JPMorgan Chase Bank, N.A., as syndication agent
(13)
10.9
First Amendment to the Loan and Servicing Agreement, dated as of June 30, 2014, among Carlyle GMS Finance SPV LLC, as borrower, Carlyle GMS Finance, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agent and Institutional Lenders party thereto, Citibank, N.A.
(14)
10.10
Second Amendment to the Loan and Servicing Agreement, dated as of June 19, 2015, among Carlyle GMS Finance SPV LLC, as borrower, Carlyle GMS Finance, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agent and Institutional Lenders party thereto, Citibank, N.A.
(15)
10.11
Collateral Management Agreement, dated as of June 26, 2015, by and between Carlyle GMS Finance MM CLO 2015-1 LLC, as issuer, and Carlyle GMS Investment Management L.L.C., as collateral manager
(16)
10.12
Contribution Agreement, dated as of June 26, 2015, by and between Carlyle GMS Finance, Inc., as the contributor, and Carlyle GMS Finance MM CLO 2015-1 LLC, as the contributee
(17)
10.13
Third Amendment to the Loan and Servicing Agreement, dated as of June 9, 2016, among Carlyle GMS Finance SPV LLC, as borrower, Carlyle GMS Finance, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agent and Institutional Lenders party thereto, Citibank, N.A. , as lead arranger
(18)
10.14
Fourth Amendment to the Loan and Servicing Agreement, dated as of May 26, 2017, among TCG BDC SPV LLC, as borrower, TCG BDC, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agents and Institutional Lenders party thereto, Citibank, N.A. , as lead arranger
(19)
10.15
Second Amended and Restated Limited Liability Company Agreement, dated as of June 24, 2016, between Carlyle GMS Finance, Inc. and Credit Partners USA LLC, as members
(20)
10.16
Agreement and Plan of Merger, dated as of May 3, 2017, between TCG BDC, Inc. and NF Investment Corp.
(21)
10.17
Fifth Amendment to the Loan and Servicing Agreement, dated as of August 9, 2018, among TCG BDC SPV LLC, as borrower, TCG BDC, Inc., as servicer and transferor, each of the Conduit Lenders, Liquidity Banks, Lender Agents and Institutional Lenders party thereto, Citibank, N.A. , as lead arranger
(22)
10.18
First Supplemental Indenture, dated as of August 30, 2018, between Carlyle Direct Lending CLO 2015-1R LLC, as issuer, and State Street Bank and Trust Company, as trustee
(23)
10.19
Note Purchase Agreement, dated December 30, 2019, by and between TCG BDC, Inc.
(24)
10.20
First Supplement to Master Note Purchase Agreement dated as of December 8, 2020, by and between TCG BDC, Inc.
(30)
14.1
Code of Ethics for TCG BDC, Inc.
(25)
14.2
Code of Ethics for Carlyle Global Credit Investment Management L.L.C.
(26)
21.1
List of Subsidiaries
(31)
31.1
Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended with respect to the Original Form 10-K.
(31)
31.2
Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended with respect to the Original Form 10-K.
(31)
31.3
Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended.
*
31.4
Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
*
32.1
Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C.
(31)
32.2
Certification of Chief Financial Officer (Principal Financial Officer) Pursuant to 18 U.S.C.
(31)
99.1
Consolidated Financial Statements of Middle Market Credit Fund, LLC for the years ended December 31, 2020 and 2019.
(31)
*Filed herewith.
(1)Incorporated by reference to Exhibit 3.1 to the Companys Form 10-12G/A filed by the Company on April11, 2013 (File No. 000-54899)
(2)Incorporated by reference to Exhibit 3.2 to the Companys Form 10-K filed by the Company on March22, 2017 (File No. 000-54899)
(3)Incorporated by reference to Exhibit 3.2 to the Companys Form 10-12G/A filed by the Company on April11, 2013 (File No. 000-54899)
(4)Incorporated by reference to Exhibit 3.4 to the Companys Form 10-K filed by the Company on March22, 2017 (File No.000-54899)
(5)Incorporated by reference to Exhibit 4.1 to the Companys Form 10-12G/A filed by the Company on April11, 2013 (File No. 000-54899)
(6)Incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q filed by the Company on August12, 2015 (File No. 814-00995)
(7)Incorporated by reference to Exhibit (e)(1) to the Companys Form N-2 filed by the Company on June 5, 2017 (File No. 333-218114)
(7)Incorporated by reference to Exhibit (e)(2) to the Companys Form N-2 filed by the Company on June 5, 2017 (File No. 333-218114)
(8)Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed by the Company on November6, 2018 (File No.814-00995)
(9)Incorporated by reference to Exhibit (j) to the Companys Registration Statement on Form N-2 filed by the Company on May19, 2017 (File No. 333-218114)
(10)Incorporated by reference to Exhibit 10.2 to the Companys Form 10-12G/A filed by the Company on April 11, 2013 (File No.000-54899)
(11)Incorporated by reference to Exhibit 10.3 to the Companys Form 10-12G/A filed by the Company on April11, 2013 (File No. 000-54899)
(12)Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed by the Company on July31, 2013 (File No.814-00995)
(13)Incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q filed by the Company on August 6, 2019 (File No.814-00995)
(14)Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed by the Company on August13, 2014 (File No.814-00995)
(15)Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed by the Company on August12, 2015 (File No.814-00995)
(16)Incorporated by reference to Exhibit 10.3 to the Companys Form 10-Q filed by the Company on August12, 2015 (File No.814-00995)
(17)Incorporated by reference to Exhibit 10.4 to the Companys Form 10-Q filed by the Company on August12, 2015 (File No.814-00995)
(18)Incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q filed by the Company on August8, 2016 (File No.814-00995)
(19)Incorporated by reference to Exhibit (k)(13) to the Companys Form N-2 filed by the Company on June 5, 2017 (File No. 333-218114)
(20)Incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q filed by the Company on November10, 2016 (File No.814-00995)
(21)Incorporated by reference to Exhibit 2.1 to the Companys Form 8-K filed by the Company on May 9, 2017 (File No. 814-00995)
(22)Incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q filed by the Company on November6, 2018 (File No.814-00995)
(23)Incorporated by reference to Exhibit 10.3 to the Companys Form 10-Q filed by the Company on November6, 2018 (File No.814-00995)
(24)Incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed by the Company on December 30, 2019 (File No.814-00995)
(25)Incorporated by reference to Exhibit 14.1 to the Companys Form 10-K filed by the Company on February 26, 2019 (File No.814-00995)
(26) Incorporated by reference to Exhibit 14.2 to the Companys Form 10-K filed by the Company on February 26, 2019 (File No. 814-00995)
(27) Incorporated by reference to Exhibit 2.1 to the Companys Form 8-K filed by the Company on November 4, 2020 (File No. 814-00995)
(28) Incorporated by reference to Exhibit 3.1 to the Companys Form 10-Q filed by the Company on May 5, 2020 (File No. 814-00995)
(29) Incorporated by reference to Exhibit 4.1 to the Companys Form 10-Q filed by the Company on May 5, 2020 (File No. 814-00995)
(30) Incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filed by the Company on December 11, 2020 (File No. 814-00995)
(31)Incorporated by reference to the Companys Form 10-K filed by the Company on February 23, 2021.
(c) Consolidated Financial Statement Schedules
Separate financial statements of subsidiaries not consolidated:
Consolidated Financial Statements of Middle Market Credit Fund, LLC for the years ended December31, 2020 and 2019 are filed as Exhibit 99.1 to the Original Form 10-K. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Overtime Compensation has been determined based on the Companys estimation of the average of overtime hours per month that the Employees position may require.
The Company granted Mr. Ben-Zvi annual award of NIS 210 thousand worth (approximately $ 61 thousand) of restricted stock units (the RSU) effective as of the employee Start Date and on each one-year anniversary following the employee Start Date subject to the approval of the board of directors (the additional RSU). The RSU and each of the Additional RSU (if approved by the board of directors), as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$ 0.40 per share). 1/12 of the RSUs shall vest and become nonforfeitable three months following the Start Date, and an additional 1/12 of the RSUs shall vest and become nonforfeitable at the end of every 3-months period thereafter, provided that the employee continues to be employed by the Company at the applicable date of vesting. The vesting schedule shall be also applied to each of the Additional RSUs granted, mutatis mutandis, such that the vesting period of each of the respective Additional RSU shall commence from its actual date of grant.
### Shalom Shushan
Integrity Applications, Ltd., a wholly owned subsidiary of the Company, entered into an employment agreement with Mr. Shushan as of November 9, 2020. The summary terms of the employment agreement are as follows:
The Employee shall be entitled to a gross monthly salary of NIS 41,250 (the
### Base Salary).
In addition, in consideration for overtime hours that the Employee may work during the month the Employee shall receive a global payment of NIS 13,750 per month (the
Global Overtime Compensation, and together with the Base Salary, the S alary).
The Global Overtime Compensation has been determined based on Companys knowledgeable estimation of the average of overtime hours per month that the Employees position requires. The Employee shall have 23 annual vacation days.
Subject to the terms and conditions of the Company Share Incentive Plan, as amended and restated from time to time (the
Plan), the Company shall recommend the Board of Directors of the Parent (the
Parent Board) to grant the Employee one time award (the
Award) of NIS 90,000 worth of restricted stock units (the
RSU) effective as of the Start Date. Furthermore, on each one-year anniversary following the Start Date, Company shall grant the Employee with NIS 60,000 worth of restricted stock units (the
### Additional RSU
). Both the RSU and each of the Additional RSU, as applicable, shall be based on the stock price at actual the date of grant (and not lower than US$ 0.40 per share). The vesting schedule shall be also applied to each of the Additional RSUs granted to the Employee, mutatis mutandis, such that the vesting period of each of the respective Additional RSU shall commence from its actual date of grant.
Employee will participate in the annual incentive plan at a level target of up to NIS 60,000 based on the achievement of certain company and individual performance metrics as determined by the Companys Board of Directors. Company shall have the full discretion to amend and\or cancel the Bonus Plan suggested at any time, at its sole discretion.
### Jolie Kahn
The Company also entered into a Consulting Agreement with Ms. Kahn for her services as Interim CFO. She is compensated $10,000 per month for her services. The Agreement was for an initial term of six months which expired on January 31, 2020 and was renewed by the Company on February 5, 2020 for an additional six month term and may be further extended for successive six-month terms and may be terminated by either party on 30 days notice.
The following table sets forth for each of Integritys named executive officers certain information regarding unexercised options as of December 31, 2020:
### DIRECTOR COMPENSATION
The following table sets forth information with respect to the compensation of our directors as of December 31, 2020:
(1) The Board agreed to take seventy-five percent of all compensation for 2020 in stock calculated at the end of each calendar quarter based upon a 10 day volume weighted average price formula as follows:
The Companys Board fee schedule is as follows:
The following table sets forth certain information regarding the ownership of our Common Stock within 60 days of April 30, 2021 by: each person known to us to be the beneficial owner of more than 5% of our outstanding shares of common stock; each of our named executive officers and our current directors;
Except as otherwise indicated below, the address of each beneficial owner listed in the table is c/o Integrity Application Inc., 19 HaYahlomim Street, Ashdod Israel.
Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is based on 200,781,596 shares of common stock outstanding on April 30, 2021. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed as outstanding shares of common stock subject to options held by that person that are currently exercisable or exercisable within 60 days of April 30, 2021. We did not deem these exercisable shares outstanding, however, for the purpose of computing the percentage ownership of any other person. The applicable footnotes are an integral part of the table and should be carefully read in order to understand the actual ownership of our securities, particularly by the 5% stockholders listed in the table.
(1) Ownership includes (i) 412,523 shares of Common Stock owned individually, and (ii) 43,103 owned jointly by Dr. Fischell and his wife. All the options to purchase an aggregate of 41,560 shares of Common Stock granted to Dr. Fischell under the Incentive Plan, will be deemed vested within 60 days of April 30, 2021
(2) Options deemed vested within 60 days of April 30, 2021. In addition to vested options, this number also includes 239,975 shares of Common Stock owned by Mr. Malka.
(3) SDR Diversified Holdings, LLC, an entity owned by Leah Rapps, the wife of Shimon Rapps, owns 46,511 shares of common stock and 15,945,222 warrants to purchase shares of our Common Stock. Leah Rapps has voting control and investment power over SDR Diversified Holdings, LLC. Ms. Rapps also owns 27,285 shares in her personal name. Mr. Rapps disclaims beneficial ownership in the shares and warrants held by his wife and by SDR Diversified Holdings, LLC.
(4) Ownership includes: (i) 106,221 shares of common stock owned by Mr. Sycoff; (ii) 387,596 shares of common stock owned by Andrew Garrett, Inc; and (iii) 1,846,914 shares of common stock issuable upon the exercise of warrants owned by Andrew Garrett, Inc. Mr. Sycoff has voting power and investment control over the shares of common stock held by Andrew Garrett, Inc. Alma Diversified Holdings LLC, an entity owned by Sharon Sycoff, the wife of Mr. Sycoff owns (i) 977,510 shares of common stock; and (ii) 39,173,244 shares of common stock issuable upon the exercise of warrants. Sharon Sycoff has voting power and investment control over the shares and warrants held by Alma Diversified Holdings LLC and Mr. Sycoff disclaims beneficial ownership in the shares and warrants held by Alma Diversified Holdings LLC.
(5) In addition, the John A. Ballantyne Revocable Trust 08/01/2017 owns additional shares of common stock acquirable within 60 days, each of which is subject to a Blocker Limitation. However, the percentage ownership by the John A. Ballantyne Revocable Trust 08/01/2017 is currently in excess of such Blocker Limitations, and as a result, such Blocker Securities have been excluded from the table. These Blocker Securities consist of the following: 4,923,336 warrants. Mr. Ballantyne owns 17,408 shares in his personal name and 66,284,003 shares in the Trust. The address of John A. Ballantyne Rev Trust 08/01/2017 is 1101 28th Avenue, South Fargo, ND 58103. John A. Ballantyne has voting and investment control over the shares held by John A. Ballantyne Rev Trust 08/01/2017.
* Less than 1% ownership.
### Changes in Control
There are no arrangements known to the Company the operation of which may at a subsequent date result in a change in control of the Company.
Item 13.
Except as set forth below, Integrity is not aware of any transactions since the beginning of its last fiscal year or any proposed transactions in which Integrity was or is a party, in which (1) the amount involved exceeded the lesser of $120,000 or 1% of the average of Integritys total assets at year-end for the last two completed fiscal years and (2) in which a director, director nominee, executive officer, holder of more than 5% of Integritys Common Stock or Preferred Stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest.
In 2020, Andrew Garrett, Inc., which is controlled by one of our directors, Andrew Sycoff, received from us, cash of $1,980,000 ($1,950,000 for Placement Agent fees relating to our 2020 private placement and $30,000 for Advisory fees that were earned in 2019) and 3,750,000 warrants for Placement Agent fees relating to our 2020 private placement.
### Director Independence
Integrity is not currently listed on any national securities exchange. As a result, Integrity is not subject to the requirements of any securities exchange providing that a majority of the Board of Directors must be comprised of independent directors. Nevertheless, the Board has applied the independence rules of the NYSE American (formerly NYSE MKT) to determine the independence of its directors. The independence rules of the NYSE American include a series of objective tests, including that an independent person will not be employed by Integrity and will not be engaged in various types of business dealings with Integrity. Applying these rules and based on representations from the directors with respect to their independence thereunder, the Board has determined that each of the current members of Integritys Board of Directors is independent, except for Mr. Sycoff, and, therefore, a majority of the members of the Board are independent directors.
Audit Fees
Fees for services rendered by Fahn Kanne & Co. (Fahn Kanne) for professional services rendered for the 2020 and 2019 audit of our annual financial statements, review of financial statements included in quarterly reports on Form 10-Q in 2020 and 2019 and out of pocket expenses, totaled approximately $72,000 and $60,000 for 2020 and 2019, respectively.
### Tax Fees
Integrity did not pay Fahn Kanne any fees in 2019 and paid $7500 in 2020 for assurance and related services reasonably related to the performance of the audit or review of the Integritys financial statements.
All Other Fees
Integrity did not pay any other fees to Fahn Kanne in 2020 or 2019.
Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Board is solely responsible for the pre-approval of all audit and non-audit services to be provided by the independent accountants. The Board approved all of the fees paid to Fahn Kanne for the years ended December 31, 2020 and 2019.
### PART IV
Item 15.<|endoftext|>Each Named Executive Officer is eligible to receive lump sum payments of: (1) up to a maximum of two years Total compensation as reported in the Summary Compensation Table; (2) a transaction bonus (which range up to $250,000 per Named Executive Officer); (3) three years medical premiums (which range up to $115,000 per Named Executive Officer); (4) accelerated benefits under the Executive Retirement Plan Salary Component as more fully described under Non-Qualified Executive Retirement Plan; and (5) tax gross-up payments to cover excise taxes under IRC Section 280G which as of December 31, 2020 are estimated as follows: Mr. Steinwert $0; Mr. Haley $0; Ms. Skinner $0; Mr. Smith $0; Mr. Colombini $0; Mr. Misasi $0; and Mr. Zitterow $0.
### Employment Contracts
The Company has employment agreements with each of its Named Executive Officers. These agreements are generally structured for an initial three year period and then renew automatically for successive two year terms unless terminated by either party. The agreements provide for (i) a base salary (see Summary Compensation Table), (ii) salary increases at the discretion of the Board of Directors based upon performance, (iii) participation in the Companys annual performance-based bonus program, (iv) participation in certain non-qualified deferred compensation and retirement plans, (v) use of a Company-owned automobile or automobile allowance, and (vi) certain insurance benefits. Under certain circumstances, in the event of termination of employment, each Named Executive Officer may be entitled to receive severance compensation (see Post Termination Compensation).
Report of the Personnel Committee of the Board of Directors on Executive Compensation
The Personnel Committee has reviewed the Compensation Discussion & Analysis included herein with management and based upon those reviews and discussions has recommended to the Board of Directors that the Compensation Discussion & Analysis be included in this Amendment No. 1 to the Companys annual report on Form 10-K.
Respectfully Submitted
,
### Edward Corum Jr., Chairman
Stephenson K. Green
Kevin Sanguinetti
Messrs. Sanguinetti, Corum and Green served in 2020 as members of the Personnel Committee. During 2020, certain members of the Personnel Committee had loans or other extensions of credit outstanding from the Bank. These loans were made in the ordinary course of business and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company or Bank. These loans are exempt from the loan prohibitions of the Sarbanes-Oxley Act of 2002 and did not involve more than the normal risk of collection or have other unfavorable features.
The following tables provide details regarding the various forms of remuneration paid by the Company for the services performed in all capacities by each Named Executive Officer.
Since the Company does not offer: (1) stock options or other stock-based compensation; or (2) defined benefit plans, the following tables are not included herein: Grants of Plan-Based Awards, Outstanding Equity Awards at Fiscal Year-End, Option Exercises and Stock Vesting and Pension Benefits.
### Pay Ratio Disclosure
Pursuant to Item 402 of Regulation S-K the Company is required to disclose: (1) the median of the annual total compensation (defined as Wages, Tips and Other Compensation as reported in Box 1 of a W-2 form plus any fringe benefits not subject to federal income tax) of all employees (defined as those employees on the payroll as of December 31 st of the year) except the Principal Executive Officer (Mr. Steinwert), which during 2020 was $72,161; and (ii) the ratio of the Principal Executive Officers total compensation (as reported on the Summary Compensation Table) to the median annual total compensation of all employees except the Principal Executive Officer, which during 2020 was 64.1 to 1.
To determine the median of the annual total compensation of all employees of the Company (other than our Principal Executive Officer), we identified our total employee population as of December 31, 2020, which consisted of 383 individuals. As permitted by the disclosure rules, we annualized the compensation for any employees that were not employed by us for all of 2020. To identify the median employee we conducted a full analysis of this employee population, without the use of statistical sampling. After identifying the median employee, we calculated annual total compensation for such employee using the same methodology we use for our named executive officers as set forth in the 2020 Summary Compensation Table.
(1) Includes base salary, unused vacation pay, car allowance and annual bonus. See Annual Compensation Program and Employment Contracts.
All earnings on Non-Qualified Deferred Compensation Plan balances are assumed to be at market rates (see Footnote 4 in the Non-Qualified Deferred Compensation Table).
(4) See All Other Compensation Table for additional details.
(1) Certain executives receive a car allowance as opposed to the use of a company car. Car allowance amounts are included in Salary in the Summary Compensation Table.
(2) Represent tax gross-up payments to reimburse executive for split-dollar life insurance premiums under the Companys BOLI program.
(3) Includes Non-Qualified Executive Retirement Plan contributions for the current year. Investment earnings or losses generated from investing prior year balances are reflected in the Non-Qualified Deferred Compensation Table.
(4) Includes contributions to the Companys Profit Sharing Plan.
(Includes both vested and unvested balances - see Footnote 1)
(1) The Company expenses all deferred compensation in the year earned, even if it is not yet vested. As of December 31, 2020 all balances were vested with the exception of Jay Colombini ($16,088). See Post Termination Compensation for details regarding unvested balances upon the occurrence of certain triggering events.
(2) Includes voluntary deferrals of earned salary or annual bonus. The Company's Deferred Compensation Plan was terminated in 2016 and all balances distributed to participants.
(3) Includes Company contributions. See Non-Qualified Executive Retirement Plan for details regarding the types of compensation deferred, measures of calculating plan earnings and terms of payouts, withdrawals and other distributions. Current year contributions are included in the All Other Compensation Table.
(4) All balances are held in a Master Trust which is subject to the claims of the Company's creditors in the event of insolvency. Participants can then work with the investment manager(s) to request investment of their vested balances according to their own risk profile, with no guarantees of principal provided by the Company.
(5) Represents the cumulative amount of the current and all previous years' contributions and earnings or losses.
ITEM 12.
To the knowledge of the Company, as of April 22, 2021, no person or entity was the beneficial owner of more than five percent (5%) of the outstanding shares of the Companys common stock except as set forth in the following tables. For the purpose of this disclosure and the disclosure of ownership shares by management, shares are considered to be beneficially owned if the person has or shares the power to vote or direct the voting of the shares, the power to dispose of or direct the disposition of the shares, or the right to acquire beneficial ownership (as so defined) within 60 days of April 22, 2021. The percentage ownership data is based on 789,646 shares of our common stock outstanding at April 22, 2021.
(1) Mail should be sent to this individual at the Companys address marked c/o Stockholder Relations.
The following table shows the number of common shares and the percentage of the total shares of common stock of the Company beneficially owned by each of the current Directors, by the Named Executive Officers and by all Directors and Named Executive Officers of the Company and of the Bank as a group, as of April 22, 2021.
*
Indicates less than 1%.
(1)
Mail should be sent to these individuals at the Companys address marked c/o Stockholder Relations.
(2)
Shares are beneficially owned, directly and indirectly, together with spouses, and, unless otherwise indicated, holders share voting power with their spouses. None of the shares are pledged.
ITEM 13.
Certain Directors and Named Executive Officers of the Bank and the Company and corporations and other organizations associated with them and members of their immediate families were customers of and engaged in banking transactions, including loans, with the Bank in the ordinary course of business in 2020. Such loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with borrowers not related to the Company or Bank. These loans did not involve more than the normal risk of collection or have other unfavorable features. All Director and Named Executive Officer loans must be approved by the Board of Directors. With the exception of the previous banking transactions, the Company had no Related Person Transactions as defined by Item 407(a) of Regulation S-K with its Directors or Named Executive Officers.
### Director Independence
The Company uses Rule 5605(a)(2) of the Nasdaqs current listing rules to determine whether a Director is independent. With the exception of Mr. Steinwert who is currently an employee of the Company, all Directors are considered to be independent. For more information about factors considered, see Item 10 of this Amendment.
ITEM 14.
Audit Fees
The aggregate fees billed by Moss Adams LLP for performance of the audit and review of the Companys quarterly and annual financial statements for fiscal year 2019 were $259,900 and fiscal year 2020 were $305,000.
### Audit-Related Fees
The aggregate fees billed by Moss Adams LLP for services that were reasonably related to the performance of the audit and review of the Companys quarterly and annual financial statements for fiscal year 2019 were $40,019 and fiscal year 2020 were $39,492.
Tax Fees
The aggregate fees billed by Moss Adams LLP for professional services for tax compliance, tax advice and tax planning for fiscal year 2019 were $59,595 and fiscal year 2020 were $37,957.
### All Other Fees
There were no other fees billed by Moss Adams LLP in 2019 or 2020.
Pre-approval of Services by the Companys External Auditor
The Audit Committee will consider annually and, if appropriate, approve the provision of audit services by its independent auditor and consider, and if appropriate, pre-approve the provision of certain defined audit and non-audit services. The Audit Committee will also consider on a case-by-case basis and, if appropriate, approve specific engagements that are not otherwise pre-approved.
Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee or one or more of its members. The member or members to whom such authority is delegated shall report any specific approval of services at its next regular meeting. The Audit Committee will regularly review summary reports detailing all services being provided by its external auditor.
PART IV
ITEM 15.
(a)(3)
Exhibits | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical Investment
### Director
Director
Director
### Director
Director
Director
### Director
Director
Managing Director
### Ed Hurwitz
MacroGenics, Inc.
Applied Genetic Technologies Corporation
Viewpoint Therapeutics, Inc.
BioIntervene, Inc.
### Protego Biopharma
Dyne Therapeutics, Inc.
ReCode Therapeutics, Inc.
Rekindle Therapeutics, Inc.
MPM
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical Investment
### Director
Director
Director
### Director
Director
Director
### Director
Director
Managing Director
### Vinay Bhaskar
Amphivena Therapeutics, Inc.
Tizona Therapeutics, Inc.
MPM
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical Investment
### Director
Director
Partner
### Individual
Entity
Entitys Business
### Affiliation
Matthew Roden
Aktis Oncology, Inc.
iTeos Therapeutics, Inc.
NextPoint Therapeutics, Inc.
MPM
### Biopharmaceutical
Biopharmaceutical
Biopharmaceutical
Biopharmaceutical Investment
CEO
### Director
Director
Director
### David Meeker
Rhythm Pharmaceuticals
Biopharmaceutical
MyoKardia
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### Biopharmaceutical
Biopharmaceuticals
Director
### Director
Andrew Robbins
Cogent Biosciences, Inc.
### Biopharmaceuticals
Harpoon Therapeutics
### Biopharmaceutical
Director
Mitchell Finer
Oncorus, Inc.
CODA Biotherapeutics, Inc.
### ElevateBio LLC
Biopharmaceutical
Biopharmaceutical
### Biopharmaceutical
ExecutiveChairman
Director
Chief Scientific Officer
MPM
Executive Partner
TCR2 Therapeutics, Inc.
### Biopharmaceutical
Scientific Advisory Board Member
Pablo Cagnoni
Fusion Pharmaceuticals, Inc.
Repertoire Immune Medicines, Inc.
### Tizona Therapeutics
Biopharmaceuticals
Biopharmaceutical
### Biopharmaceutical
Director
Director
### Director
Rubius Therapeutics, Inc.
Biopharmaceutical
### President, CEO and
Director
Synthekine
### Biopharmaceutical
Director
Holders of our ClassA Ordinary shares should also be aware of the following other potential conflicts of interest.
With certain limited exceptions, the private placement units, the private placement shares, the private placement units and the ClassA ordinary shares underlying such warrants, will not be transferable until 30 days following the completion of our initial business combination. Because each of our executive officers and director nominees will own ordinary shares or warrant directly or indirectly, they may have a conflict of interest in determining whether a particular target business is an appropriate business with which to effectuate our initial business combination.
Any such accompanies may present additional conflicts of interest in pursuing an acquisition target, particularly in the event there is overlap among investment mandates.
Furthermore, in no event will our sponsor or any of our existing officers or directors, or their respective affiliates be paid by us any finders fee, consulting fee, or other compensation prior to, or for any services they render, in order to effectuate the completion of our initial business combination other than the annual cash retainer and bonus for non-employee directors and the Chairman described above under the section titled -Executive Officer and Director Compensation. Further, we reimburse an affiliate of our sponsor for office space, secretarial and administrative services provided to us in the amount of $10,000 per month.
We have entered into agreements with our directors and officers to provide contractual indemnification in addition to the indemnification provided for in our amended and restated memorandum and articles of association.
Item11.
### Executive Compensation.
None of our executive officers or directors have received any cash compensation for services rendered to us, other than (i)our non-employee directors who receive an annual cash retainer of $20,000 and an one-time cash payment of $30,000 to be paid upon the consummation of our initial business combination and (ii)Matthew Roden, as Chairman, receives an annual cash retainer of $40,000 and will receive a one-time cash payment of $60,000 to be paid upon the consummation of our initial business combination.
### Item12.
The following table does not reflect record or beneficial ownership of the private warrants as these warrants are not exercisable within 60 days of March30, 2020.
*
Less than one percent
(1)
Unless otherwise noted, the business address of each of our shareholders is 450 Kendall Street, Cambridge, Massachusetts 02142.
(2)
(3)
Our sponsor is governed by a board of directors consisting of one director, Dr.Evnin. As such, Dr.Evnin has voting and investment discretion with respect to the ClassB ordinary shares held of record by our sponsor and may be deemed to have shared beneficial ownership of the ClassB ordinary shares held directly by our sponsor.
(4)
Sculptor Capital LP (Sculptor) serves as the principal investment manager to a number of investment funds and discretionary accounts (collectively, the Accounts) and thus may be deemed to be the beneficial owner of the ordinary shares of the Company held in the Accounts managed by Sculptor. As such, SCHC may be deemed to control Sculptor and, therefore, may be deemed to be the beneficial owner of the Ordinary Shares reported in this Schedule 13G. (SCU) is the sole shareholder of SCHC, and may be deemed to be the beneficial owner of the ordinary shares of the Company. The business address of Sculptor is 9 West 57th Street, New York, New York 10019.
(5)
The shares reported above are held by Glazer Capital, LLC (Glazer Capital) on behalf of certain funds and managed accounts to which Glazer Capital serves as investment manager (collectively, the Glazer Funds). Mr.PaulJ. Glazer (Mr.Glazer) serves as the Managing Member of Glazer Capital, with respect to the shares held by the Glazer Funds, and may be deemed to be the beneficial owner of the ordinary shares of the Company. The business address of Glazer Capital is 250 West 55th Street, Suite 30A, New York, New York 10019.
Transfers of Founders shares and Private Placement Units
The founder shares, private placement units, the private placement units and any ClassA ordinary shares issued upon conversion or exercise thereof are each subject to transfer restrictions pursuant to lock-up provisions in the agreement entered into by our sponsor and management team. Our sponsor and each member of our management team have agreed not to transfer, assign or sell (i)any of their founder shares until the earliest of (a)one year after the completion of our initial business combination and (b)subsequent to our initial business combination, (x)if the closing price of our ClassA ordinary shares equals or exceeds $12.00 per share (as adjusted for share subdivisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading day period commencing at least 150 days after our initial business combination or (y)the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our public shareholders having the right to exchange their ClassA ordinary shares for cash, securities or other property, and (ii)any of their private placement units, private placement shares, private placement units and ClassA ordinary shares issued upon conversion or exercise thereof until 30 days after the completion of our initial business combination. The private placement units and the respective ClassA ordinary shares underlying such warrants are not transferable or salable until 30 days after the completion of our initial business combination. (e)by private sales or transfers made in connection with the consummation of a business combination at prices no greater than the price at which the founder shares, private placement units or ClassA ordinary shares, as applicable, were originally purchased;
Item13.
On September1, 2020, the sponsor paid $25,000, or approximately $0.01 per share, to cover certain of our expenses in consideration of 2,875,000 ClassB ordinary shares, par value $0.0001. On October12, 2020, our sponsor effected a surrender of 431,250 founder shares to the company for no consideration, resulting in a decrease in the total number of ClassB ordinary shares outstanding from 2,875,000 to 2,443,750 such that the total number of founder shares would represent 20% of the total number of ordinary shares (excluding the private placement shares).
Our sponsor and its affiliates purchased 415,500 private placement units for a purchase price of $10.00 per unit in a private placement that occurred simultaneously with the closing of our Initial Public Offering. Our sponsors interest in this transaction is valued at $4,155,000. The private placement units (including the private placement shares, private placement units and ClassA ordinary shares issued upon the exercise or conversion thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder.
No compensation of any kind, including finders and consulting fees, will be paid to our sponsor, officers and directors, or their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination, other than the annual cash retainer and bonus for non-employee directors and the Chairman described Item 11 of this Annual Report.
The warrants would be identical to the private placement units, including as to exercise price, exercisability and exercise period.
We entered into a registration and shareholder rights agreement pursuant to which our initial shareholders, and their permitted transferees, if any, are entitled to certain registration rights with respect to the private placement units, the private placement shares, the private placement units, the securities issuable upon conversion of working capital loans (if any) and the ClassA ordinary shares issuable upon exercise of the foregoing and upon conversion of the founder shares, and, upon consummation of our initial business combination, to nominate three individuals for appointment to our board of directors.
The audit committee of our board of directors will adopt a charter, providing for the review, approval and/or ratification of related party transactions, which are those transactions required to be disclosed pursuant to Item 404 of Regulation
### Director Independence
Our board of directors has determined that Pablo Cagnoni, David Meeker and Andrew Robbins are independent directors as defined in the Nasdaq listing standards.
Item14.
Audit Fees
The aggregate fees billed by Withum for audit fees, inclusive of required filings with the SEC for the period from August28, 2020 (inception) through December31, 2020, and of services rendered in connection with our initial public offering, totaled $85,490.
### Audit-Related Fees
We did not pay Withum any audit-related fees during the period from August28, 2020 (inception) through December31, 2020.
### Tax Fees
We did not pay Withum any tax fees during the period from August28, 2020 (inception) through December31, 2020.
All Other Fees
We did not pay Withum any other fees during the period from August28, 2020 (inception) through December31, 2020.
### Pre-Approval
Policy.
### PART IV
Item15.<|endoftext|>To purchase shares of common stock held by Linda W. Cyr 2020 Irrevocable Trust for Descendant.
(5)
Includes 25,173 shares of common stock held by Mr. Norris directly, 503,568 shares of common stock held by Norris Trust Ltd 6/18/02, 30,000 shares of common stock held by the Charles Norris 2020 Annuity Trust and 30,000 shares held by the Margaret Norris 2020 Annuity Trust.
(6)
Includes 151,188 shares of common stock held directly by Mr. Kassar and 50,000 shares of common stock held by Richard Kassar 2020 GRAT.
(7)
Excludes Mr. Kassar, as he is no longer an executive officer of the Company.
The Company administers three current equity compensation plans: our 2014 Plan, a 2016 inducement stock option grant to Mr.Cyr and a 2020 inducement stock option grant to Ms. Pomerantz. The Company also administers two legacy equity compensation plans: our 2010 Stock Option Plan (or 2010 plan) and our 2006 Stock Incentive Plan (or 2006 Plan). The following table provides information as of December 31, 2020 regarding shares of our common stock that may be issued under the plans.
Plan Category
### Number of Securities to be Issued
Upon Exercise of Outstanding
Options, Warrants, and Rights
(#)
(a)
### Weighted-Average Exercise Price of
Outstanding Options, Warrants, and
Rights
($)
(b)(1)
### Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans (Excluding
Securities Reflected in Column (a))
(#)
(c)
2,631,697 (2)
78.15
1,015,000 (3)
10.98
### Total
$59.45
(1)
RSUs reflected in column (a) are not reflected in these weighted-average exercise prices.
(2)
Includes 2,404,926 options outstanding under our 2014 Plan with a weighted average exercise price of $78.92; 193,185 RSUs outstanding under our 2014 Plan; and 26,130 options outstanding under our 2010 Plan with a weighted average exercise price of $7.10.
(3)
Reflects a September 2016 inducement grant to our CEO, Mr. Cyr, and a January 2020 inducement grant to our CFO, Ms. Pomerantz, which grants are described below.
2014 Omnibus Plan
Our 2014 Plan was adopted by the Board in connection with our initial public offering and approved by our stockholders in October 2014. Upon the adoption of our 2014 Plan, we discontinued our 2010 Plan, as described below.
Inducement Grant to Mr.
Cyr
In September 2016, we granted our CEO, Mr.Cyr, an inducement grant of stock options in accordance with the Nasdaq Marketplace Rules. Mr.Cyrs inducement grant consisted of 500,000 performance-vesting options and 500,000 time-vesting options.
Inducement Grant to Ms.
### Pomerantz
In January 2020, we granted our CFO, Ms. Pomerantz, an inducement grant of stock options in accordance with the Nasdaq Marketplace Rules. Ms. Pomerantzs inducement grant consisted of 15,000 time-vesting options.
2010 Stock Option Plan
Our 2010 Plan was adopted by the Board and approved by our stockholders in December 2010. Our 2010 Plan allowed for the grant of tax-qualified incentive stock options and nonstatutory stock options to our employees, officers, directors, consultants, and advisors. We discontinued our 2010 Plan in March 2014 and no new awards have been granted under the plan since that time. Any award outstanding under our 2010 Plan at the time of its discontinuance will remain in effect until the award is exercised or has expired in accordance with its terms.
ITEM
13.
Procedures for Approval of Related Party Transactions
There are no related person transactions that require reporting under SEC rules. Our Board of Directors has adopted a written related party transaction policy, which sets forth the policies and procedures for the review and approval or ratification of related party transactions. This policy is administrated by our Audit Committee. These policies provide that, in determining whether or not to recommend the initial approval or ratification of a related party transaction, the relevant facts and circumstances available shall be considered, including, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related partys interest in the transaction.
### DIRECTOR INDEPENDENCE
See Item 10. Directors, Executive Officers and Corporate Governanceand Item 10. Directors, Executive Officers and Corporate GovernanceBoard Committees.
ITEM
14.
Fees for Services Rendered by Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by our current independent registered public accounting firm for the fiscal years ended December31, 2020 and 2019.
(1)
Audit Fees:These fees include fees related to the audit of the Companys annual financial statements and review of the Companys quarterly financial statements as well as services that are normally provided by independent registered public accounting firms in connection with statutory and regulatory filings or engagements.
(2)
Audit-Related Fees:Audit-related fees are for assurance and related services including, among others, due diligence services and consultation concerning financial accounting and reporting standards. Additionally, fees include services in connection with the Companys filing of a registration statement and preparation of a comfort letter in connection with a secondary offering.
(3)
KPMGs Accounting Research Online (ARO) Subscription.
Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services
Performed by the Independent Registered Public Accounting Firm
The Audit Committees policy is to pre-approve all audit and permissible non-audit services provided by the independent auditor and to not engage the independent auditor to perform the non-audit services proscribed by law or regulation. The Audit Committee may adopt pre-approval policies and procedures detailed as to particular services and delegate pre-approval authority to a member of the Audit Committee. The decisions of any Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee at its next scheduled meeting.
All services provided by KPMG, LLP for 2020 and 2019 were pre-approved by the Audit Committee.
PART IV
ITEM
15.
(1)
Financial StatementsAll financial statements are omitted for the reason that they are not required or the information is otherwise supplied in Item 8. Financial Statements and Supplementary Datain the 2020 10-K filed on February 22, 2021.
(2)
(3)
ExhibitsThe exhibits listed on the accompanying Exhibit Index are filed or incorporated by reference as part of this report.
### EXHIBIT INDEX
Exhibit No.
Description
3.1
FourthAmended and Restated Certificate of Incorporation of Freshpet, Inc. (Incorporated by reference to Exhibit 3.1 to the Company s Current Report on Form 8-K, filed with the SEC on September 25, 2020)
3.2
Amended and Restated Bylaws (incorporated by reference to the Company s Registration on Form S-8 filed on December 12, 2014)
4.1
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
10.1
Fifth Amended and Restated Loan and Security Agreement Amendment, dated April 17, 2020, by and among the Company and City National Bank, a national banking association, as the arranger and administrative agent, and the lenders thereto (incorporated by reference to the Company s Current Report on Form 8-K filed with the SEC on April 20, 2020)
10.2
Sixth Amended and Restated Loan and Security Agreement Amendment, dated February 19, 2021, by and among the Company and City National Bank, a national banking association, as the arranger and administrative agent, and the lenders thereto (incorporated by reference to the Company s Current Report on Form 8-K filed with the SEC on February 19, 2021)
10.3
Freshpet, Inc. Second Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to the Company s Registration Statement on Form S-8, filed with the SEC on October 7, 2020)
10.4
Amendment to Freshpet, Inc. Second Amended and Restated 2014 Omnibus Incentive Plan (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
10.5
Professor Connor s, Inc. 2010 Stock Option Plan (incorporated by reference to the Company s Registration on Form S-8 filed on December 12, 2014)
10.6
Professor Connor s, Inc. 2006 Stock Plan (incorporated by reference to the Company s Registration on Form S-8 filed on December 12, 2014)
10.7
Form of Restricted Stock Agreement Pursuant to the Freshpet, Inc.
10.8
Form of Restricted Stock Unit Agreement Pursuant to the Freshpet, Inc.
10.9
Form of Incentive Stock Option Agreement Pursuant to the Freshpet, Inc.
10.10
Form of Nonqualified Stock Option Agreement Pursuant to the Freshpet, Inc.
10.11
Form of Stock Appreciation Rights Agreement Pursuant to the Freshpet, Inc.
10.12
Summary of Non-Employee Director Compensation Arrangements (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
10.13
Employment Agreement, dated as of July 27, 2016, by and between Freshpet, Inc. and William B. Cyr (incorporated by reference to Exhibit 10.1 to the Company s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016)
10.14
Form of Employment Agreement between Scott Morris and Freshpet, Inc.
10.15
Offer Letter Agreement, dated as of December 16, 2019, by and between Freshpet, Inc. and Heather Pomerantz (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
10.16
Employment Agreement, dated as of July 6, 2015, by and between Freshpet, Inc. and Stephen Weise (incorporated by reference to Exhibit 10.18 to the Company s 10-K, Amendment No.1, filed on April 30, 2019)
10.17
Form of Employment Agreement between Cathal Walsh and Freshpet, Inc.
10.18
and William B. Cyr, dated September 6, 2016 (incorporated by reference to Exhibit 99.1 to the Company's Registration Statement on Form S-8, filed with the SEC on October 7, 2020)
10.19
and Heather Pomerantz, dated January 12, 2020 (incorporated by reference to Exhibit 99.1 to the Company s Registration Statement on Form S-8, filed with the SEC on October 7, 2020)
10.20
Form of Indemnification Agreement between Freshpet, Inc. and each of its directors and executive officers
21.1
List of Subsidiaries (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
23.1
Consent of KPMG LLP (incorporated by reference to the Company s Annual Report on Form 10-K filed on February 22, 2021)
31.1
31.2
31.3*
Certificationof Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to the Registrants Amendment No.
31.4*
Certificationof Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, relating to the Registrants Amendment No.
32.1
Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
101.SCH
Inline XBRL Schema Documents
101.CAL
Inline XBRL Calculation Linkbase Document
101.LAB
Inline XBRL Labels Linkbase Document
101.PRE
Inline XBRL Presentation Linkbase Document
101.DEF
### Inline XBRL Definition Linkbase Document
Inline XBRL Formatted Cover Page
*
### Filed herewith.
Filed as an exhibit to the 2020 10-K, filed on February 22, 2021. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
44,104,541 shares of Class A Common Stock issued and outstanding as of April 1, 2021.
(5)
The percentage is based upon 34,443,898 shares of Class B Common Stock issued and outstanding as of April 1, 2021.
(6)
462,369 shares are held in the name of Azure Energy, LLC (Azure). Mr. Lodzinski disclaims beneficial ownership of the shares held by Azure, except to the extent of his pecuniary interests therein.
(7)
Two affiliated investment funds (the EnCap Funds), specifically EnCap Energy Capital FundVII, L.P. (EnCap FundVII) holds 4,611,808 shares of Class A Common Stock and EnCap Energy Capital Fund IX, L.P. (EnCap Fund IX) beneficially holds 33,956,524 shares of Class B Common Stock, which are owned by its wholly-owned subsidiary Bold Holdings. EnCap Partners GP, LLC (EnCap Partners GP) is the sole general partner of EnCap Partners, LP (EnCap Partners), which is the managing member of EnCap Investments Holdings, LLC (EnCap Holdings), which is the sole member of EnCap Investments Blocker, LLC (EnCap Investments Holdings). EnCap Investments Holdings is (i) the sole member of EnCap Investments GP, L.L.C. (EnCap Investments GP), which is the sole general partner of EnCap, and (ii) the sole limited partner of EnCap. EnCap is the sole general partner of each of EnCap Equity Fund VII GP, L.P. (EnCap Fund VII GP) and EnCap Equity Fund IX GP, L.P. (EnCap Fund IX GP). EnCap Fund VII GPis the general partner of EnCap Fund VII.EnCap Fund IX GP is the general partner of EnCap Fund IX. Therefore, EnCap Partners GP, EnCap Partners, EnCap Holdings, EnCap Investments Holdings, EnCap Investments GP, EnCap, EnCap Fund VII GP and EnCap Fund IX GP may be deemed to beneficially own the listed securities. Messrs. Thielemann and Zorich do not have the sole or shared power to vote or dispose of the Class A Common Stock or Class B Common Stock held by the EnCap Funds. Mr. Zorich is a managing partner of EnCap Partners and may be deemed to beneficially own the reported securities held by the EnCap Funds. Mr. Thielemann is a partner at EnCap Partners. Mr. Zorich disclaims beneficial ownership of such securities except to the extent of his pecuniary interest therein. The address for the EnCap entities listed above is 1100 Louisiana Street, Suite 4900, Houston, Texas 77002.
(8)
Based solely on a Schedule 13D filed with the SEC on January 19, 2021 by the Warburg Entities: the Warburg Pincus LLC shareholders (the WP Shareholders) are: (i) Warburg Pincus Private Equity (E&P) XI A, L.P. (WP E&P XI A) which holds 2,123,393 shares of Class A Common Stock, (ii) Warburg Pincus XI (E&P) Partners A, L.P. (WP XI E&P Partners A) which holds 163,270 shares of Class A Common Stock, (iii) WP IRH Holdings, L.P. (WP IRH Holdings) which holds 2,068,675 shares of Class A Common Stock, (iv) Warburg Pincus XI (E&P) Partners-B IRH, LLC (WP XI E&P Partners B IRH) which holds 57,365 shares of Class A Common Stock, (v) WP Energy IRH Holdings, L.P. (WPE IRH Holdings) which holds 3,179,794 shares of Class A Common Stock, (vi) WP Energy Partners IRH Holdings, L.P. (WPE Partners IRH Holdings) which holds 260,350 shares of Class A Common Stock, (vii) Warburg Pincus Energy (E&P) Partners-B IRH, LLC (WPE E&P Partners B IRH) which holds 101,492 shares of Class A Common Stock, (viii) Warburg Pincus Energy (E&P) Partners-A, L.P. (WPE E&P Partners A) which holds 300,946 shares of Class A Common Stock, and (ix) Warburg Pincus Energy (E&P)-A, L.P. (WPE E&P A) which holds 4,982,825 shares of Class A Common Stock. Warburg Pincus XI (E&P) Partners B, L.P. (WP XI E&P Partners B) is the general partner of WP XI E&P Partners B IRH. Warburg Pincus (E&P) XI, L.P. (WP XI E&P GP) is the general partner of WP E&P XI A, WP XI E&P Partners A, WP IRH Holdings, and WP XI E&P Partners B. Warburg Pincus (E&P) XI LLC (WP XI E&P GP LLC) is the general partner of WP XI E&P GP. Warburg Pincus Partners (E&P) XI LLC (WPP E&P XI) is the managing member of WP XI E&P GP LLC. Warburg Pincus Energy (E&P) Partners-B, L.P. (WPE E&P Partners B) is the general partner of WPE E&P Partners B IRH. Warburg Pincus (E&P) Energy GP, L.P. (WPE E&P GP) is the general partner of WPE IRH Holdings, WPE Partners IRH Holdings, WPE E&P Partners B, WPE E&P Partners A, and WPE E&P A. Warburg Pincus (E&P) Energy LLC (WPE E&P GP LLC) is the general partner of WPE E&P GP. Warburg Pincus Partners II (US), L.P. (WPP II US) is the managing member of WPP E&P XI and WPE E&P GP LLC. Warburg Pincus & Company US, LLC (WP & Co. US LLC) is the general partner of WPP II US. Warburg Pincus LLC (WP LLC and collectively, with WP XI E&P Partners B, WP XI E&P GP, WP XI E&P GP LLC, WPP E&P XI, WPE E&P Partners B, WPE E&P GP, WPE E&P GP LLC, WPP II US, WP & Co. US LLC and the WP Shareholders, the Warburg Entities) is a registered investment adviser, and the manager of WP E&P XI A, WP XI E&P Partners A, WPE E&P Partners A, and WPE E&P A. Each of WP XI E&P GP, WP XI E&P GP LLC and WPP E&P XI may be deemed to share beneficial ownership of the shares held of record by each of WP E&P XI A, WP XI E&P Partners A, WP IRH Holdings, WP XI E&P Partners B IRH and WP XI E&P Partners B. WP XI E&P Partners B may be deemed to share beneficial ownership of the shares held of record by WP XI E&P Partners B IRH. Each of WPE E&P GP, WPE E&P GP LLC, WPP II US and WP & Co. US LLC may be deemed to share beneficial ownership of the shares held of record by each of WPE IRH Holdings, WPE Partners IRH Holdings, WPE E&P Partners B IRH, WPE E&P Partners B, WPE E&P Partners A and WPE E&P A. WPE E&P Partners B may be deemed to share beneficial ownership of the shares held of record by WPE E&P Partners B IRH. Each of WPP II US and WP & Co. US LLC may be deemed to share beneficial ownership of the shares held of record by the WP Shareholders. WP & Co. US LLC may be deemed to share beneficial ownership of the shares held of record by each of WP E&P XI A, WP XI E&P Partners A, WPE E&P Partners A, and WPE E&P A. Each of the Warburg Entities disclaims any such beneficial ownership. The address of the Warburg Entities is 450 Lexington Avenue, New York, New York 10017.
The following table provides information related to our Class A Common Stock which may be issued under our existing equity compensation plans as of December 31, 2020, including the 2014 Plan:
PLAN CATEGORY
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(a)
(b)
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column a)
(c)
Equity compensation plans approved by security holders:
(1)
(1)
$
(2)
Equity compensation plans not approved by security holders:
### Total
$
(2)
(1)
Represents the number of shares of Class A Common Stock underlying outstanding time-vested RSU awards and performance-based Performance Unit awards and assumes a 100% issuance related to the Performance Units which have a range of 0% to 200% based on the results of the performance criteria of the award.
(2)
The outstanding RSU awards do not have an exercise price.
Item13.
### Warburg Pincus, LLC
Warburg Pincus, LLC and its affiliates (Warburg) beneficially own approximately 16.9% of the combined voting power of the outstanding Class A Common Stock and Class B Common Stock as of April 1, 2021. Warburg has various investment funds that it manages. Those investment funds make investments in entities with which the Company may interact in the normal course of business.
Warburg Registration Rights Agreement
At the closing of the Purchase and Sale Agreement dated December 17, 2020 (the Independence Purchase Agreement), by and among Earthstone, EEH, Independence Resources Holdings, LLC (Independence) and Independence Resources Manager, LLC, Earthstone and Independence entered into a registration rights agreement (the Warburg Registration Rights Agreement) relating to the shares of Class A Common Stock that Independence acquired pursuant to the Independence Purchase Agreement (the IRM Acquisition Shares) and the shares of Class A Common Stock that Independence acquired from EnCap Investments L.P. and its affiliates (EnCap) on January 7, 2021 (collectively, the Registrable Securities).
### Warburg Voting Agreement
On January 7, 2021, in connection with the closing of the Independence Purchase Agreement, the WP Shareholders, EnCap and Earthstone entered into a voting agreement (the Warburg Voting Agreement) containing provisions by which the Warburg Parties will have the right to appoint one director to the Board. The WP Shareholders right to appoint one director will terminate when the WP Shareholders, in the aggregate, no longer own: (i) 8% of the outstanding Class A Common Stock or (ii) 10% or more of the outstanding Class A Common Stock as a result of a sale by the WP Shareholders. The WP Shareholders nominated David S. Habachy and the Board appointed Mr. Habachy as a Class II director who will hold office until Earthstones annual meeting of stockholders in 2023.
EnCap Investments L.P.
EnCap and its affiliates beneficially own approximately 49.1% of the combined voting power of the outstanding Class A Common Stock and Class B Common Stock as of April 1, 2021. EnCap has various investment funds that it manages. Those investment funds make investments in entities with which the Company interacts in the normal course of business.
The discussion included in Note 16. Commitments and Contingencies, in the Notes to Consolidated Financial Statements related to the Olenik v. Lodzinski et al. lawsuit is incorporated herein by reference.
Pursuant to the terms of the Bold Contribution Agreement, at the closing of the Bold Contribution Agreement, Earthstone, Bold Holdings, and the unitholders of Bold Holdings entered into a registration rights agreement (the Registration Rights Agreement) relating to the shares of Class A Common Stock issuable upon the exchange of the EEH Units and Class B Common Stock held by Bold Holdings or its unitholders. In accordance with the Registration Rights Agreement, we filed a registration statement on Form S-3 (the Registration Statement) with the SEC to permit the public resale of the shares of Class A Common Stock issued by the Company to Bold Holdings or its unitholders in connection with the exchange of Class B Common Stock and EEH Units in accordance with the terms of the EEH LLC Agreement. On October 18, 2017, the Registration Statement was declared effective by the SEC.
Voting Agreement
On May 9, 2017, in connection with the closing of the Bold Contribution Agreement, Earthstone, EnCap and Bold Holdings entered into a voting agreement (the Voting Agreement), pursuant to which EnCap and Bold Holdings agreed not to vote any shares of Class A Common Stock or Class B Common Stock held by them in favor of any action, or take any action that would in any way alter the composition of the Board from its composition immediately following the closing of the Bold Contribution Agreement as long as the Voting Agreement is in effect. Immediately following the closing of the Bold Contribution Agreement, the Board was increased to nine members from eight members, four of which were designated by EnCap, three of which are independent, and two of which are members of management, including our Chief Executive Officer. On April 22, 2020, Earthstone entered into an amendment to the Voting Agreement (the VA Amendment) providing the size of the Board would be reduced by one member to eight members and at any time prior to the termination of the Voting Agreement, EnCap would have the ability to cause Earthstone to increase the size of<|endoftext|>Stock options, stock appreciation rights and performance stock appreciation rights outstanding and exercisable at January2, 2021:
### FOSSIL GROUP,INC.
Restricted Stock, Restricted Stock Units and Performance Restricted Stock Units.
The following table summarizes restricted stock, restricted stock unit and performance restricted stock unit activity:
The total fair value of shares/units vested during fiscal years 2020, 2019 and 2018 was $4.8 million, $17.6 million and $16.6 million, respectively.
### Other Retirement Plans.
The Company maintains a defined benefit plan for its employees located in Switzerland. The plan is funded through payments to an insurance company. The payments are determined by periodic actuarial calculations. During fiscal years 2020, 2019 and 2018, the Company recorded pension gains (expenses) of ($1.3) million, $0.7 million and $(0.6) million, respectively, related to this plan. The liability for the Company's defined benefit plan was $14.5 million and $17.0 million at the end of fiscal years 2020 and 2019, respectively.
Under French law, the Company is required to maintain a defined benefit plan for its employees located in France, which is referred to as a "retirement indemnity." The amount of the retirement indemnity is based on the employee's last salary and duration of employment with the Company. The employee's right to receive the retirement indemnity is subject to the employee remaining with the Company until retirement. During fiscal years 2020, 2019 and 2018, the Company recorded pension gains (expenses) of $0.2 million, $(0.4) million and $0.4 million, respectively, for its retirement indemnity obligations. The liability for the Company's retirement indemnity was $1.2 million at the end of both fiscal years 2020 and 2019.
17.
The following table summarizes supplemental cash flow information (in thousands):
### FOSSIL GROUP,INC.
18. Supplemental Disclosure for Accumulated Other Comprehensive Income (Loss)
The following table illustrates changes in the balances of each component of accumulated other comprehensive income (loss), net of taxes (in thousands):
### FOSSIL GROUP,INC.
19. Major Customer, Segment and Geographic Information
### Major Customer
Wholesale customers of the Company consist principally of major department stores and specialty retail stores located throughout the world. No individual customer accounts for 10% or more of the Company's net sales.
Segment Information
The Company reports segment information based on the "management approach". The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company's reportable segments.
The Company manages its business primarily on a geographic basis. The Company's reportable operating segments are comprised of (i) Americas, (ii) Europe and (iii) Asia.
The Company evaluates the performance of its reportable segments based on net sales and operating income (loss). Net sales for geographic segments are based on the location of the selling entity. Operating income (loss) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. Corporate includes peripheral revenue generating activities from factories and intellectual property and general corporate expenses, including certain administrative, legal, accounting, technology support costs, equity compensation costs, payroll costs attributable to executive management, brand management, product development, art, creative/product design, marketing, strategy, compliance and back office supply chain expenses that are not allocated to the various segments because they are managed at the corporate level internally. The Company does not include intercompany transfers between segments for management reporting purposes.
Summary information by operating segment was as follows (in thousands):
### FOSSIL GROUP,INC.
The following table shows revenue for each class of similar products for fiscal years 2020, 2019 and 2018 (in thousands):
### Geographic Information
Net sales and long-lived assets related to the Company's operations in the U.S., Europe, Asia and all other international markets were as follows (in thousands):
FOSSIL GROUP,INC.
(1)
Net sales are based on the location of the selling entity (including exports).
(2)
Net sales from Germany (including exports) accounted for more than 10% of the Company's consolidated net sales and were approximately $225.5 million, $310.1 million and $359.9 million in fiscal years 2020, 2019 and 2018, respectively.
(3)
Net sales from China (including Hong Kong, Macau and Taiwan and exports) accounted for more than 10% of the Company's consolidated net sales in fiscal year 2020 and were approximately $228.4 million, $218.1 million and $190.0 million in fiscal years 2020, 2019 and 2018, respectively.
20. Restructuring
In fiscal year 2019, the Company launched New World Fossil 2.0 - Transform to Grow Program (NWF 2.0), which is focused on optimizing the Companys operating structure to be more efficient, with faster decision-making and a more consumer-centric focus. In addition to optimizing the way the Company goes to market, the Company is also pursuing additional gross margin expansion opportunities. The Company is taking a zero-based budgeting approach to adjust its business model to enable more investment in digital capabilities and marketing, move closer to the consumer and react more quickly to the ever-evolving consumer shopping patterns. The Company also plans to change overall business processes and resources, creating a more centrally directed operating model, reducing complexity and redundancy, and operating at a lower cost base. The NWF 2.0 restructuring program was expanded to address additional challenges posed by COVID-19, including a number of cost saving measures such as store closures. The Company estimates total NWF 2.0 charges of $75 million to $85 million.
The following tables show a rollforward of the accrued liability related to the Companys NWF 2.0 restructuring plan (in thousands):
### FOSSIL GROUP,INC.
NWF 2.0 restructuring charges by operating segment were as follows (in thousands):
The Company implemented a multi-year restructuring program that began in fiscal year 2016 called New World Fossil ("NWF 1.0") and concluded in fiscal 2019. The remaining liability under NWF 1.0 is no longer material as of January2, 2021, therefore the rollforward of the liability is not presented below.
The following table shows a rollforward of the accrued liability related to the Companys NWF 1.0 restructuring plan (in thousands):
NWF 1.0 restructuring charges by operating segment were as follows (in thousands):
None.
We conducted an evaluation of the effectiveness of our "disclosure controls and procedures" ("Disclosure Controls"), as defined by Rules13a-15(e) and 15d-15(e) of the Exchange Act as of January2, 2021, the end of the period covered by this Annual Report on Form10-K. The Disclosure Controls evaluation was done under the supervision and with the participation of management, including our CEO and CFO. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.
Based upon this evaluation, our CEO and CFO have concluded that our Disclosure Controls were effective at the reasonable assurance level as of January2, 2021.
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external reporting purposes in accordance with generally accepted accounting principles.
Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate over time.
Management, including our CEO and our CFO, assessed the effectiveness of the Company's internal control over financial reporting as of January2, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in
### Internal ControlIntegrated Framework (2013)
Based on its assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of January2, 2021.
Deloitte& ToucheLLP, the independent registered public accounting firm that audited the Company's consolidated financial statements included in this Annual Report on Form10-K, has issued an attestation report on the Company's internal control over financial reporting, which is included herein.
There were no changes in our internal control over financial reporting during the quarter ended January2, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
We have audited the internal control over financial reporting of Fossil Group, Inc. and subsidiaries (the Company) as of January 2, 2021, based on criteria established in
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 2, 2021, based on criteria established in
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements and financial statement schedule as of and for the year ended January 2, 2021 of the Company and our report, dated March 12, 2021, expressed an unqualified opinion on those consolidated financial statements and financial statement schedule
### Basis for Opinion
/s/ Deloitte & Touche LLP
### Dallas, Texas
March 12, 2021
Item9B.Other Information
None.
### PART III
The information under the headings "Directors and Nominees," "Executive Officers," "Delinquent Section 16(a) Reports" and "Board Committees and Meetings" in our proxy statement to be filed with the SEC pursuant to Regulation14A, not later than 120days after the end of the fiscal year covered by this report, is incorporated herein by reference.
We have adopted a code of ethics that applies to all our directors and employees, including the principal executive officer, principal financial officer, principal accounting officer and controller. The full text of our Code of Conduct and Ethics is published on the Investors section of our website at www.fossilgroup.com
We intend to disclose any future amendments to certain provisions of the Code of Conduct and Ethics, or waivers of such provisions granted to executive officers and directors, on this website within five business days following the date of any such amendment or waiver.
PART IV
Item15.Exhibits and Consolidated Financial Statement Schedules
(a)
Documents filed as part of Report.
Page
1.
2.
Consolidated Financial Statement Schedule: See "ScheduleII"
3.
Exhibits required to be filed by Item601 of RegulationS-K
The exhibits required to be filed by this Item15 are set forth in the Exhibit Index accompanying this report. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Common stock.
### Paycheck Protection Program SBA Loan
In May 2020, the Company received a loan in the amount of $66,330 under the Payroll Protection Program (PPP Loan). The loan accrues interest at a rate of 1% and has an original maturity date of two years which can be extended to five years by mutual agreement of the Company and SBA. The PPP loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.
Under the terms of the loan, a portion or all of the loan is forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company has utilized the proceeds of the PPP loan in a manner which will enable qualification as a forgivable loan. However, no assurance can be provided that all or any portion of the PPP loan will be forgiven. The balance on this PPP loan was $66,330 as of December 31, 2020 and has been classified as a long-term liability in notes payable.
### Notes Payable Chapter 11 Settlement
On July 18, 2018, the Companys former Controller Dennis Lenaburg sued the Company for $2,694,577 dollars plus stock warrants in the Circuit Court of the 15 th
Judicial Circuit in Palm Beach County, Florida. That lawsuit was moved to the Bankruptcy Court when the Company entered Chapter 11 on October 22, 2018. The Company filed a Complaint against Lenaburg on November 16, 2018, in the bankruptcy court in the Southern District of Florida. The bankruptcy judge ordered mediation, and a settlement was reached that paid Lenaburg $13,650 upon Plan Confirmation and a $50,000 claim payable out of post-confirmation net profits over 3 years, plus 1.5 million common stock warrants with a strike price of $0.30/share and a ten year expiration period. The $50,000 is due on September 18, 2022.
### Notes Payable Related Parties
In July 2016, the Company issued six (6) short-term notes payable to related parties in conjunction with the Companys acquisition of the remaining 49% of AMG Energy Group. These notes had a value of $2,002,126 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the notes was $278,794.68 and $176,460 respectively. All of the notes were due on August 4, 2017 and then were in default. However, the notes were held by related parties with the understanding that the notes were not to be paid until the Company begins generating profit. The Company renegotiated some of these notes during its Chapter 11 proceedings, whereas others failed to submit a claim and were discharged upon the Courts Confirmation Order approving the Companys Chapter 11 Plan on September 18, 2019. The renegotiated amounts, as per the Plan Confirmation are all to be paid from 50% of the future net profits and discharged to the extent unpaid five years after the Plan effective date of September 18, 2019. These amount are 1) Mark Koch $240,990 plus 6% interest on any portion not repaid within 12 months of the Companys first reported quarterly net profit; 2) Animated Family Films $579,942 out of the Companys net profits plus 6% interest; 3) Steven Dunkle, CTWC, & Wellington Asset Holdings $1.5 million plus 6% interest once there is positive quarterly EBITDA from the first plant of Company, or, at its option, may convert that into an equity investment in the first plant of the Company, measured by a percentage of the total cost to build, subject to a minimum equity interest of 1.25% in said plant.
On February 28, 2018, the Company entered into a short-term loan with Steven Sadaka, with a principal balance of $100,000 due and payable on May 1, 2018. The note does not accrue interest, however the Company provided 2,000,000 inducement shares to secure the note. These inducement shares were valued at $84,000 and are being amortized over the life of the note. The notes maturity date was extended to 7/1/2018. If the note is not repaid at maturity, then an additional 5,000,000 shares of common stock will be due. The note was renegotiated during the Companys Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $100,000 is to be paid out of future gross revenues to satisfy this note in full, with no additional shares to be issued.
On May 15, 2018, the Company entered into a short term loan with Christopher Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019.
On May 15, 2018, the Company entered into a short term loan with Pamela Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019.
### Notes Payable Other
In July 2016, the Company issued a short-term note payable to a third party in conjunction with the Companys acquisition of the remaining 49% of AMG Energy Group. The note had a principal balance of $96,570 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the note was $14,382.2 and $8,588 respectively. The note was due on August 4, 2017 and was then in default. The Company renegotiated this note during its Chapter 11 proceedings, and as per the Plan Confirmation, now the $96,570 is to be paid with no interest out of the same 50% of the future net profits of the Company as the notes mentioned above, if any, or discharged to the extent unpaid five years after September 18, 2019.
In November 2017, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $143,000 due and payable on May 30, 2018. The note carries an 8% one-time interest charge, a $43,000 original issue discount and a 35% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 500,000 inducement shares to secure the note, and may have to provide additional shares on the notes 6-month anniversary if the Companys share price declines. These inducement shares were valued at $39,500 and were amortized over the life of the note. In May 2018, the company made two principal payments totaling $40,000. The note went into default on June 1, 2018 and incurred a 40% penalty of the outstanding balance immediately prior to the default event. That case was staid on October 22, 2018 when the Company filed for Chapter 11 protection in the US Negotiations took place and a settlement was reached on this note and a subsequent note, and confirmed as part of the Plan Confirmation Order, that Hoppel would be paid a total of $100,000 out of 5% of the future gross revenue of the Company.
In February 2018, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $165,000 due and payable on September 21, 2018. The note carries an 8% one-time interest charge, a $15,000 original issue discount and a 40% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 500,000 inducement shares to secure the note. These inducement shares were valued at $14,500, and were amortized over the life of the note. The Note went into default on June 1, 2018, through a cross default provision with another Note to Hoppel, and incurred a 40% penalty of the outstanding balance immediately prior to the default event. That case was staid on October 22, 2018 when the Company filed for Chapter 11 protection in the US Negotiations took place and a settlement was reached on this note and a prior note, and confirmed as part of the Plan Confirmation Order, that Hoppel would be paid a total of $100,000 out of 5% of the future gross revenue of the Company to settle both notes.
On March 27, 2019, the Company entered into an agreement with Partiz and Company, P.A. such that its debt will be reduced from $32,000 to $20,000 payable out of future gross revenues, upon the bankruptcy courts acceptance of the Companys plan of reorganization. The Plan was confirmed by the Court on September 18, 2019.
### Convertible Debentures Related Parties
On November 8, 2018, the Company entered into a convertible promissory note with Edmund J Burke for a total of $175,000. There is no interest, and it is payable out of 20% of the net profits of Company. Upon conversion, Burke shall receive an additional 4,450,148 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 4,450,148 shares of Burkes common stock was cancelled.
On November 8, 2018, the Company entered into a convertible promissory note with Steven Sadaka for a total of $24,000. There is no interest, and it is payable out of 2.5% of the net profits of Company. Upon conversion, Sadaka shall receive an additional 1,000,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 1,000,000 shares of Sadakas common stock was cancelled. On January 15, 2021, Steven Sadaka elected to convert this Note into common stock.
On November 8, 2018, the Company entered into a convertible promissory note with Annie Bindler for a total of $2,500. Upon conversion, Annie Bindler shall receive an additional 100,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 100,000 shares of Annie Bindlers common stock was cancelled. On January 13, 2021, Annie Bindler elected to convert this Note into common stock.
On November 8, 2018, the Company entered into a convertible promissory note with Zac Bindler for a total of $2,500. Upon conversion, Zac Bindler shall receive an additional 100,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 100,000 shares of Zac Bindlers common stock was cancelled. On January 13, 2021, Zac Bindler elected to convert this Note into common stock.
A summary of all debts indicated in the Notes above is as follows:
$100,000 of the amount listed under Long Term Convertible Debentures in the summary chart for 2019 were short term as of the end of 2020.
Of the $3,133,462 due as of December 31, 2020, $1,820,630 is due out of future revenue and $917,502 is due out of future profits, totaling $2,738,132. $2,417,502 of that debt will be discharged if not paid by September 18, 2024, which is 5 years after the Company exited Chapter 11. $66,330 may be forgiven by the SBA. The remaining debt that would not be discharged or forgiven, and which has not converted as of the date of this filing, is $170,000, consisting of $120,000 due out of future revenue to other, and a $50,000 Chapter 11 settlement.
### NOTE 6 STOCKHOLDERS EQUITY
The total number of shares of capital stock, which the Company has authority to issue, is 510 million, 500 million of which are designated as common stock at $0.001 par value (the Common Stock) and 10 million of which are designated as preferred stock par value $0.001 (the Preferred Stock). As of December 31, 2020, the Company had 241,721,947 shares of Common Stock issued and outstanding and no shares of Preferred Stock were issued. Holders of shares of Common stock shall be entitled to cast one vote for each share held at all stockholders meetings for all purposes, including the election of directors. The Common Stock does not have cumulative voting rights. No holder of shares of stock of any class shall be entitled as a matter of right to subscribe for or purchase or receive any part of any new or additional issue of shares of stock of any class, or of securities convertible<|endoftext|>Combination or (ii)a notice of redemption described below under "Redemption of warrants when the price per ClassA common stock equals or exceeds $10.00").
The Company is not registering the shares of ClassA common stock issuable upon exercise of the warrants at this time. However, the Company has agreed that as soon as practicable, but in no event later than twenty business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of ClassA common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of ClassA common stock until the warrants expire or are redeemed. If a registration statement covering the ClassA common stock issuable upon exercise of the warrants is not effective by the 60thbusiness day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a "cashless basis" in accordance with Section3(a)(9)of the Securities Act or another exemption.
The warrants will have an exercise price of $11.50 per share and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation. If (x)the Company issues additional shares of ClassA common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share of ClassA common stock (with such issue price or effective issue price to be determined in good faith by the Company and, (i)in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance, and (ii)to the extent that such issuance is made to the Sponsor or its affiliates, without taking into account the transfer of Founder Shares or Private Placement Warrants (including if such transfer is effectuated as a surrender to the Company and subsequent reissuance by the Company) by the Sponsor in connection with such issuance) (the "Newly Issued Price"), (y)the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the completion of the initial Business Combination (net of redemptions), and (z)the volume-weighted average trading price of ClassA common stock during the 20 trading day period starting on the trading day prior to the day on which the Company completes its initial Business Combination (such price, the "Market Value") is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices described under "Redemption of warrants when the price per ClassA common stock equals or exceeds $18.00" and "Redemption of warrants when the price per ClassA common stock equals or exceeds $10.00" will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants will be identical to the Public Warrants, except that the Private Placement Warrants (including the ClassA common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30days after the completion of the initial Business Combination and they will not be redeemable by the Company so long as they are held by the Sponsor or its permitted transferees
and if, and only if, the last reported sale price of ClassA common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders (the "Reference Value") equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like
However, in this case, the Company will not redeem the warrants unless an effective registration statement under the Securities Act covering the ClassA common stock issuable upon exercise of the warrants is effective and a current prospectus relating to those shares of ClassA common stock is available throughout the 30-day redemption period. Any such exercise would not be on a "cashless" basis and would require the exercising warrant holder to pay the exercise price for each warrant being exercised.
Once the warrants become exercisable, the Company may redeem the outstanding warrants
(except as described herein with respect to the Private Placement Warrants)
: in whole and not in part; at $0.10 per warrant upon a minimum of 30 days prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table based on the redemption date and the fair market value of the Shares of ClassA common stock; and if, and only if, the Reference Value equals or exceeds $10.00 per share
(as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like); and if the Reference Value is less than $18.00 per share
(as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like), the Private Placement Warrants must also concurrently be called for redemption on the same terms (except as described herein with respect to a holder's ability to cashless exercise its warrants) as the outstanding Public Warrants, as described above
The fair market value ofClassA common stock shall mean the volume-weighted average price of ClassA common stock for the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants.In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361shares ofClassA common stockper warrant (subject to adjustment).
If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company's assets held outside of the Trust Account with the respect to such warrants.
ClassA Common Stock
The Company is authorized to issue 400,000,000shares of ClassA common stock with a par value of $0.0001 per share. As of December31, 2020, there were 41,071,823 shares of ClassA common stock outstanding, including 34,375,578 shares of ClassA common stock subject to possible redemption that were classified as temporary equity in the accompanying balance sheet.
### ClassB Common Stock
The Company is authorized to issue 40,000,000shares of ClassB common stock with a par value of $0.0001 per share.
On July23, 2020, an affiliate of the Sponsor paid an aggregate of $25,000 for certain expenses on behalf of the Company in exchange for issuance of 14,375,000 shares of ClassB common stock, with such shares subsequently transferred to the Sponsor. On October6, 2020, the Sponsor surrendered 2,875,000 shares of ClassB common stock to the Company for no consideration, resulting in a decrease of the outstanding ClassB common stock from 14,375,000 shares to 11,500,000 shares. Of these, an aggregate of up to 1,500,000 shares of ClassB common stock that are subject to forfeiture to the Company by the initial stockholders for no consideration to the extent that the underwriters' over-allotment option is not exercised in full or in part, so that the number of Founder Shares will equal 20% of the Company's issued and outstanding shares of common stock after the Initial Public Offering. The underwriters partially exercised their over-allotment option on November12, 2020, and the remaining over-allotment expired unexercised on November20, 2020 resulting in the forfeiture of 1,232,044 ClassB common shares. As of December31, 2020, 10,267,956 shares of ClassB common stock were outstanding with no shares subject to forfeiture.
Holders of our ClassA common stock and holders of our ClassB common stock will vote together as a single class on all matters submitted to a vote of our stockholders except as required by law
The ClassB common stock will automatically convert into ClassA common stock on the first business day following the completion of the initial Business Combination at a ratio such that the number of shares of ClassA common stock issuable upon conversion of all Founder Shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i)the total number of shares of ClassA common stock issued and outstanding upon completion of the Initial Public Offering, plus (ii)the sum of (a)the total number of shares of ClassA common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the completion of the initial Business Combination, excluding any shares of ClassA common stock or equity-linked securities exercisable for or convertible into shares of ClassA common stock issued, or to be issued, to any seller in the initial Business Combination and any Private Placement Warrants issued to the Sponsor upon conversion of Working Capital Loans, minus (b)the number of Public Shares redeemed by Public Stockholders in connection with the initial Business Combination.
### Preferred Stock
The following table presents information about the Companys assets that are measured at fair value on a recurring basis as of December31, 2020 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement as of December 2020 as the Public Warrants were separately listed and traded beginning in November 2020. The amount transferred to Level 1 was $30.2 million.
Level 1 instruments include investments in mutual funds invested in government securities.
Specifically, the future stock price of the Company is modeled assuming a Geometric Brownian Motion in a risk-neutral framework.
The change in the fair value of the derivative warrant liabilities for the period from July 6, 2020 (inception) through December 31, 2020 is summarized as follows:
### Note 10Income Taxes
The Company does not currently have taxable income but will generate taxable income in the future primarily consisting of interest income earned on the Trust Account. The Company's general and administrative costs are generally considered start-up costs and are not currently deductible.
### Note 11Subsequent Events
Management has evaluated subsequent events to determine if events or transactions occurring through March
, 2021, the date the financial statements were available for issuance, require potential adjustment to or disclosure in the financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Of transactions between the Company and any related person. Related person means anyone who is, or within the past year was, a director, nominee for director or executive officer of the Company or greater than five percent beneficial owner of the Company's voting securities or any member of their immediate families.
Under the policy, any related person transaction must be reviewed, considered, and approved or ratified by the Audit Committee of the Board of Directors directly or through the Chairman of the Audit Committee. The Policy applies to all related person transactions, even if the amount involved does not exceed the $120,000 threshold required for disclosure under the SEC rules. Review of a proposed related person transaction takes into consideration the purpose of, and the potential benefits to the Company from, the related person transaction, and the impact of the related person transaction on a director's independence in the event that the related person is a director or an immediate family member of a director. No member of the Audit Committee may participate in any review, consideration, or approval of any related person transaction with respect to which such member or any of his or her immediate family members is the related person.
The policy provides that the Company may undertake certain pre-approved related person transactions (e.g., transactions in which the related person's interest derives solely from his or her service as a director of another corporation or entity that is a party to the transaction) without further specific review, consideration and approval. The Company engaged in no related person transactions in 2020.
### ITEM 14.
The Audit Committee is responsible for the appointment, compensation, retention and oversight of the work of BKD LLP, our independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee. As part of its responsibility, the committee established a policy requiring the pre-approval of all audit and permissible non-audit services performed by the registered public accounting firm. In pre-approving services, the Audit Committee considers whether such services are consistent with the SECs ruleson auditor independence.
Prior to the engagement of the registered public accounting firm for an upcoming audit/non-audit service period, defined as a twelve-month timeframe, BKD LLP submits a detailed list of services expected to be rendered during that period as well as an estimate of the associated fees for each of the following four categories of services to the Audit Committee for approval:
Audit Services consist of services rendered by an external auditor for the audit of our annual consolidated financial statements (including tax services performed to fulfill the auditors responsibility under generally accepted auditing standards) and internal controls and reviews of financial statements included in Forms10-Q, and includes services that generally only an external auditor can reasonably provide, such as comfort letters, statutory audits, attest services, consents and assistance with and review of documents filed with the SEC.
Audit-Related Services consist of assurance and related services by an external auditor that are reasonably related to audit or review of financial statements, including employee benefit plan audits, due diligence related to mergers and acquisitions, and accounting consultations.
Tax Services consist of services not included in Audit Services above, rendered by an external auditor for tax compliance.
Other Non-Audit Services are any other permissible work that is not an Audit, Audit-Related or Tax Service.
Circumstances may arise during the twelve-month period when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging the independent auditor.
The table below summarizes the fees billed by our independent registered public accounting firms, BKD, LLP, with respect to the fiscal year ended December 31, 2020, and Ernst& Young LLP, with respect to the fiscal year ended December 31, 2019, for the audit of our annual financial statements for such fiscal years and fees billed for other services rendered by each such firm during those periods.
(1)
Audit fees include fees for professional services rendered for the audit of our annual consolidated financial statements (including, for the year ended December 31, 2019, services related to the audit of internal control over financial reporting under the Sarbanes-Oxley Act of 2002) and the reviews of the interim financial statements included in our Forms 10-Q.
(2)
Tax fees represent professional services related to tax compliance.
For the fiscal year ended December 31, 2020, none of the Audit-Related Fees, Tax Fees or Other Fees were approved in accordance with the exceptions to the pre-approval requirements set forth in 16 CFR 210.2-01(c)(7)(i)(C).
PART IV
ITEM 15. EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES
(c)Exhibits
Exhibits are set forth on the attached exhibit index
### ITEM 16. FORM 10-K SUMMARY
Not applicable
INDEX TO EXHIBITS
EXHIBIT
NUMBER
EXHIBIT
3.1
Amended and Restated Certificate of Incorporation of Houston Wire & Cable Company (incorporated herein by reference to Exhibit 3.1 to Houston Wire & Cable Companys Registration Statement on Form S-1 (Registration No. 333-132703))
3.2
Amended and Restated By-Laws of Houston Wire & Cable Company (incorporated herein by reference to Exhibit 3.2 to Houston Wire & Cable Companys Registration Current Report on Form 8-K filed May 11, 2012)
4.1
Description of the Registrants Securities (incorporated herein by reference to Exhibit 4.1 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2019)
10.1*
Houston Wire & Cable Company 2006 Stock Plan, as amended and restated effective March 1, 2015, as amended (incorporated herein by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed March 13, 2015 and Exhibit 10.12 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2016)
10.2*
Amended and Restated Executive Employment Agreement dated as of January 1, 2017, as amended as of March 11, 2020, between James L. Pokluda, III and Houston Wire & Cable Company (incorporated by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed March 29, 2017 and Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed March 12, 2020)
10.3*
Form of Employee Non-Qualified Stock Option Agreement under Houston Wire & Cable Companys 2006 Stock Plan (incorporated herein by reference to Exhibit 10.4 to Houston Wire & Cable Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2015)
10.4*
Form of Director Non-Qualified Stock Option Agreement under Houston Wire & Cable Companys 2006 Stock Plan (incorporated herein by reference to Exhibit 10.2 to Houston Wire & Cable CompanysQuarterly Report on Form 10-Q for the quarter ended June 30, 2015)
10.5*
Form of Stock Award Agreement for Key Employees under Houston Wire & Cable Companys 2006 Stock Plan (incorporated herein by reference to Exhibit 10.3 to Houston Wire & Cable CompanysQuarterly Report on Form 10-Q for the quarter ended June 30, 2015)
10.6*
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors under Houston Wire & Cable Companys 2006 Stock Plan (incorporated herein by reference to Exhibit 10.1 to Houston Wire & Cable Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2015)
10.7*
Form of Performance Stock Unit Award Agreement under Houston Wire & Cable Companys 2006 Stock Plan (incorporated herein by reference to Exhibit 10.7 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2016)
10.8*
Description of Senior Management Bonus Program(incorporated herein by reference to Exhibit 10.7 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2015)
10.9*
Form of Director/Officer Indemnification Agreement by and between Houston Wire & Cable Company and a director, member of a committee of the Board of Directors or officer of Houston Wire & Cable Company (incorporated herein by reference to Exhibit 10.24 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2006)
10.10
Fourth Amended and Restated Loan and Security Agreement, dated as of October 1, 2015, as amended on March 12, 2019 and December 10, 2019, among HWC Wire & Cable Company, as borrower, Houston Wire & Cable Company, as Guarantor, certain financial institutions, as lenders, and Bank of America, N.A., as agent (incorporated herein by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed October 2, 2015, Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed October 5, 2016, Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed March 14, 2019 and Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed on December 12, 2019)
10.11
Third Amended and Restated Guaranty dated as of October 1, 2015, by Houston Wire & Cable Company, as guarantor, in favor of Bank of America, N.A., as agent (incorporated herein by reference to Exhibit 10.2 to Houston Wire & Cable Companys Current Report on Form 8-K filed October 2, 2015)
10.12*
Houston Wire & Cable Company 2017 Stock Plan, as amended (incorporated herein by reference to Exhibit A to Houston Wire & Cable Companys definitive proxy statement for the annual meeting of stockholders held May 5, 2020)
10.13*
Form of Restricted Stock Unit Award Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.2 to Houston Wire & Cable Companys Current Report on Form 8-K filed August 8, 2017)
10.14*
Form of Restricted Stock Unit Award Agreement for Key Employees (incorporated herein by reference to Exhibit 10.3 to Houston Wire & Cable Companys Current Report on Form 8-K filed August 8, 2017)
10.15*
Form of Stock Appreciation Agreement (incorporated herein by reference to Exhibit 10.4 to Houston Wire & Cable Companys Current Report on Form 8-K filed August 8, 2017)
10.16*
Form of Stock Award Agreement for Key Employees (incorporated by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed May 14, 2018)
10.18*
Letter Agreement dated April 5, 2018 between Houston Wire & Cable Company and Christopher M. Micklas (incorporated by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed April 13, 2018)
10.19*
Houston Wire & Cable Company Nonemployee Directors Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed December 14, 2017)
10.20
Letter Agreement dated as of November 5, 2020 between Houston Wire & Cable Company and Eric W. Davis (incorporated by reference to Exhibit 10.1 to Houston Wire & Cable Companys Current Report on Form 8-K filed November 6, 2020)
21.1
Subsidiaries of Houston Wire & Cable Company (incorporated herein by reference to Exhibit 21.1 to Houston Wire & Cable Companys Annual Report on Form 10-K for the year ended December 31, 2019)
23.1
Consent of BKD LLP**
23.2
### Consent of Ernst & Young, LLP**
**Previously filed with the Original 10-K Filing
***Filed herewith<|endoftext|>Disciplinary authority over its members or persons associated with a member.
Kerko, Wagner and Ms. Wellman, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Mr.Thompson and Mr.Van Buren will expire at the second annual meeting of stockholders. Clammer and Greene, will expire at the third annual meeting of stockholders. Subject to any other special rights applicable to the stockholders, any vacancies on our board of directors may be filled by the affirmative vote of a majority of the directors present and voting at the meeting of our board that includes any directors representing our sponsor then on our board, or by a majority of the holders of our founder shares.
Our bylaws provides that our officers may consist of a Chief Executive Officer, a President, a Chief Financial Officer, Vice Presidents, a Secretary, Assistant Secretaries, a Treasurer, Assistant Treasurers and such other offices as may be determined by the board of directors.
Audit Committee
Wellman, and Mr.Kerko serves as chairman of the audit committee.
Each member of the audit committee is financially literate and our board of directors has determined that Mr.Thompson qualifies as an audit committee financial expert as defined in applicable SEC rules and has accounting or related financial management expertise.
We have adopted an audit committee charter, which details the purpose and principal functions of the audit committee, including: assisting board oversight of (1)the integrity of our financial statements, (2)our compliance with legal and regulatory requirements, (3)our independent registered public accounting firms qualifications and independence, and (4)the performance of our internal audit function and independent registered public accounting firm; reviewing the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us; obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the independent registered public accounting firms internal quality-controlprocedures and (2)any material issues raised by the most recent internal quality-controlreview, or peer review, of the independent registered public accounting firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
### Compensation Committee
Kerko, Wagner and Ms. Wellman.
reviewing and making recommendations to our board of directors with respect to (or approving, if such authority is so delegated by our board of directors) the compensation, and any incentive-compensationand equity-basedplans that are subject to board approval of all of our other officers;
### Director Nominations
Wellman.
### Code of Ethics
Availability of Documents
We have filed a copy of our form of Code of Ethics, our audit committee charter and our compensation committee charter as exhibits to the registration statement filed in connection with our initial public offering.
Item 11.
Executive Compensation.
### Item 12
The following table sets forth information regarding the beneficial ownership of our common stock as of February 17, 2021 based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by: each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
* less than 1%
(2)
Interests shown consist solely of shares of Class B common stock which are referred to herein as founder shares. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment, as described in the section entitled Description of Securities.
(3)
Nebula Caravel Holdings, LLC is the record holder of the shares reported herein. True Wind Capital II is the managing member of Nebula Caravel Holdings, LLC. Mr. Greene and Mr. Clammer are the managing members of True Wind Capital GP II, LLC, the General Partner of True Wind Capital II. As such, they may be deemed to have or share beneficial ownership of the Class B Common Stock held directly by Nebula Caravel Holdings, LLC.
(6)
According to Schedule 13G filed with the SEC on December 15, 2020 by Integrated Core Strategies (US) LLC (Integrated Core Strategies), Riverview Group LLC (Riverview Group), ICS Opportunities, Ltd. Englander). The business address of these entities and individual is 666 Fifth Avenue, New York, New York 10103. As of December 14, 2020, Integrated Core Strategies beneficially owned 815,000 shares of Class A common stock as a result of holding 815,000 units; Riverview Group beneficially owned 350,000 shares of Class A common stock as a result of holding 350,000 units; ICS Opportunities beneficially owned 326,949 shares of Class A common stock as a result of holding 326,949 units, which together with the shares of Class A common stock beneficially owned by Integrated Core Strategies and Riverview Group represented 1,491,949 shares of the Class A common stock or 5.4% of the Class A common stock outstanding. The managing member of Millennium Group Management is a trust of which Mr. Therefore, Mr.
The table above does not include the shares of common stock underlying the private placement warrants or forward purchase securities held or to be held by our sponsor because these securities are not exercisable within 60 days of this Report.
None.
### Changes in Control
Not applicable.
Item 13.
In September 2020, our sponsor purchased an aggregate of 7,906,250founder shares for an aggregate purchase price of $25,000, or approximately $0.003per share. In September and October 2020, our sponsor transferred 25,000founder shares to each of Messrs. In December 2020, 312,500 founder shares held by our sponsor were forfeited as a result of the partial exercise of underwriters over-allotment option.
Our sponsor has purchased an aggregate of 5,166,667 private placement warrants for a purchase price of $7,750,000, or $1.50 per warrant, that will also be worthless if we do not complete our initial business combination. Each private placement warrant entitles the holder thereof to purchase one share of our Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. The private placement warrants (including the ClassA common stock issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30days after the completion of our initial business combination.
If any of our officers or directors becomes aware of a business combination opportunity which is suitable for one or more entities to which he or she has fiduciary, contractual or other obligations or duties, including TWC Tech Holdings II Corp., he or she will honor these obligations and duties to present such business combination opportunity to such entities first, and only present it to us if such entities reject the opportunity and he or she determines to present the opportunity to us. Our officers and directors currently have other relevant fiduciary, contractual or other obligations or duties that may take priority over their duties to us, including to TWC Tech Holdings II Corp.
Our sponsor, officers and directors or any of their respective affiliates will be reimbursed for any out-of-pocketexpenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or our or any of their respective affiliates and will determine which expenses and the amount of expenses that will be reimbursed.
Prior to the consummation of our initial public offering, our Sponsor advanced approximately $176,000 to us under a promissory note to cover expenses related to our initial public offering. We repaid the promissory note in full as of December 11, 2020.
In connection with the consummation of our initial public offering, we have entered into forward purchase agreements with several institutional accredited investors (including an affiliate of our sponsor), which we refer to herein as forward purchasers, that provide for the aggregate purchase of at least $100,000,000 of Class A common stock at $10.00 per share, in a private placement that will close concurrently with the closing of our initial business combination. The forward purchasers commitments under the forward purchase agreements are subject to certain conditions, as described herein. these shares will be identical to the shares of Class A common stock included in the units being sold in our initial public offering, except that the forward purchase shares will be subject to certain transfer restrictions and have certain registration rights, as described herein.
In addition, in order to finance transaction costs in connection with an intended initial business combination, our sponsor, an affiliate of our sponsor or our officers and directors may, but none of them is obligated to, loan us funds as may be required. Up to $1,500,000of such loans may be convertible into warrants at a price of $1.50per warrant at the option of the lender. The terms of such loans by our sponsor, an affiliate of our sponsor or our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans.
It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combinationbusiness to determine executive officer and director compensation.
We have entered into a registration rights agreement with respect to the founder shares, private placement warrants and warrants issued upon conversion of working capital loans (if any), as well as forward purchase shares.
### Director Independence
Wellman are independent directors as defined in the Nasdaq listing standards and applicable SEC rules.
### Item 14
### Audit Fees
Audit fees consist of fees billed for professional services rendered for the audit of our period-end financial statements and services that are normally provided by Withum in connection with regulatory filings. The aggregate fees billed by Withum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods and other required filings with the SEC for the period from September 18, 2020 (inception) through December 31, 2020 totaled $55,620.
Audit-Related Fees.
We did not pay Withum for consultations concerning financial accounting and reporting standards for the period from September 18, 2020 (inception) through December 31, 2020.
### Tax Fees
We did not pay Withum for tax planning and tax advice for the period from September 18, 2020 (inception) through December 31, 2020.
All Other Fees
We did not pay Withum for other services for the period from September 18, 2020 (inception) through December 31, 2020.
### Pre-Approval Policy
PART IV
Item 15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Or direct the disposition of, 136,454 shares of our common stock.
(5)
As of December31, 2020, based on information provided in a Schedule 13G filed with the SEC on February16, 2021 by T. Rowe Price Associates, Inc. (T. Rowe Price), in which T. Rowe Price reported that it has sole voting power with respect to 1,636,115 shares of our common stock and sole power to dispose of, or direct the disposition of, 5,910,834 shares of our common stock.
(6)
Amounts represent (i) 59,149 shares of common stock held by Mr.Michaels, (ii) 164,100 shares of common stock issuable upon the exercise of options that are currently exercisable and (iii) 36,431 restricted stock awards which are entitled to voting and dividend rights as described in the related award agreement though still subject to vesting.
(7)
Amounts represent (i) 128,331 shares of common stock held by Mr.Doman, (ii) 22,000 shares of common stock held by an LLC controlled by Mr.Doman, (iii) 48,653 shares of common stock issuable upon the exercise of options that are currently exercisable and (iv) 17,853 restricted stock awards which are entitled to voting and dividend rights as described in the related award agreement though still subject to vesting.
(8)
Amounts represent (i) 4,438 shares of common stock held by Mr.Garner, (ii) 9,509 shares of common stock issuable upon the exercise of options that are currently exercisable and (iii) 6,653 restricted stock awards which are entitled to voting and dividend rights as described in the related award agreement though still subject to vesting.
(9)
Amounts represent (i) 50,313 shares of common stock held by Mr.Fentress, (ii) 82,672 shares of common stock issuable upon the exercise of options that are currently exercisable and (iii) 9,105 restricted stock awards which are entitled to voting and dividend rights as described in the related award agreement though still subject to vesting.
(10)
Amounts include 2,881 restricted stock units vesting on May8, 2021.
(11)
Amount represents Mr.Robinsons ownership as of December1, 2020, and includes (i) 80,837 shares of common stock held by Mr.Robinson, (ii) 25,170 restricted stock awards that vest within 60 days of December1, 2020 and (iii) 46,669 performance share units that vest within 60 days of December1, 2020.
(12)
Amount represents Mr.Lindsays ownership as of December1, 2020.
(13)
Amount represents Mr.Walls ownership as of December1, 2020.
(14)
Amount represents Mr.Woodleys ownership as of July30, 2020.
(15)
Amount represents Mr.Wakefields ownership as of March31, 2021 as a result of Mr.Wakefields departure from the Company on April1, 2021, and includes (i) 18,008 shares of common stock held by Mr.Wakefield, (ii) 1,073 shares of common stock held in a 401(k) plan account, (iii) 827 shares of common stock held by Mr.Wakefields spouse, (iv) 29,904 shares of common stock issuable upon the exercise of options that are currently exercisable and (v) 58,039 restricted stock awards which are entitled to voting and dividend rights as described in the related award agreement though still subject to vesting.
(16)
The group information is as of April15, 2021. The group excludes Messrs. Robinson, Lindsay and Wall since their ownership information is as of December1, 2020. The group excludes Mr.Woodley since his ownership information is as of July30, 2020. The group excludes Mr.Wakefield since his ownership information is as of March31, 2021.
The following table sets forth aggregate information as of December31, 2020 about the Companys compensation plans under which our equity securities are authorized for issuance.
(1)
Of the 1,479,319 securities to be issued upon exercise of outstanding options, warrants and rights, 722,828 are options with a weighted average exercise price of $37.45 and the remaining 756,491 are restricted shares and performance shares that do not have an exercise price.
ITEM13.
Policies and Procedures Dealing with the Review, Approval and Ratification of Related Party Transactions
The charter of the Audit Committee provides that the Audit Committee shall review and ratify all transactions to which the Company is a party and in which any director or executive officer has a direct or indirect material interest, apart from their capacity as director or executive officer of the Company. To assist with this review process, the Audit Committee has adopted a policy on related party transactions that provides procedures for the review, and approval or ratification, of certain transactions involving related parties. This policy applies to any transaction or series of transactions in which we or one of our subsidiaries is a participant, the amount involved exceeds or may be expected to exceed $100,000 in any fiscal year and a related party has a direct or indirect material interest. Under the policy, a related party includes (i)any person who is or was, since the beginning of the last fiscal year, a director, executive officer or nominee for election as a director, (ii)a greater than 5% beneficial owner of any class of our voting securities, (iii)an immediate family member of either of the foregoing persons or (iv)any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position in which such person has a 5% or greater beneficial ownership interest. Related party transactions are referred to the Audit Committee, or if there are not a sufficient number of directors on the Audit Committee without interests in the transaction, by the disinterested directors serving on our Board of Directors, for approval, ratification, or other action.
In addition, our Companys Code of Business Conduct provides that conflict of interest situations involving directors or executive officers must receive the prior review and approval of the Audit Committee. Our Code of Business Conduct sets forth various examples of when conflict of interest situations may arise, including when an officer or director, or members of his or her family: receive improper personal benefits as a result of his or her position in or with the Company; have certain relationships with competing businesses or businesses with a material financial interest in the Company, such as suppliers or customers; or receive improper gifts or favors from such businesses.
Since January1, 2020, there has not been, nor is there any proposed related party transactions in which we were or will be a party required to be disclosed under SEC rules, other than the compensation arrangements and other agreements and transactions which are described in the Executive Compensation section of this Form
10-K/A and the transactions described below.
We have entered into indemnification agreements with each of our directors and certain of our officers. These agreements require us to indemnify such individuals, to the fullest extent permitted by Georgia law, for certain liabilities to which they may become subject as a result of their service to the Company.
Director Independence
Our Board of Directors is currently comprised of six directors having terms expiring at our 2021 Annual Meeting.
Our Corporate Governance Guidelines include categorical standards adopted by our Board of Directors to determine director independence that meet the listing standards of the NYSE. Our Corporate Governance Guidelines also require that at least a majority of our Board of Directors be independent under NYSE listing requirements. Our Board of Directors, as listed in the below table, has affirmatively determined that all of our directors are independent in accordance with NYSE listing requirements and the requirements of our Corporate Governance Guidelines, other than Mr.Michaels, our President and Chief Executive Officer, and Mr.Doman, our Chief Innovation Officer.
ITEM14.
### AUDIT MATTERS
Fees Billed in the Last Two Fiscal Years
Ernst& Young LLP (EY), served as our independent registered public accounting firm for the years ended December31, 2020 and 2019 and has been selected by the Audit Committee to continue as our independent registered public accounting firm for the current fiscal year. The following table sets forth the fees for services provided by our independent auditors in each of the last two fiscal years.
(1)
Includes fees associated with the annual audit of the consolidated financial statements, internal control over financial reporting, reviews of the quarterly reports on Form
10-Q, assistance with and review of documents filed with the SEC, accounting and financial reporting consultations and research work necessary to comply with generally accepted auditing standards, debt covenant letters and the audit report in the franchise disclosure document. The audit fees in 2020 also includes services performed by EY associated with the
Spin-Off, including the separate carve-out audits and quarterly reviews of The Aarons Company and review of the Companys Form 10 filings. Included in the fees reflected above, the Company reimbursed EY for out of pocket expenses that were incurred while performing these audit services totaling $578 and $67,437 in 2020 and 2019, respectively.
(2)
Includes fees associated with certain due diligence efforts regarding strategic initiatives in 2020 and 2019.
(3)
Includes fees for tax compliance, tax due diligence efforts, tax advice and tax planning services, as well as fees for tax services provided in connection with the
Spin-Off.
(4)
Includes fees associated with the Companys online accounting research subscription.
### Approval of Auditor Services
The Audit Committee is responsible for pre-approving all audit and permitted non-audit services provided to the Company by its independent auditors. To help fulfill this responsibility, the Audit Committee has adopted an Audit and
### Non-Audit
Services
Pre-Approval
### Policy (the
Pre-Approval
Policy). Under the
### Pre-Approval
Policy, all auditor services must be pre-approved by the Audit Committee either (i)before the commencement of each service on a case-by-case basis (specific pre-approval) or (ii)by description in sufficient detail in the
### Pre-Approval
Policy of particular services which the Audit Committee has generally approved, without the need for case-by-case consideration (general pre-approval).
Unless a particular service has received general pre-approval, it must receive the specific pre-approval of the Audit Committee or its Chair. The
### Pre-Approval
Policy describes the audit, audit-related and tax services that have received general pre-approval.
These general pre-approvals allow the Company to engage the independent auditors for the enumerated services for individual engagements up to the fee levels prescribed in the
### Pre-Approval
Policy. The annual audit engagement for the Company is subject to the specific pre-approval of the Audit Committee. Any engagement of the independent auditors pursuant to a general pre-approval must be reported to the Audit Committee at its next regular meeting. The Audit Committee periodically reviews the services that have received general pre-approval and the associated fee ranges. The
### Pre-Approval
Policy does not delegate to management the Audit Committees responsibility to pre-approve services performed by the independent auditors.
### Part IV
The following exhibits are filed as part of this Amendment No.1 and supplement the exhibits filed and furnished with the Original Form
10-K:
ITEM15.
Exhibit
No.
DescriptionofExhibit
31.1*
Certification of the Chief Executive Officer of PROG Holdings, Inc.
31.2*
Certification of the Chief Financial Officer of PROG Holdings, Inc.
*
Filed herewith<|endoftext|>By and among FORM Holdings Corp., FHXMS, LLC, XpresSpa Holdings, LLC and Mistral XH Representative, LLC, as representative of the unitholders, dated September 8, 2016 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on September 9, 2016)
2.3
Amendment No. 2 to Agreement and Plan of Merger by and among FORM Holdings Corp., FHXMS, LLC, XpresSpa Holdings, LLC and Mistral XH Representative, LLC, as representative of the unitholders, dated October 25, 2016 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on October 25, 2016)
3.1
Amended and Restated Certificate of Incorporation (incorporated by reference from Exhibit 3.1 to our Annual Report on Form 10-K filed with the SEC on April 20, 2020)
3.2
Certificate of Amendment to the Amended and Restated Certificate of Incorporation of XpresSpa Group, Inc., filed with the Secretary of State of the State of Delaware on June 10, 2020 (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on June 10, 2020)
3.3
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Annual Report on Form 10-K filed with the SEC on April 1, 2019)
4.1
Form of Warrant (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on October 16, 2015)
4.2
Form of Warrant (incorporated by reference from Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on May 4, 2015)
4.3
Section 382 Rights Agreement, dated as of March 18, 2016, between Vringo, Inc. and American Stock Transfer & Trust Company, LLC, which includes the Form of Certificate of Designation of Series C Junior Participating Preferred Stock as Exhibit A, the Form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Stock as Exhibit C (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 21, 2016)
4.4
Amendment to Section 382 Rights Agreement, dated March 18, 2019, between the Company and American Stock Transfer & Trust Company, LLC (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 22, 2019)
### Exhibit
No.
Description
4.5
Form of Warrant to Purchase Shares of Common Stock of FORM Holdings Corp. (incorporated by reference from Annex F to our Registration Statement on Form S-4 filed with the SEC on October 26, 2016)
4.6
Form of Secured Convertible Note (incorporated by reference from Exhibit 4.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018)
4.7
Amendment to Secured Convertible Note (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on June 27, 2019)
4.8
Second Amended and Restated Convertible Promissory Note, dated as of July 8, 2019 (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
4.9
Third Amended and Restated Convertible Promissory Note, dated as of January 9, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on January 14, 2020)
4.10
Fourth Amended and Restated Convertible Promissory Note, dated as of March 6, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 6, 2020)
4.11
Form of Class A Warrant (incorporated by reference from Exhibit 4.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018)
4.12
Form of Class B Warrant (incorporated by reference from Exhibit 4.3 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018)
4.13
Form of First Amendment to Warrant to Purchase Common Stock, dated as of May 16, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on May 17, 2019)
4.14
Form of Second Amendment to Warrant to Purchase Common Stock, dated as of June 17, 2019 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on June 17, 2019)
4.15
Unsecured Convertible Note due May 31, 2022 (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
4.16
Warrant to Purchase Common Stock in favor of Calm.com, Inc., dated as of July 8, 2019 (incorporated by reference to Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
4.17
Form of December 2016 Warrant Amendment, dated as of July 8, 2019 (incorporated by reference from Exhibit 4.4 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
4.18
Form of Pre-Funded Warrant to Purchase Common Stock, dated March 19, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 19, 2020)
4.19
Form of Pre-Funded Warrant to Purchase Common Stock, dated March 25, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 25, 2020)
4.20
Form of Pre-Funded Warrant to Purchase Common Stock, dated March 27, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on March 27, 2020)
### Exhibit
No.
Description
4.21
Form of Pre-Funded Warrant to Purchase Common Stock, dated April 6, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on April 7, 2020)
4.22
Description of the Registrants Securities (incorporated by reference from Exhibit 4.22 to our Annual Report on Form 10-K filed with the SEC on April 20, 2020)
4.23
Amended and Restated Calm Note, dated as of April 17, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on April 17, 2020).
4.24
Amended and Restated Calm Note, dated as of April 22, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on April 24, 2020)
4.25
Form of Warrant to Purchase Common Stock, dated June 17, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on June 17, 2020)
4.26
Form of Placement Agent Warrant to Purchase Common Stock, dated June 17, 2020 (incorporated by reference from Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on June 17, 2020)
4.27
Form of Warrant to Purchase Common Stock, dated August 25, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on August 28, 2020)
4.28
Form of Pre-Funded Warrant to Purchase Common Stock, dated August 25, 2020 (incorporated by reference from Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on August 28, 2020)
4.29
Form of Placement Agent Warrant to Purchase Common Stock, dated August 25, 2020 (incorporated by reference from Exhibit 4.3 to our Current Report on Form 8-K filed with the SEC on August 28, 2020)
4.30
Form of Warrant to Purchase Common Stock, dated December 17, 2020 (incorporated by reference from Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on December 21, 2020)
4.31
Form of Placement Agent Warrant to Purchase Common Stock, dated December 17, 2020 (incorporated by reference from Exhibit 4.2 to our Current Report on Form 8-K filed with the SEC on December 21, 2020)
10.1
Vringo, Inc. 2012 Employee, Director and Consultant Equity Incentive Plan, as amended (incorporated by reference from Appendix C of our Proxy Statement on Schedule 14A (DEF 14A) filed with the SEC on September 25, 2015)
10.2
Form of Management Option Agreement (incorporated by reference from our Registration Statement on Form S-1 filed on March 29, 2010).
10.3
Form of Stock Option Agreement (incorporated by reference from our Registration Statement on Form S-8 filed on July 26, 2012)
10.4
Form of Restricted Stock Unit Agreement (incorporated by reference from our Registration Statement on Form S-8 filed on July 26, 2012)
10.5
Form of Indemnification Agreement, dated January 31, 2013, by and between Vringo, Inc. and each of its Directors and Executive Officer (incorporated by reference from our Annual Report on Form 10-K for the period ended December 31, 2012 filed on March 21, 2013)
### Exhibit
No.
Description
10.6
FORM Holdings Corp. 2012 Employee, Director and Consultant Equity Incentive Plan, as amended (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 28, 2016)
10.7
Independent Directors Agreement, by and between FORM Holdings Corp. and Andrew R. Heyer, dated as of December 23, 2016 (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on December 23, 2016)
10.8
Executive Employment Agreement, dated January 20, 2017, by and between FORM Holdings Corp. and Edward Jankowski (incorporated by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2017)
10.9
Credit Agreement dated as of April 22, 2015, by and between XpresSpa Holdings, LLC and Rockmore Investment Master Fund Ltd (incorporated by reference from Exhibit 10.1 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018).
10.10
First Amendment to Credit Agreement and Conditional Waiver dated as of August 8, 2016, by and between XpresSpa Holdings, LLC and Rockmore Investment Master Fund Ltd (incorporated by reference from Exhibit 10.2 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018).
10.11
Second Amendment to Credit Agreement dated as of May 10, 2017, by and between XpresSpa Holdings, LLC and B3D, LLC (incorporated by reference from Exhibit 10.3 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018).
10.12
Third Amendment to Credit Agreement dated as of May 14, 2018, by and between XpresSpa Holdings, LLC and B3D, LLC (incorporated by reference from Exhibit 10.4 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018).
10.13
Fourth Amendment to Credit Agreement, dated as of July 8, 2019, by and between XpresSpa Holdings LLC and B3D, LLC (incorporated by reference from Exhibit 10.3 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
10.14
Registration Rights Agreement, dated as of July 8, 2019, by and between the Company and B3D, LLC (incorporated by reference from Exhibit 10.4 to our Current Report on Form 8-K filed with the SEC on July 8, 2019)
10.15
Amendment to Second Amended and Restated Convertible Promissory Note, dated August 22, 2019, by and between XpresSpa Holdings LLC and B3D, LLC (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on August 26, 2019)
10.16
Fifth Amendment to Credit Agreement, dated as of January 9, 2020, by and between XpresSpa Holdings LLC and B3D, LLC (incorporated by reference from Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on January 14, 2020)
10.17
Sixth Amendment to Credit Agreement, dated as of March 6, 2020, by and between XpresSpa Holdings LLC and B3D, LLC (incorporated by reference from Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on March 6, 2020)
10.18
Form of Securities Purchase Agreement, dated May 15, 2018, by and among the Company and the Investors (incorporated by reference from Exhibit 10.8 to our Quarterly Report on Form 10-Q filed with the SEC on May 15, 2018).
### Exhibit
No.
Description
10.19
Form of Registration Rights Agreement, dated May 15, 2018, by and among the Company and the Investors (incorporated by reference from Exhibit 10.9 to our Quarterly Report on Form 10-Q filed with | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
ITEM 10.
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
### EXPLANATORY NOTE
Communications Systems, Inc. (CSI or the Company) is filing this Amendment No. 1 on Form 10-K/A to amend our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, (which was filed on March 31, 2021) to set forth information required by Items 10, 11, 12, 13, and 14 under Part III becaus e the Company will not be filing a def i n iti v e prox y s t a t e m en t con t a i n i n g this i nfor m a ti o n w it h i n
0 day s af t e r t h e en d o f t h e fiscal year covered by our original Form 10-K filing. This Form 10-K/A amends Part III of the original Form 10-K filing only, and all other portions of our original Form 10-K filing remain in effect and have not been updated to reflect the events and developments since the original March 31, 2021 fili ng date.
PA
RT III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVER
NANCE
### BOARD OF DIRECTORS
The following table sets forth information regarding the Companys current directors including information regarding their principal occupations currently and for the preceding five years.
ROGER H.D. LACEY (70) served as the Companys Chief Executive Officer from February 2015 until November 30, 2020 and has served as the Executive Chairman of the Companys Board of Directors since December 2018. He has been a Company director since 2008, served as Board Vice Chair from September 2013 until December 2018 and interim Chief Executive Officer from June 2014 until February 2015. Mr. Lacey was Senior Vice President of Strategy and Corporate Development at the 3M Company from 2009 to his retirement in 2013. He was the 3M Companys Chief Strategy Officer and head of Global Mergers and Acquisitions from
2000 to 2013. Mr. Laceys career with 3M began in 1975; from 1989 to 2000 he held various senior positions including serving as Division Vice President of 3M Telecom Division. In addition, Mr. Lacey served as a member of the corporate venture capital board for internal and external new venture investments from 2009 to 2013. In addition, he is a Board member of Johnsonville Sausage Corporation, a leading US food company, and also a Senior Partner in CGMR Capital, a private equity firm. He is a member of the Board of Governors for Opus Business School, University of St. Thomas; a visiting Professor of Strategy and Corporate Development, Huddersfield University; a founding member of the Innovation Lab at MIT; and is a former Vice Chair of Abbott Northwestern Hospital Foundation. Mr. Lacey brings a unique perspective that combines familiarity with key telecommunication and data markets around the world combined with deep experience in strategic planning and business development.
ANITA KUMAR (53) was appointed Chief Executive Officer and elected to the Board of Directors effective December 1, 2020. Ms. Kumar joined CSIs subsidiary Transition Networks, Inc in 2011 and served in a number of roles of increasing res pon si b ilit y i n e ng i n eeri ng a nd m a n a g e m e n t un til s h e w as p r o m o te d t o
G e n eral
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ADC
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### Lucen t
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K u m a r has a Ph.D. from Ohio University in high energy particle physics and a B.S. from University of Mumbai.
RICHARD A. PRIMUTH (75) was elected as a director in October 2013 and currently serves as Chair of the Compensation Committee. Beginning January 1, 2018, Mr. Primuth began providing legal and business consulting services as an independent contractor. Prior thereto, for over 44 years, Mr. Primuth served as an attorney with the Minneapolis law firm of Lindquist & Vennum LLP, specializing in business law. He was a partner in this firm from 1977 until December 2011 when he became Of Counsel to the firm. Mr. Primuths business law practice was heavily focused on representing public and private corporations, securities offerings, mergers and acquisitions, and other complex business transactions. He served as the Companys primary outside legal counsel from 1983 until he was elected to the Board in 2013. Upon being elected to the Board, he ceased providing any legal services to the Company. On December 31, 2017, Mr. Primuth retired from and ceased having any further association with Lindquist & Vennum LLP when it merged with and into Ballard Spahr LLP. Primuths significant experience in corporate governance, public offerings and other financings, capital markets, SEC compliance and reporting, mergers and acquisitions, spin offs, complex contract negotiations, and other business law areas, as well as his deep understanding of the Company, its history, markets and products, make him a significant resource as a Company director.
RANDALL D. SAMPSON (61) has been a director since 1999 and the Lead Independent Director since December 2018. He currently serves as Chair of the Audit & Finance Committee, and also is a member of the Compensation Committee. Mr. Sampson is the President, Chief Executive Officer, and a Board member of Canterbury Park Holding Corporation (CPHC), positions he has held since 1994. CPHC is a public company based in Shakopee Minnesota that re-launched a failed pari-mutuel race track and stimulated the revival of Minnesotas horse breeding and training industries. Under his leadership, the Canterbury Park Racetrack has become a unique, family-friendly venue for live horse races and other entertainment, as well as pari-mutuel and card club wagering. Before becoming one of the three co-founders of CPHC in 1994, and after graduating from college with a degree in accounting, Mr. Sampson worked for five years in the audit department of a large public accounting firm where he earned his CPA certification, subsequently gained experience as a controller of a private company, served as a chief financial officer of a public company and managed Sampson family interests in horse breeding and training. The challenging nature of Canterbury Parks business has demanded from its CEO an entrepreneurial mindset, attention to expense control, continuous innovation in marketing, and attention to the needs of customers, which, along with other qualities, Mr. R.D. Sampson uniquely brings to the governance responsibilities of the CSI Board.
STEVEN C. WEBSTER (64) has served as a director since 2017. Since July 2013, Mr. Webster has served as Senior Fellow and Spencer Chair in Technology Management at the University of Minnesota. In this capacity, he teaches graduate classes in innovation for mid-career professionals and in business basics for graduate students in science and technology. From May 2005 to October 2012, Mr. Webster was Vice President of Research and Technology Commercialization for 3M Companys Display and Graphics Business. In that role, he had responsibility for about 1,000 technical professionals worldwide, setting technology strategy and guiding key programs for a $4 billion global business. He directly led laboratories in Saint Paul, Minnesota; Austin, Texas; and Singapore. Over his 31-year career with 3M, Mr. Webster also held the executive position leading the global deployment of 3M Six Sigma; held R&D leadership roles in display technology, optical films, telecommunications, data storage and optical recording; and had business responsibility for fiber optics and test systems products in the 3M Telecom Systems Division. Prior to joining 3M, Mr. Webster was a Member of Technical Staff at Bell Laboratories in Holmdel New Jersey, from 1979 to 1981, where he worked on the first commercial fiber optics transmission system. Mr. Webster received a Master of Science in electrical engineering and computer science and a Bachelor of Science in electrical engineering from MIT in 1979. Mr. Webster currently serves on the Board of Directors and
Executive Committee of the Guthrie Theater, and on the MIT Undergraduate Practice Opportunities Program Advisory Board. Mr. Webster brings deep experience in new product development, an understanding of telecommunications technology and business dynamics, expertise in the application of Six Sigma to improve business processes and significant executive level management skill, all qualities that will strengthen the Boards oversight of the Companys businesses.
MICHAEL R. ZAPATA (43) has served as a director since June 2020. Mr. Zapata has served as Executive Chairman and President of Schmitt Industries, Inc. since December 2018, and as Chief Executive Officer of that company since July 2019. Mr. Zapata is the founder and Managing Member of Sententia Capital Management, LLC, a value investing focused investment management firm (Sententia). Since its inception in 2012, Sententia has invested in deep value public equities in a concentrated portfolio. The firm employs a rigorous research process and attempts to engage constructively with management when appropriate. Prior to Sententia, Mr. Zapata served nearly 10 years in the U.S. Navy. During his service from 2001 to 2010, he held various leadership roles during the Global War on Terror. Deploying to locations including Iraq, Afghanistan, Africa, the Middle East and the Arabian Peninsula, he brings valuable insight and expertise in intelligence fusion, operational execution, strategic planning and risk mitigation. He received his B.S. from Texas A&M University, where he was recognized as a Dougherty Award Recipient. He received his M.B.A. from Columbia University as a student in the Heilbrunn Center for Value Investing. He serves as a director of Tip of the Spear Foundation, a non-profit dedicated to supporting Elite Operators and their families during times of need. Mr. Zapata s background in, and kno w ledge of, operational execution and str a t eg i c p l ann i ng
, as well as his and familiarity with small public companies and the challenges they face bring a good perspective to the Board.
The Companys Officers, Directors and beneficial owners of more than ten percent of the Companys common stock are required to file reports of their beneficial ownership with the SEC. Except as noted below, based on the Companys review of copies of such reports received by it, or written representations from reporting persons, the Company believes that during the fiscal year ended December 31, 2020, Executive Officers and Directors of the Company filed all reports with the SEC required under Section 16(a) to report their beneficial ownership on a timely basis, except that Randall Sampson did not timely file a Form 5. According to our records, all other beneficial holders reports have been timely filed.
CORPORATE GOVERNANCE AND BOARD MATTERS
### General Information
Our Board is committed to sound and effective corporate governance practices. Our governance policies are consistent with applicable provisions of the rules of the SEC and the listing standards of the Nasdaq Capital Market (Nasdaq). We also periodically review our governance policies and practices in comparison to those suggested by authorities in corporate governance and the practices of other public companies. You can access our corporate governance charters and other related materials by following links on the Corporate Governance page of our website [IDX]
### The Board, Board Committees and Meetings
Meeting<|endoftext|>Benefits payable to each of our named executive officers pursuant to their respective employment agreements and our equity incentive plans. The equity incentive plans provide for the following benefits in the event of a termination or change in control:
2020 Stock LTIP Awards.
The following conditions are applicable with respect to the 2020 LTIP Stock Awards issued to each of the NEOs on November 4, 2019:
In the event of (i) the death or disability of the executive officer, (ii) termination of the executive officers employment without Cause or by the executive officer for Good Reason within one year following a Change in Control (as defined in the Companys 2016 Stock Incentive Plan), or (iii) a Change in Control in which the Companys Class A shares are no longer outstanding and publicly traded immediately following such transaction (each, a Permitted Acceleration Event), 100% of award shall vest. In the event that the executive officer is terminated without Cause (subject to such termination not otherwise being a Permitted Acceleration Event) or resigns for Good Reason a number of restricted shares shall vest, if such termination occurs prior to the Determination Date, on the Determination Date, in an amount equal to the product of (x) the number of restricted shares that would otherwise vest in accordance with the applicable performance conditions, if any, and (y) a fraction, the numerator of which shall be the number of full months of service completed by the executive officer from January 1, 2020 through the termination date, and the denominator of which shall be 36. The Determination Date is the date the Company achieves the performance thresholds set forth in the award, as determined by the Compensation Committee on or prior to March 1, 2021.
2020 Cash LTIP Awards.
The following conditions are applicable with respect to the 2020 LTIP Cash Awards issued to each of the NEOs on November 4, 2019:
The 2020 Cash LTIP Award would vest upon (i) the death or disability of the executive officer or (ii) termination of the executive officers employment without Cause or with Good Reason based on the actual performance for the performance period, with the amount of the earned performance-based award (if any) based on a fraction, the numerator of which shall be the number of full months of service completed by the executive officer from January 1, 2020 through the termination date, the denominator of which is 36. Upon a Change in Control (as defined in the Companys 2014 Long-Term Cash Incentive Compensation Plan) prior to December 31, 2022, the performance-based award will vest in full, with the amount payable determined by using an EBITDA performance multiplier equal to the greater of (a) one (1) and (b) the EBITDA performance multiplier calculated in accordance with the terms of the 2020 Cash LTIP award; provided, however, that if the price per share paid in such Change in Control is equal to or greater than 175% of the average closing trading price of one of the Companys Class A shares during the twenty (20) days preceding the grant date, then the EBITDA performance multiplier shall be two (2). If the Change in Control is not structured as a share acquisition and/or there is no price per share in the Change in Control (as would be the case with the Stagwell transaction, if consummated) then the implied price per share paid in such Change in Control will be determined by the Compensation Committee in good faith immediately prior to such Change in Control. On October28, 2020, the Compensation Committee adopted an interpretive standard that the implied price per share paid with respect to the 2020 Cash LTIP Awards in connection with the Stagwell transaction, if consummated, will be the average closing trading price of one of the Companys ClassA shares during the five (5)trading days preceding the closing date.
### Mark Penn
Penns employment without Cause, or Mr. Penn terminates his employment for Good Reason (as defined in his employment agreement), then MDC is required to pay Mr. Penn a lump sum severance payment within 60 days of the date of termination equal to the product of 1.5 times the sum of (i)his then-current base salary plus (ii) the amount of his annual discretionary bonus paid in respect of the year immediately prior to the applicable date of termination. Mr. Penn will also be entitled to a pro-rata portion of his annual discretionary bonus for the year of termination based on actual performance. If Mr. Penns employment had terminated under these circumstances on December 31, 2020, the aggregate cash payment due to him under the agreement would have been $2,362,500.
As of December 31, 2020, Mr. Penn had 1,000,000 SARs that would vest upon (i) his death or disability, (ii) termination of his employment without Cause or with Good Reason, or (iii) a Change in Control (as defined in the Companys 2016 Stock Incentive Plan). Penns employment by MDC without Cause, or by Mr. Penn for Good Reason as of December 31, 2020, a total of1,000,000 SARs would fully vest, and the value of such SARs would be $320,000.
As of December 31, 2020, Mr. Penn had a 2020 LTIP Stock Award in the amount of 577,500 restricted shares with a fair value equal to $1,449,525. Penns employment by MDC without Cause (subject to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Penn for Good Reason as of December 31, 2020, 183,017 of the restricted shares under this award would vest (based on actual performance through such date) with a fair value equal to $459,373.
As of December 31, 2020, Mr. Penn had a 2020 Cash LTIP Award in the amount of $1,155,000. Penns employment by MDC without Cause or by Mr. Penn for Good Reason as of December 31, 2020, up to one-third of the award would remain eligible to vest and pay out based on actual performance for the three-year period ending December 31, 2022. Penn under this award upon a Change in Control would be $1,155,000.
### Frank Lanuto
Lanutos employment without Cause, or Mr. Lanuto terminates his employment for Good Reason (as defined in his employment agreement), then MDC is required to pay Mr. Lanuto a lump sum severance payment within 60 days of the date of termination equal to six (6) months base salary. If Mr. Lanutos employment had terminated under these circumstances on December 31, 2020, the aggregate cash payment due to him under the agreement would have been $225,000.
If Mr. Lanutos employment is terminated within one year following the closing of a change in control by the company without Cause, or by Mr. Lanuto for Good Reason, then MDC is required to pay Mr. Lanuto a lump sum severance payment within 60 days of the date of termination equal to nine (9) months base salary. If Mr. Lanutos employment had terminated under these circumstances on December 31, 2020, the aggregate cash payment due to him under the agreement would have been $337,500.
As of December 31, 2020, Mr. Lanuto had 300,000 SARs that would vest upon termination of employment by the company without Cause, or by Mr. Lanuto for Good Reason, or a Change in Control (as defined in the Companys 2016 Stock Incentive Plan). Based on the closing price of the Companys Class A shares as of December 31, 2020, this award would have had no value.
As of December 31, 2020, Mr. Lanuto had a 2020 LTIP Stock Award in the amount of 99,000 restricted shares with a fair value equal to $248,490. Lanutos employment by MDC without Cause (subject to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Lanuto for Good Reason as of December 31, 2020, 31,374 of the restricted shares under this award would vest (based on actual performance through such date) with a fair value equal to $78,750.
As of December 31, 2020, Mr. Lanuto had a 2020 Cash LTIP Award in the amount of $198,000. Lanutos employment by MDC without Cause or by Mr. Lanuto for Good Reason as of December 31, 2020, up to one-third of the award would remain eligible to vest and pay out based on actual performance for the three-year period ending December 31, 2022. Lanuto under this award upon a Change in Control would be $198,000.
### David Ross
Rosss employment without Cause, or Mr. Ross terminates his employment for Good Reason (as defined in his employment agreement), then MDC is required to pay Mr. Ross a severance payment within 10 days of the date of termination of one (1) times Mr. Rosss total remuneration. Total remuneration means the sum of his then-current base salary plus the highest annual discretionary cash bonus he earned in the three years ending December 31 of the year immediately preceding the date of termination. If Mr. Rosss employment had terminated under these circumstances on December 31, 2020, the aggregate cash payment due to him under the agreement would have been $1,522,500.
If Mr. Rosss employment is terminated by the Company without Cause, or by Mr. Ross for Good Reason, within one year following the closing of a Change in Control, then Mr. Ross will be entitled to a payment of two (2) times his total remuneration. If there had been a Change in Control on December 31, 2020 and Mr. Rosss employment terminated in connection with that Change in Control, the aggregate cash severance payment MDC would have paid him under the contract would be $3,045,000.
Furthermore, Mr. Ross will also be allowed to continue participating for one year after termination on the same basis as before he was terminated in all benefit plans. MDC will be obligated to pay Mr. Ross the economic equivalent of the benefits in these plans if he is unable to participate in the plans. The aggregate amount of this benefit would have been approximately $23,873 if Mr. Rosss employment had terminated as of December 31, 2020.
As of December 31, 2020, Mr. Ross had a 2020 LTIP Stock Award in the amount of 200,000 restricted shares with a fair value equal to $502,000. Rosss employment by MDC without Cause (subject to such termination not otherwise being a Permitted Acceleration Event) or by Mr. Ross for Good Reason as of December 31, 2020, 63,383 of the restricted shares under this award would vest (based on actual performance through such date) with a fair value equal to $159,090.
As of December 31, 2020, Mr. Ross had a 2019 Special Incentive Award in the amount of 68,750 restricted shares with a fair value equal to $172,563 that would vest upon (i) his death or disability, (ii) termination of his employment without Cause or with Good Reason, or (iii) a Change in Control.
As of December 31, 2020, Mr. Ross had 26,738 restricted shares awarded in February 2018 with a fair value equal to $67,112 that that would vest in the event of (i) his death, (ii) termination of his employment without Cause or by Mr. Ross for Good Reason within one year following a Change in Control, or (iii) a Change in Control in which the Companys Class A shares are no longer outstanding and publicly traded immediately following such transaction. In the event of the termination of Mr. Rosss employment by the Company without Cause (other than in connection with a Change in Control) or his resignation for Good Reason as of December 31, 2020, none of the restricted shares under this award would vest.
As of December 31, 2020, Mr. Ross had a 2020 Cash LTIP Award in the amount of $400,000. Rosss employment by MDC without Cause or by Mr. Ross for Good Reason as of December 31, 2020, up to one-third of the award would remain eligible to vest and pay out based on actual performance for the three-year period ending December 31, 2022. Ross under this award upon a Change in Control would be $400,000.
Finally, as of December 31, 2020, Mr. Ross had a performance-based cash | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Made on August 24, 2020. Such RSUs vest in full in five equal annual installments, beginning on the first anniversary of the respective grant date, in each case subject to the directors continued service as a director of the Company through such date, provided that, if the director makes himself available and consents to be nominated by the Company for continued service as a director of the Company, but is not nominated for the Board of directors for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the RSUs will vest in full as of the directors last date of service as a director of the Company. See footnote 1 above for more information.
Dill (Chair), Lanktree, and General Payne, none of whom has been at any time an executive officer or employee of the Company, or has any relationship requiring disclosure under Item 404 of Regulation S-K.
### Compensation Committee
Michael R. Dill (Chair)
Charles T. Lanktree
### E. Gray Payne
April 23, 2021
I tem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
### BENEFICIAL OWNERSHIP OF SECURITIES
The table below sets forth information regarding the beneficial ownership of our common stock as of April 23, 2021, by the following individuals or groups:
Shares of our common stock that are subject to our stock options that are presently exercisable or exercisable within 60 days of April 23, 2021, as well as shares of common stock issuable within 60 days of April 23, 2021, upon vesting of restricted stock units (RSUs), are deemed to be outstanding and beneficially owned by the person holding the stock options or RSUs, as applicable, for the purpose of computing the percentage of ownership of that person, but are not treated as outstanding for the purpose of computing the percentage of any other person.
Unless indicated otherwise below, the address of our directors and executive officers is c/o BK Technologies Corporation, 7100 Technology Drive, West Melbourne, Florida 32904. Except as indicated below, the persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them. As of April 23, 2021, we had outstanding12,536,471 shares of our common stock.
______________
*Less than 1%
The following options are not reflected in the table, as they are not presently exercisable or exercisable within 60 days of April 23, 2021: options to purchase 39,000 common shares held by Mr. Vitou; options to purchase 29,000 common shares held by Mr. Kelly; options to purchase 30,000 shares held by Mr. Willis; and options to purchase 24,000 common shares held by Dr. Avanic.
The table also does not include the following RSUs held by each of Messrs. Cerminara, Johnson, Dill, Lanktree, Struble, Turner, and General Payne: 3,037 RSUs remaining pursuant to a grant made on September 6, 2018 (not including 1,013 RSUs that vested as of September 6, 2019 and 1,013 RSUs that vested as of September 6, 2020); 8,311 RSUs granted on September 6, 2019 (not including 2,078 RSUs that vested as of September 6, 2020); and 13,245 RSUs granted on August 24, 2020. The RSUs vest in five equal annual installments, beginning on the first anniversary of the respective grant date, in each case subject to the directors continued service as a director of the Company through such date. All RSUs were granted under the Companys 2017 Incentive Compensation Plan (the 2017 Plan).
The following table provides information as of December 31, 2020, with respect to our 2017 Plan, under which our common stock is authorized for issuance, and the 2007 Plan. Our stockholders approved the 2017 Plan at the 2017 annual stockholders meeting. On December 31, 2020, 388,035 shares of our common stock were available for issuance under the 2017 Plan
I tem 13.Certain Relationships and Related Transactions, and Director Independence
Any transaction with a related person is subject to our written policy for transactions with related persons, which is available on our website at www.bktechnologies.com/investor-relations. The audit committee is responsible for applying this policy. As set forth in the policy, the audit committee reviews the material facts of the transaction and considers, among other factors it deems appropriate, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related persons interest in the transaction. The policy also prohibits our directors from participating in any discussion or approval of any interested transaction for which he is a related person, except that the director is required to provide all material information concerning the transaction to the committee.
If a transaction with a related party will be ongoing, the audit committee will establish guidelines for our management to follow in our ongoing relationships with the related person, will review and assess ongoing relationships with the related person to determine if such relationships are in compliance with the audit committees guidelines, and, based on all the relevant facts and circumstances, will determine if it is in the best interests of us and our stockholders to continue, modify or terminate any such interested transaction.
The policy provides exceptions for certain transactions, including (i) those involving compensation paid to a director or executive officer required to be reported in the Companys proxy statement, (ii) transactions with another company at which a related persons only relationship is as an employee (other than an executive officer), director or beneficial owner of less than 10% of that companys shares, if the aggregate amount involved does not exceed the greater of $500,000 or two percent (2%) of that companys total annual revenues, (iii) certain charitable contributions, (iv) transactions where all of our stockholders receive proportional benefits, (v) transactions involving competitive bids, (vi) certain regulated transactions, and (vii) certain banking-related services.
Except as set forth below, during 2020 and 2019, we did not have any transactions with related persons that were reportable under Item 404 of Regulation S-K, and we do not have any transactions with related persons currently proposed for 2020 that are reportable under Item 404 of Regulation S-K.
Fundamental Global, together with its affiliates, is the largest stockholder of the Company. Mr. Cerminara, a member of our Board of Directors, is Chief Executive Officer, Co-Founder and Partner of Fundamental Global. In addition, Mr. Struble, Chairman of the Board, serves as a consultant to Fundamental Global Management, LLC, an affiliate of Fundamental Global.
In addition, we have an investment in a limited partnership, FGI 1347 Holdings, LP, of which we are the sole limited partner. FGI 1347 Holdings, LP was established for the purpose of investing in securities using a portion of the proceeds from our previously successful investment in Iteris, Inc. (Nasdaq: ITI), which was liquidated for a substantial gain. Affiliates of Fundamental Global serve as the general partner and investment manager of FGI 1347 Holdings, LP. During 2020, FGI 1347 Holdings, LP incurred total expenses of $81,428 related to audit, legal and other professional services that were paid by the limited partnership directly to the third-parties for services rendered on behalf of the limited partnership. Fundamental Global has not received any management fees or performance fees for its services to the limited partnership. Principals of Fundamental Global serve on the board of directors of portfolio companies and receive compensation for their service.
### DIRECTOR INDEPENDENCE
The NYSE Americancorporate governance listing standards provide that the Company, as a smaller reporting company, may have a board of directors consisting of at least fifty percent (50%) independent directors. Our Board of Directors reviews the relationships that each director has with us and other parties. Only those directors who do not have any of the categorical relationships that preclude them from being independent within the independence requirements of the NYSE American corporate governance listing standards and who the Board of Directors affirmatively determines have no relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director are considered to be independent directors. The Board of Directors reviews a number of factors to evaluate the independence of each of its members. These factors include its members current and historic relationships with us and our subsidiaries; their relationships with management and other directors; the relationships their current and former employers have with us and our subsidiaries; and the relationships between us and other companies of which our Board members are directors or executive officers. The Board of Directors reviewed the various factors described above in April 2021, including an evaluation of the holdings of Fundamental Global, one of our most significant stockholders, and Mr. Cerminaras positions as its Chief Executive Officer,Co-Founder and Partner, as well as Mr. Strubles role as consultant to Fundamental Global Management, LLC, and our investment in
FG Financial Group, Inc. (Nasdaq: FGF)
, through our investment in FGI 1347 Holdings, LP, a consolidated variable interest entity of which we are the sole limited partner. Pursuant to such evaluation, the Board of Directors determined that Messrs. Dill, Lanktree, and General Payne wereindependent directors within the independence requirements of the NYSE American corporate governance listing standards and all applicable rules and regulations of the SEC. All Board committee members during 2020 were, and all current Board committee members are, independent for the purpose of the committees on which they served or serve.
Independent members of our Board of Directors meet in executive session without the presence of non-independent directors and management, and are scheduled to do so at least once per year.
### I tem 14.Principal Accounting Fees and Services
MSL, an independent registered public accounting firm, audited our financial statements for fiscal 2020 and fiscal 2019. We had no disagreements with MSL on accounting and financial disclosures. MSLs work on our audit for fiscal 2020 was performed by full time, permanent employees and partners of MSL.
MSL has served as our independent registered public accounting firm since November 2015.
The rules of the SEC require us to disclose fees billed by our independent registered public accounting firm for services rendered to us for each of the years ended December 31, 2020 and 2019. The following table represents aggregate fees billed for the fiscal years ended December 31, 2020 and 2019 by MSL.
The audit committee has adopted a formal policy concerning approval of audit and non-audit services to be provided to us by our independent registered public accounting firm, MSL. The policy requires that all services to be provided by MSL, including audit services and permitted audit-related and non-audit services, must be pre-approved by the audit committee. The audit committee approved all audit services provided by MSL to us during 2020. MSL did not provide any audit-related or non-audit services to us during 2020. The audit committee has determined that the provision of the services by MSL reported hereunder had no impact on its independence.
P
### ART IV
Item 15.Exhibits and Financial Statement Schedules
S
IGNATURES<|endoftext|>Convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant.
NOTE 7. COMMITMENTS
### Registration and Stockholder Rights Agreement
Pursuant to a registration and stockholder rights agreement entered into on October 20, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any ClassA common stock issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to ClassA common stock). However, the registration and stockholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period.
Underwriting Agreement
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate. Subject to the terms of the underwriting agreement, (i)the deferred fee will be placed in the Trust Account and released to the underwriter only upon the completion of a Business Combination and (ii)the deferred fee will be waived by the underwriter in the event that the Company does not complete a Business Combination.
### NOTE 8. STOCKHOLDERS EQUITY
Preferred Stock
### ClassA Common Stock
At December31, 2020, there were 5,293,761 shares of ClassA common stock issued and outstanding, excluding 24,706,239 shares of ClassA common stock subject to possible redemption.
ClassB Common Stock
The Company is authorized to issue 10,000,000 shares of ClassB common stock with a par value of $0.0001 per share. At December31, 2020, there were 7,500,000 shares of ClassB common stock issued and outstanding.
Holders of ClassB common stock will have the right to elect all of the Companys directors prior to a Business Combination. Holders of ClassA common stock and ClassB common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The shares of ClassB common stock will automatically convert into shares of ClassA common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of ClassA common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of ClassB common stock shall convert into shares of ClassA common stock will be adjusted (unless the holders of a majority of the outstanding shares of ClassB common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of ClassA common stock issuable upon conversion of all shares of ClassB common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of ClassA common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination and any private placement-equivalent warrants issued upon conversion of Working Capital Loans).
### NOTE 9. WARRANTS
The Public Warrants will become exercisable on the later of (a)30days after the completion of a Business Combination or (b) October 23, 2021.
The Company will not be obligated to deliver any ClassA common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the ClassA common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue a share of ClassA common stock upon exercise of a warrant unless the share of ClassA common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company will agree that as soon as practicable, but in no event later than twenty business days after the closing of a Business Combination, the Company will use its commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of ClassA common stock issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days following a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the ClassA common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a cashless basis in accordance with Section3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Once the Public Warrants become exercisable, the Company may redeem the Public Warrants (except with respect to the Private Placement Warrants): in whole and not in part; and if, and only if, the last reported sale price of the ClassA common stock for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders (the Reference Value) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).
at $0.10 per warrant upon a minimum of 30days prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the ClassA common stock; if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like); and if the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. if, and only if, there is an effective registration statement covering the issuance of the shares of ClassA common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given, or an exemption from registration is available.
However, the warrants will not be adjusted for issuance of ClassA common stock at a price below its exercise price.
In addition, if (x)the Company issues additional shares of ClassA common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per ClassA common (with such issue price or effective issue price to be determined in good faith by the Companys board of directors and, in the case of any such issuance to the initial stockholders or their affiliates, without taking into account any Founder Shares held by the initial stockholders or their affiliates, as applicable, prior to such issuance) (the Newly Issued Price), (y)the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z)the volume weighted average trading price of the Companys ClassA common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the Market Value) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued Price, respectively.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the ClassA common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30days after the completion of a Business Combination, subject to certain limited exceptions.
### NOTE 10. INCOME TAX (RESTATED)
As of December 31, 2020, the Company had $343,209 of U.S.
For the period from March 24, 2020 (inception) through December 31, 2020, the change in the valuation allowance was $59,794.
federal jurisdiction and is subject to examination by the various taxing authorities. The Companys tax returns since inception remain open to examination by the taxing authorities. The Company considers Florida to be a significant state tax jurisdiction.
### NOTE 11.
### Level1:
Level2:
### Level3:
The following table presents information about the Companys assets and liabilities that are measured at fair value on a recurring basis at December31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
The Warrants were accounted for as liabilities in accordance with ASC 815-40. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented in the statement of operations.
The Warrants were valued using a binomial lattice model, which is considered to be a Level 3 fair value measurement. The binomial lattice models primary unobservable input utilized in determining the fair value of the Warrants is the expected volatility of the common stock. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value of the Warrants as of each relevant date.
The estimated fair value of the Warrants was determined based upon the following significant inputs:
### NOTE 12. SUBSEQUENT EVENTS
The Company evaluates subsequent events and transactions that occur after the balance sheet date up to the date that the financial statements were issued. Based upon this review, the Company did not identify any subsequent events, other than as described above for the restatement, that would have required adjustment or disclosure in the financial statements. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
### EXPLANATORY NOTE
This Amendment No. 1 to the Annual Report on Form 10-K (this Amendment) of Ellington Financial Inc. (the Company) amends the Companys Annual Report on Form 10-K for the year ended December 31, 2020, which the Company filed with the Securities and Exchange Commission (SEC) on March 16, 2021 (the Original Form 10-K).
On July 1, 2021, Longbridge Financial, LLC (Longbridge), an equity method investee of the Company, restated its consolidated financial statements and the notes thereto for the year ended December 31, 2020 (the Longbridge Financial Statements).
As a result of such restatement, the Company has determined that its equity method investment in Longbridge, which is not consolidated in the Companys consolidated financial statements, was nevertheless significant in relationship to the Companys financial results for the year ended December 31, 2020, based on the significance tests set forth in SEC Regulation S-X.
Under Rule 3-09 of SEC Regulation S-X, the Company is required to include in its Annual Report on Form 10-K for the year ended December 31, 2020, separate financial statements for unconsolidated subsidiaries and investees accounted for by the equity method when such entities are individually significant; therefore, the Company is filing this Amendment to amend Item 15 to include the Longbridge Financial Statements.
Longbridges decision to restate the Longbridge Financial Statements was based on its determination, subsequent to the filing of the Original Form 10-K, that certain transactions involving the transfer of loans undertaken in connection with issuances of debt securities (the Securitizations) that were originally recorded as sales of such loans do not qualify for sale accounting in accordance with generally accepted accounting principles. The restated Longbridge Financial Statements now account for these transfers and debt securities issuances as secured borrowings and include the offsetting assets and liabilities related to the Securitizations on the balance sheet, the offsetting income and expense related to the Securitizations in the statement of operations, and changes in the statement of cash flows reflecting the changes resulting from the restatement of the balance sheet and income statement. There was no impact to Longbridges net income or members equity, and as a result, there was no impact to the fair value of the Companys investment in Longbridge or the income recognized from the Companys investment in Longbridge, as reported in the Companys consolidated financial statements included in Part III, Item 8 of the Original Form 10-K.
The Longbridge Financial Statements (as restated as described above) are filed as Exhibit 99.1 and are included as financial statement schedules in Item 15 of this Amendment. This Amendment also updates, amends, and supplements Part IV, Item 15 of the Original Form 10-K to include the filing of Exhibit 23.2, the consent of Richey May & Co., and the filing of new Exhibits 31.1, 31.2, 32.1, and 32.2, certifications of the Companys Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a-14(a) and (b) of the Securities and Exchange Act of 1934.
Except as described herein, this Amendment is not intended to, nor does it, reflect events occurring after the filing of the Original Form 10-K and does not amend or otherwise update any other information in the Original Form 10-K. Accordingly, this Amendment should be read in conjunction with the Companys Original Form 10-K and with the Companys filings with the SEC subsequent to the Original Form 10-K filing.
### Part IIItem 9B. Other Information
Since the Company elects the fair value option for its investment in Longbridge, there was no impact to the Companys financial position or results of operations as a result of the restatement of the Longbridge Financial Statements for the affected periods. However, as a result of the restatement of the Longbridge Financial Statements, certain tables in Note 6 of the Companys Notes to Consolidated Financial Statements in the Original Form 10-K, as required by Rule S-X 4-08(g) (summarizing the aggregate financial position and results of operations of the unconsolidated entities in which the Company has an investment and applies the equity method of accounting) as of December 31, 2020 and 2019, differ with the restated information from the restated Longbridge Financial Statements. The Company determined that the changes to the revised information in the tables below are immaterial to its consolidated financial statements and notes as a whole.
The following table provides a revised summary of the combined financial position of the unconsolidated entities as of December 31, 2020 and 2019, in which the Company has an investment:
(1)
Includes investments carried as the lower of cost or fair value as well as investments where the unconsolidated entity has elected the fair value option.
The following table provides a revised summary of the combined results of operations of the unconsolidated entities as of December 31, 2020 and 2019, in which the Company has an investment:
Part IVItem 15.
(a) Documents filed as part of this report:
1.
### Financial Statements:
See Index to consolidated financial statements, included in Part II, Item 8 of the Original Form 10-K.
Pursuant to Rule 3-09 of Regulation S-X, the following financial statements are attached as an exhibit to this Amendment: Financial Statements of Longbridge Financial, LLC.
2. Schedules to Financial Statements:
Except as disclosed below, all other financial statement schedules have been omitted because they are either inapplicable or the information required is provided in our Financial Statements and Notes thereto, included in Part II, Item 8, of the Original Form 10-K or in the Longbridge Financial Statements. The Companys Schedule IV, included below, is unchanged from what was filed in the Original Form 10-K and has been included in this Amendment in accordance with SEC rules.
Ellington Financial Inc.
### Schedule IVMortgage Loans on Real Estate
December 31, 2020
(1)
Aggregate cost for federal income tax purposes is $598.8million for commercial and non-securitized residential mortgage loans. Excluded from this amount is the cost basis for federal income tax purposes of $801.3million of securitized residential loans; such loans have been deemed to be sold for tax purposes but do not meet the requirements for true sale under U.S. GAAP.
(2)
As of December 31, 2020, all of the Company's mortgage loans were carried at fair value. See Note 2 and Note 3 in the notes to our consolidated financial statements for the year ended December 31, 2020 for additional details.
The following table presents a roll-forward of the fair value of the Company's mortgage loans on real estate for the year ended December 31, 2020.
3. Exhibits:
### Exhibit
Description
3.1
Certificate of Incorporation of Ellington Financial Inc.
3.2
Bylaws of Ellington Financial Inc.
3.3
Certificate of Designations of 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of Ellington Financial Inc. (incorporated by reference to the registration statement on Form 8-A filed on October 21, 2019)
4.1
Form of certificate representing the 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock of Ellington Financial Inc. (incorporated herein by reference to Exhibit 4.1 of Ellington Financial Inc.s Form 8-A filed on October 21, 2019).
4.2
Indenture, dated as of February 13, 2019, among EF Holdco Inc., EF Cayman Holdings Ltd., Ellington Financial LLC and Wilmington Trust, National Association, as trustee 001-34569), filed on February 13, 2019)
4.3
Form of EF Holdco Inc.s and EF Cayman Holdings Ltd.s 5.50% Senior Notes due 2022 (included in Exhibit 4.2)
4.4
Description of Securities Registered under Section 12 of the Exchange Act (incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2019)
10.1
Seventh Amended and Restated Management Agreement, by and between the Company, Ellington Financial Operating Partnership LLC and Ellington Financial Management LLC, dated as of March 13, 2018 (incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2017)
10.2
Operating Agreement of Ellington Financial Operating Partnership LLC, by and between the Company, Ellington Financial Operating Partnership LLC and EMG Holdings, L.P., dated as of January 1, 2013 (incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2012)
10.3
First Amendment to Limited Liability Company Operating Agreement of Ellington Financial Operating Partnership LLC, by and between the Company, Ellington Financial Operating Partnership LLC and EMG Holdings, L.P., dated as of January 1, 2013. (incorporated by reference to the Current Report on Form 8-K filed on October 22, 2019)
10.4
2007 Incentive Plan for Individuals (incorporated by reference to the registration statement on Form S-11 (No.
10.5
2007 Incentive Plan for Entities (incorporated by reference to the registration statement on Form S-11 (No.
10.6
Ellington Financial LLC 2017 Equity Incentive Plan (incorporated by reference to the Current Report on Form 8-K filed on May 18, 2017)
10.7
Form of LTIP Unit Award Agreement for Directors (incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011)
10.8
Form of LTIP Unit Award Agreement for Individuals (incorporated by reference to the Annual Report on Form 10-K for the fiscal year ended December 31, 2011)
10.9
Form of Individual LTIP Unit Award Agreement under 2017 Equity Incentive Plan (incorporated by reference to the Current Report on Form 8-K filed on May 18, 2017)
10.10
Form of Non-Employee Director LTIP Unit Award Agreement under 2017 Equity Incentive Plan (incorporated by reference to the Current Report on Form 8-K filed on May 18, 2017)
10.11
Form of OP LTIP Unit Award for Directors (incorporated by reference to Form 10-Q for the Quarter Ended September 30, 2019).
10.12
Form of OP LTIP Unit Award for Officers (incorporated by reference to Form 10-Q for the Quarter Ended September 30, 2019).
10.13
Form of Indemnity Agreement (incorporated by reference to the registration statement on Form S-11 (No. 333-160562), filed on September 3, 2009, as amended)
21.1
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020)
23.1
Consent of the Independent Registered Public Accounting Firm (incorporated by reference to Exhibit 23.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020)
23.2
Consent of Richey May & Co., for Financial Statements of Longbridge Financial, LLC
24.1
Power of Attorney (incorporated by reference to Exhibit 24.1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020)
### Exhibit
Description
(continued)
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002
32.1*
32.2*
99.1
Financial Statements of Longbridge Financial, LLC
101.INS
101.SCH
Inline XBRL Taxonomy Extension Schema
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase
*Furnished herewith. These certifications are not deemed "filed" for purposes of Section18 of the Securities Exchange Act of 1934, as amended.
Management or compensatory plan or arrangement.<|endoftext|>The company or one of its subsidiaries to satisfy the tax withholding obligations related to any award under the stock plan, shall not be available for subsequent awards under the stock plan.
Under the stock plan, on a change in the number of shares of common stock as a result of a dividend on shares of common stock payable in shares of common stock, common stock forward split or reverse split or other extraordinary or unusual event that results in a change in the shares of common stock as a whole, the terms of the outstanding award will be proportionately adjusted.
### Eligibility
Awards may be granted under the stock plan to employees, officers, directors, and consultants who are deemed to have rendered, or to be able to render, significant services to us and who are deemed to have contributed, or to have the potential to contribute, to our success.
Types of Awards
### Options.
The stock plan provides both for incentive stock options as defined in Section422 of the Internal Revenue Code (the Code) and for options not qualifying as incentive options, both of which may be granted with any other stock based award under the stock plan. The board determines the exercise price per share of common stock purchasable under an incentive or non-qualified stock option, which may not be less than 100% of the fair market value on the day of the grant or, if greater, the par value of a share of common stock. However, the exercise price of an incentive stock option granted to a person possessing more than 10% of the total combined voting power of all classes of stock may not be less than 110% of the fair market value on the date of grant. The aggregate fair market value of all shares of common stock with respect to which incentive stock options are exercisable by a participant for the first time during any calendar year, measured at the date of the grant, may not exceed $100,000 or such other amount as may be subsequently specified under the Code or the regulations thereunder. An incentive stock option may only be granted within a ten-year period commencing on September 24, 2018 and may only be exercised within tenyears from the date of the grant, or within five years in the case of an incentive stock option granted to a person who, at the time of the grant, owns common stock possessing more than 10% of the total combined voting power of all classes of our stock. Subject to any limitations or conditions the board may impose, stock options may be exercised, in whole or in part, at any time during the term of the stock option by giving written notice of exercise to us specifying the number of shares of common stock to be purchased. The notice must be accompanied by payment in full of the purchase price, either in cash or, if provided in the agreement, in our securities or in combination of the two.
Generally, stock options granted under the stock plan may not be transferred other than by will or by the laws of descent and distribution and all stock options are exercisable during the holders lifetime, or in the event of legal incapacity or incompetency, the holders guardian, or legal representative. If the holder is an employee, no stock options granted under the stock plan may be exercised by the holder unless he or she is employed by us or a subsidiary of ours at the time of the exercise and has been so employed continuously from the time the stock options were granted. However, in the event the holders employment is terminated due to disability, the holder may still exercise his or her vested stock options for a period of 12months or such other greater or lesser period as the board may determine, from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter. Similarly, should a holder die while employed by us or a subsidiary of ours, his or her legal representative or legatee under his or her will may exercise the decedent holders vested stock options for a period of 12months from the date of his or her death, or such other greater or lesser period as the board may determine or until the expiration of the stated term of the stock option, whichever period is shorter. If the holders employment is terminated due to normal retirement, the holder may still exercise his or her vested stock options for a period of 12months from the date of termination or until the expiration of the stated term of the stock option, whichever period is shorter. If the holders employment is terminated for any reason other than death, disability or normal retirement, the stock option will automatically terminate, except that if the holders employment is terminated without cause, then the portion of any stock option that is vested on the date of termination may be exercised for the lesser of threemonths after termination of employment, or such other greater or lesser period as the board may determine but not beyond the balance of the stock options term.
### Stock Appreciation Rights.
Under the stock plan, stock appreciation rights may be granted to participants who have been, or are being, granted stock options under the stock plan as a means of allowing the participants to exercise their stock options without the need to pay the exercise price in cash or without regard to the grant of options. A stock appreciation right entitles the holder to receive an amount equal tote excess of the fair market value of a share of common stock over the grant price of the award which cannot be less than the fair market value of a share at the time of grant.
Restricted Stock.
Under the stock plan, shares of restricted stock may be awarded either alone or in addition to other awards granted under the stock plan. The board determines the persons to whom grants of restricted stock are made, the number of shares to be awarded, the price if any to be paid for the restricted stock by the person receiving the stock from us, the time, or times within which awards of restricted stock may be subject to forfeiture, the vesting schedule, and rights to acceleration thereof, and all other terms and conditions of the restricted stock awards.
Restricted stock awarded under the stock plan may not be sold, exchanged, assigned, transferred, pledged, encumbered, or otherwise disposed of, other than to us, during the applicable restriction period. In order to enforce these restrictions, the stock plan provides that all shares of restricted stock awarded to the holder remain in our physical custody until the restrictions have terminated and all vesting requirements with respect to the restricted stock have been fulfilled. Except for the foregoing restrictions, the holder will, even during the restriction period, have all of the rights of a stockholder, including the right to receive and retain all regular cash dividends and other cash equivalent distributions as we may designate, pay, or distribute on the restricted stock and the right to vote the shares.
### Other Stock-Based Awards.
Under the stock plan, other stock-based awards may be granted, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed consistent with the purposes of the stock plan. These other stock-based awards may be in the form of deferred stock awards and stock issued in lieu of bonuses. These other stock-based awards may be awarded either alone, in addition to, or in tandem with any other awards under the stock plan.
Other Limitations.
The board may not modify or amend any outstanding option or stock appreciation right to reduce the exercise price of such option or stock appreciation right, as applicable, below the exercise price as of the date of grant of such option or stock appreciation right.
Item 12.
The following table sets forth, as of April 23, 2021, information regarding the beneficial ownership of our common stock by each person known to us to be or, to the best of our knowledge is or claims to be, the beneficial owner of more than 5% of our outstanding shares; Except as may be otherwise indicated, beneficial ownership reflected in the table is determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
*
Indicates less than 1%.
(1)
Unless otherwise specified, the business address of referenced holders is 420 Lexington Avenue, Suite 300, New York, New York 10170.
(2)
Represents shares of common stock over which Dr. Laster claims sole beneficial ownership based on a Schedule 13D filed by Dr. Laster on April 7, 2021. See Item 10 for additional information relating to such Schedule 13D.
(3)
Greenspan is a member and co-manager, HCP/Advest LLC, of which Mr. Greenspan is a member and sole manager, and shares of common stock held by certain other HCFP-related entities. Accordingly, Mr. Greenspan is deemed to have shared voting and dispositive power, sole voting and dispositive power and shared voting and dispositive power over shares of common stock held by the HCFP/Capital Partners 18B-1 LLC, HCP/Advest LLC and other HCFP-related entities, respectively. Mr. Greenspan disclaims beneficial ownership of the shares of common stock held by these entities, except to the extent of his proportionate pecuniary interest therein.
(4)
Lamstein is a member and co-manager.Accordingly, he is deemed to have shared voting and dispositive power over the shares of common stock held by this entity.Mr. Lamstein disclaims beneficial ownership of the shares of common stock held by this entity, except to the extent of his proportionate pecuniary interest therein.Also includes an aggregate of 3,000 shares of common stock held by Mr. Lamstein's minor children.
(5)
Includes shares of common stock held by Moreglade Pty. Limited, of which Mr. Hopper is a Director.Accordingly, he is deemed to have sole voting and dispositive power over the shares of common stock held by this entity.Mr. Hopper disclaims beneficial ownership of the shares of common stock held by this entity, except to the extent of his proportionate pecuniary interest therein.
(6)
Includes 166,667 shares of common stock issuable pursuant to outstanding stock options to purchase our common stock which are exercisable within 60 days of the date of this Amendment No. 1.Also includes an aggregate of 40,000 shares of common stock held by Mr. Sanghrajka's minor children.
(7)
Includes shares of common stock held by Dayber Snow LLC, of which Mr. Gibson is a member and co-manager.Accordingly, he is deemed to have shared voting and dispositive power over the shares of common stock held by this entity.Mr. Gibson disclaims beneficial ownership of the shares of common stock held by this entity, except to the extent of his proportionate pecuniary interest therein.Also includes an aggregate of 2,000 shares of common stock held by Mr. Gibson's minor children.
(8)
Includes 9,767 shares of common stock issuable pursuant to outstanding stock options to purchase our common stock which are exercisable within 60 days of the date of this Amendment No. 1 and 5,941 shares of common stock held by BVI Ventures LLC, of which Mr. Buckel is the sole owner.Accordingly, he is deemed to have sole voting and dispositive power over the shares of common stock held by BVI Ventures LLC.
(9)
1.
(10)
1.
(11)
1.
Item 13.
Other than compensation arrangements, we describe below transactions and series of similar transactions over the two most recently completed fiscal years, as well as the current fiscal year, 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 fiscalyears; | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Cancel and forgive all amounts owed to Sponsor pursuant to the Promissory Note (described below), and (v) receive a cash payment in lieu of converting outstanding amounts due under the Convertible Note (described below) upon the consummation of the Business Combination, in each case on terms and subject to the conditions set forth therein.
Waiver Agreements
Concurrently with the execution of the Merger Agreement, the Company, the Seller, Landsea and each of those persons holding Founder Shares (each an LF Capital Restricted Stockholder) entered into Founders Waiver Agreements, pursuant to which each LF Capital Restricted Stockholder agreed to (i) waive certain of their anti-dilution, conversion, and redemption rights with respect to their Founder Shares and (ii) agreed to convert their Founder Shares into shares of the Companys Common Stock on a one-for-one basis. Additionally, each of the LF Capital Restricted Stockholders, other than BlackRock Credit Alpha Master Fund L.P. and HC NCBR Fund (the BlackRock Holders), agreed to waive their redemption rights with respect to any Common Stock they own.
Additionally, the Company and the BlackRock Holders entered into the BlackRock Waiver Agreement, pursuant to which each of the BlackRock Holders agreed to (i) waive certain of their anti-dilution and conversion rights with respect to their Founder Shares and (ii) agreed to convert their Founder Shares into shares of the Companys Common Stock on a one-for-one basis. The Company also entered into Lock-up Agreements (described below) at the closing of the Business Combination, with each of the Seller and the Sponsor, on similar terms to the aforementioned letter agreement.
### Stockholders Agreement
Investor Representation Letter
### Lock-up Agreements
On the Closing Date, each of the Sponsor and certain other holders of converted Founder Shares entered into an equity lock-up letter agreement with the Company, which provides that their shares of Common Stock are not transferable or salable until the earlier of(A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of our Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of Common Stock for cash, securities or other property, except (a) to our officers or directors, any affiliates or family members of any of our officers or directors, any members of the Sponsor, or any affiliates of the Sponsor, (b) in the case of an individual, by gift to a member of the individuals immediate family, to a trust, the beneficiary of which is a member of the individuals immediate family or an affiliate of such person, or to a charitable organization; (e) by private sales;
(e) by private sales;
### License Agreement
On the Closing Date, an affiliate of the Seller (the Licensor), the Company and each of the Companys greater than 50% owned subsidiaries (the Licensees), entered into the License Agreement, pursuant to which, the Licensor agreed, among other things, to grant the Licensees an exclusive license to use the Landsea trademark in connection with the domestic homebuilding business (as such term is defined in the Stockholders Agreement).
Management Agreement
93 rd
We qualify as an emerging growth company, as defined in Section 2(a)(19) of the Securities Act, as modified by 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 of 2002 (SOX), 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 stockholder approval of any golden parachute payments not previously approved.
We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year (a) following June 22, 2023, the fifth anniversary of our IPO, (b) in which we have total annual gross revenue of at least $1.07 billion or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock and public warrants that is held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We also qualify as a smaller reporting company (smaller reporting company), as defined in the Exchange Act.
### Available Information
Our Internet address is [IDX] The information contained on our website is not incorporated by reference into this filing, should not be considered part of this filing, and is provided only for reference. Our principal executive offices are located at 660 Newport Center Drive, Suite 300, Newport Beach, California 92660 and our telephone number is (949) 345-8080.
Our SEC filings are available to the public over the Internet at the SECs website at www.sec.gov and at our website free of charge at www.landseahomes.com as soon as reasonably practicable after filing.
### Item 1A. Risk Factors (As Restated)
Summary of Risk Factors
An investment in our securities involves risks and uncertainties. The following summarizes the material factors that make an investment in us speculative or risk, all of which are more fully described in the Risk Factors section below. You should read and carefully consider this summary in conjunction with the Risk Factors section as well as the other information included in this Annual Report, including Cautionary Note Regarding Forward-Looking Statements, and the consolidated financial statements and the related notes thereto included elsewhere in this Annual Report, before investing in our securities. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. Any of the following risks could materially and adversely affect our business, financial condition, results of operations or prospects. However, the selected risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition, results of operations or prospects. In such a case, the trading price of our securities could decline and you may lose all or part of your investment in us.
Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.
If we are not able to develop communities successfully and in a timely manner, our revenues, financial condition and results of operations may be adversely impacted.
We may suffer uninsured losses or suffer material losses in excess of insurance limits.
Our geographic concentration could materially and adversely affect us if the homebuilding industry in our current markets should experience a decline.
Inflation and interest rate changes could adversely affect our business and financial results.
We may not be successful in integrating acquisitions, expanding into new markets or implementing our growth strategies.
Landsea Green can determine the outcome of major corporate transactions that require the approval of our stockholders and may take actions that conflict with the interests of other of our stockholders.
We are a controlled company within the meaning of Nasdaq rules and, as a result, may qualify for, and may choose to rely on, exemptions from certain corporate governance requirements.
Our internal controls over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
If the Business Combinations benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.
A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future.Resales of the shares of Common Stock included in the Merger Consideration could depress the market price of our Common Stock.
Because homes are relatively illiquid, our ability to promptly sell one or more properties for reasonable prices in response to changing economic, financial and investment conditions may be limited and we may be forced to hold non-income producing properties for extended periods of time.
New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects.
We rely on third-party suppliers and long supply chains, and if we fail to identify and develop relationships with a sufficient number of qualified suppliers, or if there is a significant interruption in our supply chains, our ability to timely and efficiently access raw materials that meet our standards for quality could be adversely affected.
Our business and results of operations are dependent on the availability, skill and performance of subcontractors.
The long-term sustainability and growth in our number of homes delivered depends in part upon our ability to acquire developed lots ready for residential homebuilding on reasonable terms.
### Risk Factors
Operational Risks Related to Our Business
Actual or threatened public health crises, epidemics, or outbreaks, including the outbreak of COVID-19, have had and may again have a material adverse effect on our business, financial condition, and results of operations.
Our business operations and supply chains may be negatively impacted by regional or global public health crises, epidemics, or outbreaks. For example, in December 2019, a novel strain of coronavirus, now known as COVID-19, emerged in Wuhan, Hubei Province, China. On March 11, 2020, the International Health Regulations Emergency Committee of the World Health Organization declared the outbreak a global pandemic. The outbreak has spread rapidly throughout the world and has caused severe disruption to the global economy. The COVID-19 outbreak has led governments across the globe to impose a series of measures intended to contain its spread, including border closures, travel bans, quarantine measures, social distancing, and restrictions on business operations and large gatherings. Such measures have adversely impacted our business, financial condition, and results of operations. In addition, a significant public health crisis, epidemic or outbreak of contagious disease in the human population may adversely affect the economies and financial markets of many countries, including those in which we operate, resulting in an economic downturn that could affect the supply or demand<|endoftext|>To March 31, 2021, the North America micronutrient product business was reported in the Companys Plant Nutrition North America segment (which is now known as the Plant Nutrition segment), which aligns with the Plant Nutrition reporting unit for purposes of evaluating goodwill. Based on the Companys assessment of the estimated relative fair values of the North America micronutrient product business and the remaining business from the former Plant Nutrition reporting unit, the Company performed an allocation of goodwill between the North America micronutrient product business classified as held for sale and the business being retained, which resulted in $6.8million and $6.6million of goodwill allocated to the North America micronutrient product business as of December 31, 2020 and 2019, respectively. An allocation of goodwill related to the former Plant Nutrition South America segment was not required as the entire segment and related goodwill is classified as held for sale in each period.
The information below sets forth selected financial information related to the operating results of the Specialty Businesses classified as discontinued operations. The Specialty Businesses revenue and expenses have been reclassified to net earnings from discontinued operations in prior periods. The Consolidated Balance Sheets present the assets and liabilities that were reclassified from the specified line items to assets and liabilities held for sale and the Consolidated Statements of Operations present the revenue and expenses that were reclassified from the specified line items to discontinued operations.
###
The following table represents summarized Consolidated Balance Sheet information of assets and liabilities held for sale (in millions):
The following table represents summarized Consolidated Statements of Operations information of discontinued operations (in millions):
###
The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in millions):
20.SUBSEQUENT EVENTS
### Dividend Declared:
On February25, 2021, the Board of Directors declared a quarterly cash dividend of $0.72 per share on the Companys outstanding common stock, unchanged from the quarterly cash dividends paid in 2020.The dividend was paid on March19, 2021, to stockholders of record as of the close of business on March10, 2021.
Change in Fiscal Year
On June 23, 2021, the Board of Directors of the Company approved a change in the Companys fiscal year end from December 31st to September 30th. As a result of this change, the Company will file a Transition Report on Form 10-K for the transition period ending September 30, 2021.
ITEM 9.
None.
### ITEM 9A.CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the Companys reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated to management, including the Companys President and Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
In connection with the preparation of this Amended Annual Report on Form 10-K/A, an evaluation of the effectiveness of the design and operation of the Companys disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer as of December31, 2020. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures were ineffective as of December31, 2020, due to the material weakness described below. The material weakness resulted in material misstatements in the unaudited quarterly information presented in Note 17 of our Original Report (there was no impact to full year financial statements) and the unaudited consolidated financial statements included in our previously filed Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 (the 1Q 2021 Form 10-Q). Notwithstanding such material weaknesses in internal control over financial reporting, our Chief Executive Officer and Chief Financial Officer have concluded that the Companys Consolidated Financial Statements included in this Amended Annual Report on Form 10-K/A present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.
The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. The Companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
Management conducted an evaluation and assessed the effectiveness of the Companys internal control over financial reporting as of the reporting date. In making its assessment of internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
A material weakness, as defined in Rule 12b-2 under the Exchange Act, is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Companys annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
Management conducted an evaluation and reassessed the effectiveness of the Companys internal control over financial reporting. Based on its evaluation, management concluded that the Companys internal control over financial reporting was ineffective as of December 31, 2020 and this report has been revised from our report included in the previously filed 2020 Form 10-K (which had reported internal controls over financial reporting as effective)
The Company did not have properly designed controls and policies to analyze inventory variances at interim reporting dates that required capitalization for its salt inventory. Ernst & Young LLP, the Companys independent registered public accounting firm, has audited the Companys consolidated financial statements for each of the three years ended December 31, 2020, and has also audited the effectiveness of the Companys internal control over financial reporting as of December 31, 2020. These reports are included in this Amended Annual Report on Form 10-K/A.
###
Remediation Efforts and Status of Material Weakness
The Company is in the process of enhancing the design of certain internal controls over financial reporting related to accounting for inventory in interim periods under ASC Topic 330 Inventory and ASC Topic 270 - Interim Reporting in accordance with a remediation plan for the material weakness, which includes updating the Companys inventory valuation policy and subsequent application of the policy. These enhanced controls will be tested for effectiveness in future periods. In addition, the Company is amending its previously filed 2020 Form 10-K and 1Q 2021 Form 10-Q by filing this Amended Annual Report on Form 10-K/A and an Amended Quarterly Report on Form 10-Q/A for the quarter ending March 31, 2021.
There were no changes in the Companys internal control over financial reporting during the most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting, other than as discussed above. The Company also implemented changes to our SOP inventory management and reporting process at our Ogden facility, which were designed to reduce risk, along with enhanced internal controls for this process.
None.
PART III
Information regarding the Companys executive officers is included in Part I to this Form 10-K/A under the caption Information about our Executive Officers and is incorporated herein by reference.
The information required by this item is included under the captions Proposal 1Election of Directors, Corporate Governance, and Board of Directors and Board Committees in the Companys proxy statement for its 2021 annual meeting of stockholders (the 2021 Proxy Statement) and is incorporated herein by reference.
The Company has adopted a Code of Ethics and Business Conduct that applies to all employees, including the Companys principal executive officer, principal financial officer and principal accounting officer, as well as members of the Board of Directors of the Company. The Code of Ethics and Business Conduct is available on the Companys website at www.compassminerals.com. The Company intends to disclose any changes in, or waivers from, this Code of Ethics and Business Conduct by posting such information on the same website or by filing a Current Report on Form 8-K, in each case to the extent such disclosure is required by SEC or New York Stock Exchange rules.
ITEM 11.EXECUTIVE COMPENSATION
The information required by this item is included under the captions 2020 Non-Employee Director Compensation, Corporate GovernanceCompensation Committee Interlocks and Insider Participation, Compensation Discussion and Analysis, Compensation Committee Report and Executive Compensation Tables in the 2021 Proxy Statement and is incorporated herein by reference.
ITEM 12.
The information required by this item is included under the caption Stock Ownership of Certain Beneficial Owners and Management in the 2021 Proxy Statement and is incorporated herein by reference. Information regarding the Companys equity compensation plans is included in this report under the caption Equity Compensation Tables and is incorporated herein by reference.
ITEM 13.CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item is included under the captions Corporate GovernanceReview and Approval of Transactions with Related Persons and Board of Directors and Board CommitteesDirector Independence in the 2021 Proxy Statement and is incorporated herein by reference.
The information required by this item is included under the caption Proposal 3Ratification of Appointment of Independent Auditors in the 2021 Proxy Statement and is incorporated herein by reference.
PART IV
### ITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial statements and supplementary data required by this Item 15 are set forth below:
(a)(2) Financial Statement Schedule:
### Schedule II Valuation Reserves
December31, 2020, 2019 and 2018
(1)
Deduction for purposes for which reserve was created.
(2)
The 2018 additions primarily relate to foreign tax credits which offset a deferred tax asset. This amount was not charged to expense.
(a)(3) List of Exhibits:
*Filed herewith.
**Furnished herewith.
+Management contracts and compensatory plans or arrangements.
### ITEM 16.FORM 10-K SUMMARY
None. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
350 Camino Gardens Blvd, Suite 200, Boca Raton, FL 33432.Mr.
(6)
Represents 2,990 shares held by Mr. Joudeh and 5,291 shares held by his spouse in her name and a wholly owned LLC. The address of Mr. Weaver Pl., Aurora, CO 80016
The following table summarizes plans under which our equity securities are authorized for issuance as of December 31, 2020.
The 2017 Equity Incentive Plan, as Amended (the Plan), is intended to promote the best interests of the Company and its stockholders by assisting the Company in the recruitment and retention of persons with ability and initiative and providing an incentive to such persons to contribute to the growth of the Companys business. The Company is authorized to make awards of up to an aggregate of 18,500,000 shares of the Companys common stock under the Pl The Company is authorized to make such awards of shares of common stock, shares of restricted stock, appreciation rights, deferred shares, performance shares, incentive stock options, nonqualified stock options under the Plan. Eligible persons under the Plan include employees, directors and consultants of the Company or any affiliate of the Company. Unless earlier terminated, the Plan will terminate in 2027.
Under two separate Securities Purchase Agreements the Company has entered into with Dye Cann II and CRW, respectively, for as long as Dye Cann II or CRW, as the case may be, holds any shares of Series A Preferred Stock, the Company may not have issued and outstanding awards under any equity incentive plan for the issuance of shares of common stock representing more than 12% of the then-issued and outstanding shares of common stock (calculated on an as-converted, fully-diluted basis, excluding warrants) in the aggregate.
In addition, the Company has made the following awards outside of the Plan: (i) the right to receive an aggregate of 1,500,000 shares of common stock granted to two former officers (one of which also is a former director), which will vest at such time that the Companys stock price appreciates to $8.00 per share with defined minimum average daily trading volume thresholds, and (ii) options to purchase an aggregate of 2,000,000 shares of common stock at an exercise price of $1.49 per share granted to one former officer.
ITEM 13.
Transactions Involving Former Directors, Executive Officers or Their Affiliated Entities
During the year ended December 31, 2019, the Company recorded sales to Futurevision, Inc., f/k/a Medicine Man Production Corp., d/b/a Medicine Man Denver (Medicine Man Denver), a customer of the Company, totaling $402,839 and sales discounts totaling $143,473. As of December 31, 2019, the Company had an accounts receivable balance with Medicine Man Denver totaling $34,748. Also, during the year ended December 31, 2019, the Company incurred expenses from Medicine Man Denver totaling $125,897 for contract labor and other related administrative costs. During the year ended December 31, 2020, the Company recorded sales to Medicine Man Denver, totaling $997,262. The Company had an accounts receivable balance with Medicine Man Denver totaling $72,109 as of December 31, 2020. The Companys former Chief Executive Officer, Andrew Williams, currently owns 38% of Medicine Man Denver.
During the year ended December 31, 2019, the Company recorded sales to MedPharm Holdings LLC (MedPharm), a customer of the Company, totaling $64,378 and sales discounts totaling $7,498. As of December 31, 2019, the Company had an accounts receivable balance with MedPharm Holdings totaling $2,604. During the year ended December 31, 2020, the Company recorded sales to MedPharm totaling $73,557. The Company had a net accounts receivable balance with MedPharm totaling $5,885 as of December 31, 2020.
During the year ended December 31, 2019, the Company made loans to MedPharm totaling $767,695 evidenced by promissory notes with original maturity dates ranging from September 21, 2019 through January 19, 2020 and bearing interest between 8 and 10% per annum. On August 1, 2020, the Company and MedPharm entered into a Settlement Agreement and Mutual Release (the Settlement Agreement) pursuant to which (i) the parties agreed that the outstanding amount owed by MedPharm to the Company was $767,695 of principal and $47,161 in accrued and unpaid interest, (ii) MedPharm paid the Company $100,000 in cash, (iii) Andrew Williams returned 175,000 shares of the Companys common stock to the Company, as partial repayment of the outstanding balance at a value of $1.90 per share. These shares are held in treasury. The parties agreed that MedPharm would pay the remaining balance of $181,911 by delivering product to the Company on an agreed-upon schedule through March 31, 2021.
During the year ended December 31, 2019, the Company recorded sales to Baseball 18, LLC (Baseball) totaling $165,617. As of December 31, 2019, the Company had an accounts receivable balance with Baseball totaling $169,960. During the year ended December 31, 2019, the Company recorded sales from Farm Boy, LLC (Farm Boy) totaling $321,307. As of December 31, 2019, the Company had an accounts receivable balance with Farm Boy totaling $330,911. During the year ended December 31, 2020, the Company recorded sales to Baseball totaling $14,605, to Farm Boy totaling $16,125, to Emerald Fields LLC totaling $16,605, and to Los Sueos Farms totaling $52,244. As of December 31, 2020 the Company had net accounts payable balances with Baseball of $31,250, and with Farm Boy of $93,944. One of the Companys former directors, Robert DeGabrielle, owns the Colorado retail marijuana cultivation licenses for Baseball, Farm Boy, Emerald Fields LLC and Los Sueos Farms.
Transactions with Entities Affiliated with Justin Dye
The Company has participated in several transaction involving Dye Capital, Dye Cann I and Dye Cann II. Justin Dye, the Companys Chief Executive Officer, one of our directors, the largest beneficial owner of the Companys common stock and Series A Preferred Stock, controls Dye Capital and Dye Capital controls Dye Cann I and Dye Cann II. Dye Cann I is the largest holder of the Companys outstanding common stock. Dye Cann II is a significant holder of the Series A Preferred Stock. Mr. Dye has sole voting and dispositive power over the securities held by Dye Capital, Dye Cann I, and Dye Cann II.
The Company entered into the Dye Cann I SPA with Dye Cann I on June 5, 2019, pursuant to which the Company agreed to sell to Dye Cann I up to between 8,187,500 and 10,687,500 shares of the Companys common stock in several tranches at $2.00 per share and warrants to purchase 100% of the number of shares of common stock sold at a purchase price of $3.50 per share. At the initial closing on June 5, 2019, the Company sold to Dye Cann I 1,500,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock for gross proceeds of $3,000,000, and the Company has consummated subsequent closings for an aggregate of 9,287,500 shares of common stock and warrants to purchase 9,287,500 shares of common stock for aggregate gross proceeds of $18,575,000 to the Company. The terms of the Dye Cann I SPA are disclosed in the Companys Current Report on Form 8-K filed on June 6, 2019. The Company and Dye Cann I entered into a first amendment to the Dye Cann I SPA on July 15, 2019, as described in the Companys Current Report on Form 8-K filed on July 17, 2019, a second amendment to the Dye Cann I SPA on May 20, 2020, as described in the Companys Current Report on Form 8-K filed on May 22, 2020, and a Consent, Waiver and Amendment on December 16, 2020, as described in the Companys Current Report on Form 8-K filed on December 23, 2020. At the time of the initial closing under the Dye Cann I SPA, Justin Dye became a director and the Companys Chief Executive Officer.
The Company granted Dye Cann I certain demand and piggyback registration rights with respect to the shares of common stock sold under the Dye Cann II SPA and issuable upon exercise of the warrants sold under the Dye Cann II SPA. The Company also granted Dye Can I the right to designate one or more individuals for election or appointment to the Board and Board observer rights as described under Item 10. Further, under the Dye Cann I SPA, until June 5, 2022, if the Company desires to pursue debt or equity financing, the Company must first give Dye Cann I an opportunity to provide a proposal to the Company with the terms upon which Dye Cann I would be willing to provide or secure such financing. If the Company does not accept Dye Cann Is proposal, the Company may pursue such debt or equity financing from other sources but Dye Cann I has a right to participate in such financing to the extent required to enable Dye Cann I to maintain the percentage of the Companys common stock (on a fully-diluted basis) that it then owns, in the case of equity securities, or, in the case of debt, a pro rata portion of such debt based on the percentage of the Companys common stock (on a fully-diluted basis) that it then owns.
The Company entered into a Securities Purchase Agreement (the Dye Cann II SPA) with Dye Cann II on November 16, 2020 pursuant to which the Company agreed to sell to Dye Cann II shares of Series A Preferred Stock in one or more tranches at a price of $1,000 per share. The terms of the Dye Cann II SPA are disclosed in the Companys Current Report on Form 8-K filed on December 23, 2020. The Company and Dye Cann II entered into an amendment to the Dye Cann II SPA on December 16, 2020, as described in the Companys Current Report on Form 8-K filed on December 23, 2020, a second amendment to the Dye Cann II SPA on February 3, 2021, as described in the Companys Form 8-K filed on February 9, 2021, and a third amendment to the Dye Cann II SPA on March 30, 2021, as described under Item 9B of this Report. The Company issued and sold to Dye Cann II 7,700 shares of Series A Preferred Stock on December 16, 2020, 1,450 shares of Series A Preferred Stock on December 18, 2020, 1,300 shares of Series Preferred Stock on December 22, 2020, 3,100 shares of Series A Preferred Stock on February 3, 2021, 3,800 shares of Series A Preferred Stock on March 2, 2021 and 4,000 shares of Series A Preferred Stock on March 30, 2021. As a result, the Company issued and sold an aggregate of 21,350 shares of Series A Preferred Stock to Dye Cann II for aggregate gross proceeds of $21,350,000.
The Company granted Dye Cann II c ertain demand and piggyback registration rights with respect to the shares of common stock issuable upon conversion of the Series A Preferred Stock under the Dye Cann II SPA. Further, the Company granted Dye Can II the right to designate one or more individuals for election or appointment to the Board and Board observer rights as described under Item 10.
On December 16, 2020, the Company entered into a Secured Convertible Note Purchase Agreement with Dye Capital and issued and sold to Dye Capital a Convertible Note and Security Agreement in the principal amount of $5,000,000 as described in the Companys Current Report on Form 8-K filed on December 23, 2020. On February 26, 2021, Dye Capital elected to convert the $5,000,000 principal amount and the $60,250 of accrued but unpaid interest under the Convertible Promissory Note and Security Agreement under its terms and Dye Capital and the Company entered into a Conversion Notice and Agreement pursuant to which the Company issued 5,060 shares of Series A Preferred Stock to Dye Capital and also paid Dye Capital $230.97 in cash in lieu of issuing any fractional shares of Series Preferred Stock upon conversion, as described in the Companys Current Report on Form 8-K filed on March 4, 2021.
The Company previously reported the terms of the Series A Preferred Stock in the Companys Current Report on<|endoftext|>Been no material changes to the procedures pursuant to which a stockholder may recommend a nominee to the Board. The
Nominating and Corporate Governance Committee does not have a set policy for whether or how stockholders are to recommend nominees for consideration by the Board. Recommendations for director nominees made by stockholders are subject to the same considerations as nominees selected by the Corporate Governance and Nominating Committee or the Board.
### Item 11. Executive Compensation
The table below sets forth, for the last two fiscal years, the compensation earned by our named executive officers consisting of our chief executive officer and chief financial officer. No other executive officer had annual compensation in excess of $100,000 during the last two fiscal years.
Summary Compensation Table
(1) Represents the aggregate grant date fair value computed in accordance with FASB 123.
(2) Resigned on October 26, 2020.
(3) Appointed CEO October 26,2020. Ms. Belangers salary was paid in $C and translated in to $US at the average exchange rate for the fourth quarter of 2020 of 1.3030 per Bank of Canada. Ms. Belanger resigned from the Company April 13, 2021.
(4) Mr. Minnicks Other Compensation were consulting fees paid for his services as Chief Financial Officer.
### Employment Agreements
David Beling
On September 30, 2011, we entered into an employment agreement with David Beling pursuant to which Mr. Beling would serve as our President and Chief Executive Officer for a period of two years (with an automatic one year extension each anniversary date) in consideration for an annual salary of $200,000.
Upon termination of Mr. Belings employment prior to expiration of the employment period (unless Mr. Belings employment is terminated for Cause or Mr. Beling terminates his employment without Good Reason) (as such terms are defined in Mr. Belings employment agreement), Mr. Beling shall be entitled to receive any and all reasonable expenses paid or incurred by Mr. Beling in connection with and related to the performance of his duties and responsibilities for the Company during the period ending on the termination date, any accrued but unused vacation time through the termination date in accordance with Company policy and an amount equal to Mr. Belings base salary and annual bonus during the prior 12 months.
### Tyler Minnick
Tyler Minnick does not have an employment agreement with the Company. Mr. Minnick received stock option grants in relation to his services to the Company as Chief Financial Officer.
Maryse Belanger
On October 1, 2020, we entered into an employment letter agreement with Maryse Belanger pursuant to which Ms. Belanger would serve as our Chief Executive Officer in consideration for an annual salary of C$250,000. For the first 18 months from the Start Date of her employment with the Company, if employment is terminated without cause by the Corporation or for good reason by her, she shall be compensated with a lump sum cash amount equal to 6 months of her Annual Salary. After 18 months of employment with the Company, if employment is terminated without cause by the Corporation or for good reason by her, she shall be compensated with a lump sum cash amount equal to one-and -one half times her Annual Salary. She shall be entitled to exercise any vested options she holds in accordance with the Companys stock option plan.
If the Company receives an offer that results in a change of control of the Company and she resigns for any good reason or are terminated by the Company without cause within six months after a change of control she shall be compensated with a lump sum cash amount equal to two times her Annual Salary and maximum target bonus of 70% plus all non-vested securities shall vest.
O utstanding equity awards at year end December 31, 2020
The following table sets forth the stock options granted to our named executive officers, as of December 31, 2020. No stock appreciation rights have been awarded.
### Director Compensation
The following table shows compensation paid to our directors (excluding compensation included under our summary compensation table above) for service as directors during the year ended December 31, 2020.
* Represents the aggregate grant date fair value computed in accordance with FASB 123.
**Resigned on October 26, 2020.
Directors that were also executive officers received no monetary compensation for serving as a Director. Non-executive directors are granted non-qualified stock options as compensation. Such stock option awards are determined at the sole discretion of the Companys Compensation Committee.
Item 12. Security Ownership of Certain Beneficial Owners and Management, and Related Stockholder Matters
The following tables set forth certain information as of the approximate date of this filing regarding the beneficial ownership of our common stock by: each person or entity who, to our knowledge, owns more than 5% of our common stock; our executive officers; each director;
The percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the Securities and Exchange Commission, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or dispositive power, which includes the power to dispose of or to direct the disposition of the security. Shares of common stock that a person purpose has the right to acquire beneficial ownership of within 60 days of the date of this filing are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned.
As of the approximate date of this filing we had 68,951,435 shares of common stock outstanding.
Other 5% or Greater Stockholders (Common Stock)
(1) Includes the following (all of which are held by Augusta Investments Inc., a company wholly owned by Mr. Warke): 21,689,788 shares of Common Stock and 18,865,727 shares underlying warrants.
(2) Includes the following: 166,667 shares of Common Stock and 166,667 shares underlying warrants.
(3) Includes the following: 42,222 shares of Common Stock and 11,111 shares underlying warrants.
(4) Includes the following (all of which are held by 2210637 Ontario Ltd., a company wholly owned by Mr. Earle): 525,000 shares of Common Stock and 470,834 shares underlying warrants.
(5) Includes the following: 44,000 shares of Common Stock and 22,000 shares underlying warrants.
(6) Includes the following: 10,000 shares of Common Stock and 5,000 shares underlying warrants.
(7) Includes the following: 216,667 shares of Common Stock and 191,667 shares underlying warrants (of which 166,667 shares of Common Stock and 166,667 shares underlying warrants are held by Lions Gate Holdings Inc., a company wholly owned by Ms. Parikh).
(8) Includes the following: 20,983 shares of Common Stock and 4,445 shares underlying warrants.
(9) Includes the following: 60,000 shares of Common Stock and 30,000 shares underlying warrants.
(10) Includes the following: 4,511 shares of Common Stock and 2,222 shares underlying warrants.
(11) Includes the following: 50,000 shares of Common Stock and 25,000 shares underlying warrants.
(12) Includes the following: 9,100,000 shares of Common Stock and 9,100,000 shares underlying warrants.
### Change in Control
We are not aware of any arrangement that might result in a change in control in the future. We have no knowledge of any arrangements, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in the Companys control.
Equity Compensation Plans
See the discussion under the heading Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in the Companys Original 10-K, which discussion is hereby incorporated by reference.
Item 13.
On August 4, 2020, the Board of Directors approved and issued a stock compensation distribution to board members Alan Lindsay, Chairman; Kjeld Thygesen, board member; and David Beling, CEO, President and board member. The Company issued 83,333 shares of common stock to each for a total of 250,000 shares with the fair market value of $1.08 per share.
Related Person Transactions Policy and Procedure
Augusta Golds Code of Ethics states that our directors, employees and consultants should not be involved in any activity that creates or gives the appearance of a conflict of interest between their personal interests and the interests of the Company. In particular, without the specific permission of our Chairman of the Audit Committee, ethics officer or our Board (including contracts approved by our Board), no director, employee or consultant, or a member of his or her family shall, unless disclosed to us, engage in the list of conflict of interest transactions set forth in the Code of Ethics. Our directors, employees and consultants must immediately notify the Chairman of the Audit Committee or our ethics officer of the existence of any actual or potential conflict of interest so that the circumstances can be reviewed for a decision on whether a conflict of interest is present, and if so, what course of action is to be taken.
### Director Independence
We currently have six directors serving on our Board of Directors. We are not listed on a national securities exchange, but for purposes of this disclosure we have selected the independence requirements of the NYSE American LLC. Using the definition of independence set forth in the rules of the NYSE American, John Boehner, Lenard Boggio, Daniel Earle and Poonam Puri would be considered independent directors of the Company.
Item 14.
### Audit Fees
For the fiscal year ended December 31, 2020, the fees billed by Davidson & Company LLP, our principal accountant, to us for services rendered for the review of the financial statements included in the quarterly reports on Form 10-Q filed with the SEC were $15,000 and $37,500 for the 2020 audit of the annual financial statements.
Audit-Related Fees
For the fiscal years ended December 31, 2020 and 2019, there were no fees billed to us by our principal accountant for the audit or review of the financial statements that are not reported above under Audit Fees.
### Tax Fees
For the fiscal year ended December 31, 2020 and 2019, there were no fees billed to us by Davidson & Company LLP.
All Other Fees
For the fiscal years ended December 31, 2020 and 2019, there were no fees billed to us by our principal accountant for services other than services described above.
The policy of our Audit Committee is to pre-approve all audit and permissible non-audit services provided by the independent auditors. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to our Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our Audit Committee approved all services that our independent accountants provided to us in the past two fiscal years.
### PART IV
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High. All markers are 4" x 4" posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim.
The location monument on which this notice is posted is situated within Section 11, Township 1N, Range 40E, Mount Diablo Meridian, Esmeralda County Nevada and this claim encompasses portions of the following quarter section (s), Township (s) and Range (s); NW 1/4 of NW 1/4 and SW 1/4 of NW 1/4 Section 11, T1N, R40E, Mount Diablo Meridian, Esmeralda County Nevada. The locality of this claim with reference to some natural object or permanent monument and additional information (if any) concerning its locality are as follows: NW corner of this claim is located 1,150 Feet South and 570 Feet East from the NW corner of Section 11, T1N, R40E. Beginning at the NW corner of this claim thence 1,500 feet due south to the SW corner of this claim, thence due east 600 feet to the SE corner of this claim, thence due north 1,500 feet to the NE corner of this claim, thence due west 600 feet back to the place of beginning, the NW corner.
WSA Gold & Minerals, Inc. NMC1190597 in the NW Quarter of Section 11, Township 1N, Range 40E, Mount Diablo Meridian, Esmeralda County, Nevada from Gateway Gold & Minerals, Inc.
### Fortuna Mine
Location and Access
### Regional Geology
### Property Geology
### Mineralization
to 17m.y. before present.
and 16.4 m.y. before present.
Exploration Plans
### Sampling and Analysis
### XRF Survey
63.
### Gold
64.
### Titanium
65.
### Manganese
66.
### Iron
67.
### Arsenic
68.
### Rubidium
69.
### Strontium
70.
### Zirconium
71.
### Niobium
72.
### Hafnium
73.
### Tungsten
74.
### Bismuth
Local Infrastructure
### Property Infrastructure
Three (3) Mines here one shaft and 2 adits. The shaft is cut on an ancient riverbed. Two Adits/Tunnels are very solid and cut from hard rock right across the wash.
Mine 8 Purple Heart
The Indicated/Unproven/Estimated Gross gold resources are 1,184,332.39 oz based on projected 200 feet excavation.
The mine is a lode mine. As defined by the U.S.
The general course of this claim is East and West, and it is situated in the SE quarter of Section 3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico. All markers are 4" x 4" posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim. NE 1/4 of SE 1/4 and NW 1/4 of SE 1/4 of S3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico. More specifically, the locality of this claim with reference to some natural object or permanent monument and 0 feet West of the SSE corner pf Section 3, T18S, R17W.
WSA Gold & Minerals, Inc. NMMC200984 in the SE quarter of Section 3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico from Gateway Gold & Minerals, Inc.
### Purple Heart Mine
Location and Access
20, 21, 22, 28, and 29, T. 18 S., R. 16 W., in Grant County, N.
The 12 tall and 15 wide entrance of Purple Heart mine is partially blocked by a tree and some brush but is still easy to access on foot. The mine shaft is visible for 70-feet before water prohibits the full exploration of the shaft(s). Local ranchers have used this water for decades to fill cattle troughs, so it is likely replenished every year during the wet season. The adit will not be entirely explored without dewatering the mine. Evidence of old tracking and tailings onsite indicated that the workings on this main adit will likely be extensive.
### Regional Geology
Gillerman, 1964).
Gerwe, 1986).
### Property Geology
Gillerman, 1964). Intruding these rocks is Proterozoic quartz diorite gneiss, which is the predominant rock in the area and part of the Burro
Mountain batholith that crops out extensively to the south and southwest of the area (Gillerman, 1964).
Gerwe, 1986).
### Mineralization
2) silver- rammeisbergite gersdorffitenickel skutterudite.
Von Bargen, 1979, 1993).
Gewe and Norman, 1985).
The Purple Heart Mine is one of the original mines in the district, and records show that it has changed hands and been worked on several occasions since the turn of the century. The main workings consist of a massive adit cut on a gentle 20-degree downward slope. The entrance is huge - about 12 feet tall and 15 wide. You could drive a truck in there.
At 70-feet in the mine is full of water - local ranchers have used this water for decades to feed cattle troughs, so it is likely replenished every year during the wet season.
### Exploration Plans
Sampling and Analysis
### XRF Survey
The analysis of the XRF measurements of Purple Heart showed that the elements promising for economic benefiting are: Gold, Titanium, Manganese, Iron, Arsenic, Rubidium, Strontium, Zirconium, Niobium, and Bismuth
75.
### Gold
The average concentration of Gold is 20.62 PPM. This could be explained as: Gold concentration in this mine ranges from 12.33 grams per ton (0.43 oz/ton) to 144.71 grams per ton (5.1 oz/ton).
76.
### Titanium
The average concentration of Titanium is 4,260.93 PPM. This could be explained as: Titanium concentration in this mine ranges from 0 grams per ton to 75,731.84 grams per ton (2,671.37 oz/ton).
77.
### Manganese
The average concentration of Manganese is 1,143.99 PPM. This could be explained as: Manganese concentration in this mine ranges from 0 grams per ton to 7,407.05 grams per ton (261.28 oz/ton).
78.
### Iron
The average concentration of Iron is 48,898.01 PPM. This could be explained as: Iron concentration in this mine ranges from 494.43 grams per ton (17.44 oz/ton) to 766,655.63 grams per ton (2,7043.01 oz/ton).
79.
### Arsenic
The average concentration of Arsenic is 40 PPM. This could be explained as: Arsenic concentration in this mine ranges from 0 grams per ton to 494.41 grams per ton (17.44 oz/ton).
80.
### Rubidium
The average concentration of Rubidium is 110.34 PPM. This could be explained as: Rubidium concentration in this mine ranges from 0 grams per ton to 234.37 grams per ton (8.27 oz/ton).
81.
### Strontium
The average concentration of Strontium is 227.30 PPM. This could be explained as: Strontium concentration in this mine ranges from 0 grams per ton to 675.75 grams per ton (23.84 oz/ton).
82.
### Zirconium
The average concentration of Zirconium is 196.36 PPM. This could be explained as: Zirconium concentration in this mine ranges from 0 grams per ton to 2,188.67 grams per ton (77.2 oz/ton).
83.
### Niobium
The average concentration of Niobium is 14.33 PPM. This could be explained as: Niobium concentration in this mine ranges from 0 grams per ton to 131.78 grams per ton (4.65 oz/ton).
84.
### Bismuth
The average concentration of Bismuth is 24.45 PPM. This could be explained as: Bismuth concentration in this mine ranges from 0 grams per ton to 175.87 grams per ton (6.2 oz/ton).
Local Infrastructure
There are no close-by power lines, gas lines, or settlements occur near the Purple Heart property.
The Black Hawk or Bullard Peak mining districts in the northern Burro Mountains is approximate 34 kilometers (21 miles) West of Silver City, NM.
### Property Infrastructure
Mine 9 Blackmoor
The Indicated/Unproven/Estimated Gross gold resources are 1,324,363.81 oz based on projected 200 feet excavation. It should be noted that due to the topography and vegetation, many sample locations were difficult to access and mapping software was used to model much of this claim.
The mine is a lode mine. As defined by the U.S.
The general course of this claim is East and West, and it is situated in the SW quarter of Section 3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico. All markers are 4" x 4" posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim. NW 1/4 of SW 1/4 and NE 1/4 of SW 1/4 of S3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico. More specifically, the locality of this claim with reference to some natural object or permanent monument and additional information (if any) concerning its locality are as follows: SW corner of this claim is 1,775 feet North and 0 feet East of the SW corner of Section 3, T18S, R17W.
WSA Gold & Minerals, Inc. NMMC200983 in the SW quarter of Section 3, T18S, R17W, New Mexico Meridian, Grant County, New Mexico.
### Blackmoor Mine
Location and Access
20, 21, 22, 28, and 29, T. 18 S., R. 16 W., in Grant County, N.
Blackmoor Mine lies almost at the end of the road before you get to the Gila River, and extensive excavations include a large 2-acre leveled staging area for equipment within a few hundred feet of the mine. The roads are in fairly good shape to access the mine, but there are a few spots that are fairly steep and narrow, so good clearance and good tire tread is recommended.
### Regional Geology
Types of deposits found in the Black Hawk mining district include Laramide veins, tungsten placer deposits, and pegmatites. Total metal production from 1881-1960 is estimated as 3,000 lbs Cu, 1,000 oz Au, 1,286,000 oz Ag, and 4,000 lbs Pb. In addition, 10,542 short tons of (2.7-71 % WO,) tungsten ore (Richter and Lawrence, 1983; Dale and McJGnney, 1959) and 615 short tons of fluorspar ore have been produced (Williams, 1966; McAnulty, 1978).
Gillerman, 1964).
Gerwe, 1986).
### Property Geology
The main mine consists of a large shaft cut to a depth of 25 feet with two horizontal adits/workings consisting of more than 2,800 feet in length heading northeast and southwest at the 25- foot level. Both adit entrances are largely blocked by natural erosion but would take more than a few hours of work to reopen and explore. There are extensive tailings onsite as well as a large wash that runs past the base of the tailings, which we would also recommending working. The old head frame and a reported cabin are long gone, but the mine is cut only a few feet from the road, so you will be able to work this one fairly easily.
Mineralization
2) silver- rammeisbergitegersdorffitenickel skutterudite.
Von Bargen, 1979, 1993).
Gewe and Norman, 1985).
The Blackmoor Mine is one of the original mines in the Black Hawk District. Reportedly one of the larger producers of gold, silver, nickel and cobalt, more than 25,000 tons of ore have been attributed to this large operation.
Exploration Plans
### Sampling and Analysis
### XRF Survey
The analysis of the XRF measurements of Blackmoor showed that the elements promising for economic benefiting are: Gold, Titanium, Manganese, Iron, Arsenic, Rubidium, Strontium, Zirconium, Niobium, Hafnium and Bismuth. It should be noted that most samples were obtained in and around the main shaft and random locations around the mine claim. Due to the steep terrain and heavy vegetation, it was not possible to take many of the planned samples. Please see maps and sample data in NI 43-101 Technical Report for reference.
85.
### Gold
The average concentration of Gold is 23.99 PPM. This could be explained as: Gold concentration in this mine ranges from 13.51 grams per ton (0.48 oz/ton) to 98.33 grams per ton (3.47 oz/ton).
86.
### Titanium
The average concentration of Titanium is 2070.42 PPM. This could be explained as: Titanium concentration in this mine ranges from 0 grams per ton to 8,399.82 grams per ton (296.3 oz/ton).
87.
### Manganese
The average concentration of Manganese is 1,749.42 PPM. This could be explained as: Manganese concentration in this mine ranges from 0 grams per ton to 14,692.93 grams per ton (1,274.27 oz/ton).
88.
### Iron
The average concentration of Iron is 35,385.19 PPM. This could be explained as: Iron concentration in this mine ranges from 4,080.41<|endoftext|>To us or at all.
If third parties bring claims against us, the proceeds held in trust could be reduced and the per-share liquidation price received by shareholders may be less than $10.00.
Although we seek to have all vendors and service providers we engage and prospective target businesses we negotiate with execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, they may not execute such agreements. Furthermore, even if such entities execute such agreements with us, they may seek recourse against the monies held in the trust account. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of our public shareholders. If we liquidate the trust account before the completion of a business combination, our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us and which have not executed a waiver agreement. Accordingly, we believe it is unlikely that our sponsor will be able to meet such indemnification obligations if it is required to do so. Therefore, the per-share distribution from the trust account in such a situation may be less than $10.00, plus interest, due to such claims.
Additionally, if we are forced to file a bankruptcy case or an involuntary bankruptcy case is filed against us which is not dismissed, or if we otherwise enter compulsory or court supervised liquidation, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any bankruptcy claims deplete the trust account, we may not be able to return to our public shareholders at least $10.00 per share.
While short-term U.S. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association
, our public shareholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income not released to us, net of taxes payable.
Risks Related to Our Securities and the Securities Market
If we do not maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise of the redeemable warrants, public holders will only be able to exercise such redeemable warrants on a cashless basis which would result in a fewer number of shares being issued to the holder had such holder exercised the redeemable warrants for cash.
Except as set forth below, if we do not maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a cashless basis, provided that an exemption from registration is available. As a result, the number of ordinary shares that a holder will receive upon exercise of its warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise their warrants on a cashless basis and would only be able to exercise their warrants for cash if a current and effective prospectus relating to the ordinary shares issuable upon exercise of the warrants is available. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to maintain a current and effective prospectus relating to the ordinary shares issuable upon exercise of the warrants until the expiration of the warrants. Notwithstanding the foregoing, the private warrants may be exercisable for unregistered ordinary shares for cash even if the prospectus relating to the ordinary shares issuable upon exercise of the warrants is not current and effective.
An investor will only be able to exercise a warrant if the issuance of ordinary shares upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No warrants will be exercisable for cash and we will not be obligated to issue ordinary shares unless the ordinary shares issuable upon such exercise have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. At the time that the warrants become exercisable, we expect to continue to be listed on a national securities exchange, which would p rovide an exemption from registration in every state. If the ordinary shares issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited and they may expire worthless if they cannot be sold.
Our managements ability to require holders of our redeemable warrants to exercise such redeemable warrants on a cashless basis will cause holders to receive fewer ordinary shares upon their exercise of the redeemable warrants than they would have received had they been able to exercise their redeemable warrants for cash.
If we call our warrants for redemption after the redemption criteria described elsewhere in this prospectus have been satisfied, our management will have the option to require any holder that wishes to exercise his warrants (including any warrants held by our initial shareholders or their permitted transferees) to do so on a cashless basis. If our management chooses to require holders to exercise their warrants on a cashless basis, the number of ordinary shares received by a holder upon exercise will be fewer than it would have been had such holder exercised his warrants for cash.
We may amend the terms of the warrants in a way that may be adverse to holders with the approval by the holders of a majority of the then outstanding warrants.
Our warrants are issued in registered form under a warrant agreement between Continental, as warrant agent, and us. The warrant agreement requires the approval by the holders of a majority of the then o utstanding warrants (including the private warrants) in order to make any change that adversely affects the interests of the registered holders. Accordingly, we would need approval from the holders of only 4,425,001, or 36.9%, of the public warrants to amend the terms of the warrants (assuming that the initial shareholders do not purchase any units in this offering units or warrants in the after-market and that the holders of the private warrants, excluding EarlyBirdCapital, voted in favor of such amendment.
Our units, ordinary shares and warrants are listed on the NYSE. Although we expect to continue to meet, on a pro forma basis, the minimum initial listing standards set forth in the NYSE listing standards, we cannot assure you that our securities will continue to be listed on the NYSE in the future or prior to our initial business combination.
Generally, we must maintain a minimum number of holders of our securities (400 public holders). For instance, our share price would generally be required to be at least $4 per share. a determination that our ordinary shares are a penny stock which will require brokers trading in our ordinary shares to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
Investors may not have sufficient time to comply with the delivery requirements for conversion.
Pursuant to our amended and restated memorandum and articles of association, we are required to give a minimum of only ten days notice for each general meeting. As a result, if we require public shareholders who wish to convert their public shares into the right to receive a pro rata portion of the funds in the trust account to comply with specific delivery requirements for conversion, holders may not have sufficient time to receive the notice and deliver their shares for conversion.
Risks Related to Acquiring and Operating a Business Outside of the United States
Federal courts may be limited.
We are an exempted company incorporated under the laws of the Cayman Islands and certain of our officers and directors are residents of jurisdictions outside the United States.
Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Law (as the same may be supplemented or amended from time to time) or the common law of the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws as compared to the United States.
We have been advised by our Cayman Islands legal counsel that the courts of the Cayman Islands are unlikely (i) to recognize or enforce against us judgments of courts of the United States predicated upon the civil liability provisions of the federal securities laws of the United States or any state; For a foreign judgment to be enforced in the Cayman Islands, such judgment must be final and conclusive and for a liquidated sum, and must not be in respect of taxes or a fine or penalty, inconsistent with a Cayman Islands judgment in respect of the same matter, impeachable on the grounds of fraud or obtained in a manner, and or be of a kind the enforcement of which is, contrary to natural justice or the public policy of the Cayman Islands (awards of punitive or multiple damages may well be held to be contrary to public policy).
We may be a passive foreign investment company (PFIC), which could result in adverse U.S. investors.
If we are determined to be a PFIC (under the rules described below) for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder (as defined below) of our ordinary shares or warrants, the U.S. The term U.S. Holder means a beneficial owner of ordinary shares or warrants who or that is for U.S. federal income tax purposes: (i) an individual citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for United States federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (B) it has in effect a valid election to be treated as a U.S. person.
A foreign (i.e., non-U.S.) corporation will be a PFIC for U.S. tax purposes if at least 75% of its gross income in a taxable year, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Goals, overall company performance measured by growth of gross written premium, and a discretionary amount determined by the Companys senior management. In the event Mr. Hermans employment is terminated by General Indemnity Group, LLC without Cause or by Mr. Herman for Good Reason, Mr. Herman will be eligible to receive severance pay equal to twelve months base salary.
Thomas Employment Agreement
On August 30, 2019, we hired Robert Thomas to serve as the President of United Casualty and Surety Insurance Company, a wholly-owned subsidiary of our wholly-owned subsidiary General Indemnity Group, LLC. Thomas, United Casualty and Surety Insurance Company and Mr. Thomas entered into an employment letter agreement, pursuant to which Mr. Thomas will receive an annual base salary of $275,000 per year, which may be increased in increments up to $320,000 as determined by the growth of annual in-force written premium. In addition, Mr. Thomas is eligible to receive an annual bonus, based on Adjusted Pre-Tax Underwriting Income performance, subject to a three-year vesting schedule whereby 60% of a positive bonus is payable 60 days following the end of each calendar year, 30% of the earned bonus is paid one year thereafter, and the remaining 10% is paid two years thereafter. Negative bonus amounts for a given year will be applied against any unvested positive bonus amounts from prior years that have not yet been paid. In the event that, after five years of employment, Mr. Thomass employment is terminated by United Casualty and Surety Insurance Company without Cause or by Mr. Thomas for Good Reason, Mr. Thomas will be entitled to be paid upon termination for any unvested portions of previously earned bonuses.
Item 12.
The following table sets forth as of March 26, 2021certain information with respect to the beneficial ownership of our common stock by (i) each person known by us to own beneficially more than 5% of our outstanding shares of each of our Class A common Stock and our Class B Common Stock, (ii) each of our directors, (iii) each of our named executive officers and (iv) all directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to shares. Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of common stock, except to the extent authority is shared under applicable law. MCF has warrants to purchase 52,778 shares of our Class B common stock and BP has warrants to purchase 51,994 shares of our Class B common stock. AllClass B common stock is convertible to Class A common stock at the option of the holder. Unless otherwise indicated, the address of each person named in the table is c/o Boston Omaha Corporation, 1601 Dodge Street, Suite 3300, Omaha, Nebraska 68102.
_______________________
*
Less than 1%
(1)
The percent of Percentage of Aggregate Voting Power of Class A common stock and Class B common stock reflects that each share of Class B common stock has 10 votes for each share of Class A common stock and assumes all outstanding Class B common stock warrants are exercised.
(2)
The percent of aggregate economic interest is based on both our Class A common stock and Class B common stock combined. The Class B common stock converts to Class A common stock on a 1:1 basis.
(3)
Includes warrants to purchase 52,778 shares of our Class B common stock.
(4)
Based on information provided in that certain Schedule 13G filed with the SEC on May 25, 2018 and that certain Schedule 13G filed with the SEC on February 14, 2019, shares held by Magnolia BOC II, LP are voted by The Magnolia Group, LLC at the direction of 238 Plan Associates LLC, and 238 Plan Associates LLC may be deemed to have voting and dispositive power over such shares.
(5)
Includes warrants to purchase 51,994 shares of our Class B common stock.
(6)
Represents amount of shares and warrants owned by Adam K. Peterson, Magnolia Capital Fund, LP, Magnolia BOC I, LP, Magnolia BOC II, LP and The Magnolia Group, LLC. Mr. Peterson serves as the manager of The Magnolia Group, LLC, the general partner of each of Magnolia Capital Fund, LP, Magnolia BOC I, LP and Magnolia BOC II, LP.
(7)
Represents shares and warrants owned by Boulderado Partners, LLC and 281,278 shares of Class A common stock held by trusts of which Mr. Rozek is the trustee and over which he has voting power, but as to which he disclaims beneficial ownership. Mr. Rozek serves as the manager of Boulderado Capital, LLC, the manager of Boulderado Partners, LLC. On January 15, 2019, BP distributed to certain of its limited partner investors 485,169 shares of Class A common stock.
(8)
Represents 10,000 shares of Class A common stock held by a limited liability company of which Mr. Briner is the Managing Member and 10,000 shares of Class A common stock held by Mr. Briner.
(9)
Represents 47,400shares of Class A common stock held by a trust established for the benefit of Mr. Keating and members of his family, 6,800 shares of Class A common stock held by Mr. Keating, and 40,800shares of Class A common stock held in retirement and 401(k) accounts for the benefit of Mr. Keating.
(10)
Represents 58,276 shares of Class A common stock held by KD Capital, L.P., of which Mr. Kenan serves as a manager and owns 100% of KD Capital Management, LLC, which is the general partner of KD Capital, L.P. and 123,390 shares of Class A common stock held by a trust under which Mr. Kenan is both the trustee and beneficiary.
### Changes in Control
There are no arrangements known to the Company, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
We had no outstanding equity awards at December 31, 2020.We do not currently have any compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance, and, as a result, none of our officers and directors is a party to any equity compensation or incentive plan with the Company.
Item 13.
The following discussion is a brief summary of certain material arrangements, agreements and transactions we have with related parties. It does not include all of the provisions of our material arrangements, agreements and transactions with related parties, does not purport to be complete and is qualified in its entirety by reference to the arrangements, agreements and transactions described. We enter into transactions with our stockholders and other entities owned by, or affiliated with, our direct and indirect stockholders in the ordinary course of business. These transactions include, among others, professional advisory, consulting and other corporate services.
The holders of record of the shares of Class B common stock, exclusively and as a separate class, are entitled to elect two directors to our Board of Directors, which number of Class B Directors may be reduced pursuant to the terms and conditions of the Amended and Restated Voting and First Refusal Agreement. Any Class B Director may be removed without cause by, and only by, the affirmative vote of the holders of eighty percent (80%) of the shares of Class B common stock exclusively and as a separate class, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of such stockholders. Matters requiring the unanimous approval of the Class B Directors are described in the risk factor entitled
Certain actions cannot be taken without the approval of MCF and BP due to their ownership of Class B common stock
Each of BP and MCF agreed as part of the Amended and Restated Voting and First Refusal Agreement also originally entered into on June 19, 2015 to elect as the Class B Directors each of Alex B. Rozek, as a nominee of BP, and Adam Peterson, as a nominee of MCF.In the event of (a) the death of a Class B Director, (b) the incapacitation of a Class B Director as a result of illness or accident, which makes it reasonably unlikely that the Class B Director will be able to perform his normal duties for the Company for a period of ninety (90) days, or (c) a change of control of BP or MCF, then the Class B stockholder which nominated such dead or incapacitated Class B Director, or the Class B stockholder undergoing such change of control, shall convert all of such Class B common stock into shares of our Class A common stock, in accordance with the procedures set forth in the certificate of incorporation.The Amended and Restated Voting and First Refusal Agreement also provides each ofus and the other parties to the Amended and Restated Voting and First Refusal Agreement with the right of first refusal to purchase the Class B common stock proposed to be sold by the other holder of Class B common stock.
On February 22, 2018, the Company entered into a Class A Common Stock Purchase Agreement for the 2018 private placement, pursuant to which the Company sold to MBOC I, MBOC II, and BBOC $150,000,000 in unregistered shares of Class A common stock at a price of $23.30, a slight premium to the closing price of shares of Class A common stock of $23.29 on the NASDAQ Capital Market, as reported by NASDAQ on the date of the Class A Common Stock Purchase Agreement. MBOC I and MBOC II are entities managed by Magnolia, and BBOC, which subsequently contributed all of its shares of Class A common stock to MBOC I, was an entity managed by Boulderado Group, LLC. The closing of the first tranche of shares to be sold under the agreement occurred on March 6, 2018, consisting of a total of 3,300,000 shares resulting in total gross proceeds of $76,890,000. The limited partners of each of MBOC I and MBOC II have the right to receive an in-kind distribution of their interests in the partnerships upon written request. On March 6, 2018, Magnolia BOC I and Magnolia BOC II entered into a registration rights agreementwith the Company pursuant to which the Company is obligated at any time after March 6, 2021 to register up to 6,437,768 shares of Class A common stock heldby Magnolia BOC I and Magnolia BOC II upon demandand which also grant the holders of these shares piggyback registration rights as described in the registration rights agreement.Such registration rights expire upon the earlier of March 31, 2033 or the date all such shares may be freely sold without restriction under Rule 144.
Mr. Peterson and Mr.
Two of our investments in affiliates, Logicand 24 th
Street Holding Company, LLC, aremanaged by Brendan Keating, a member of our board of directors. During fiscal 2020, we invested $6,000,000 in 24th Street Fund I, LLC and 24th Street Fund II, LLC. The funds are managed by 24th Street Asset Management LLC, a subsidiary of24th Street Holding Company, LLC, and will focus on opportunities within secured lending and direct investments in commercial real estate.
Policy and Procedures for the Review, Approval or Ratification of Transactions with Related Persons
Our Board of Directors has adopted a written policy and procedures, which we refer to as the Related Party Policy, for the review, approval or ratification of Related Party Transactions by the independent members of the Audit and Risk Committee of our Board of Directors. For purposes of the Related Party Policy, a Related Party Transaction is any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including the incurrence or issuance of any indebtedness or the guarantee of indebtedness) in which (1)the aggregate amount involved will or may be reasonably expected to exceed $120,000 in any fiscal year, (2)the Company or any of its subsidiaries is a participant, and (3)any<|endoftext|>With those provisions in a timely manner could prevent us from qualifying as a REIT or could force us to pay unexpected taxes and penalties. Failure to qualify as a REIT would subject us to income taxation (including interest and possibly penalties for prior periods in which we failed to qualify as a REIT) as a regular C corporation, which would reduce the amount of cash available for distribution to our stockholders.
Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty.
In order to qualify as a REIT, we must satisfy a number of requirements, including requirements regarding the composition of our assets, the sources of our income and the diversity of our stock ownership. Also, we generally must make distributions to our stockholders aggregating annually at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain). Compliance with these requirements and all other requirements for qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. Even a technical or inadvertent mistake could jeopardize our REIT status. In addition, the determination of various factual matters and circumstances relevant to REIT qualification is not entirely within our control and may affect our ability to qualify as a REIT.
If we fail to qualify as a REIT, we will be subject to tax as a regular C corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our stockholders.
We believe that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT under the Code for our taxable period ending December 31, 2020, and that our current and proposed method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code for subsequent taxable years. Our continued qualification as a REIT will depend on our ability to meet, on an ongoing basis, various complex requirements concerning, among other things, the ownership of our outstanding stock, the nature of our assets, the sources of our income, and the amount of our distributions to our stockholders. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Our compliance with the annual REIT income and quarterly asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis.
If we fail to qualify for taxation as a REIT in any taxable year, and we do not qualify for certain statutory relief provisions, we would be required to pay U.S. federal income tax on our taxable income at regular corporate rates, and distributions to our stockholders would not be deductible by us in determining our taxable income. In such a case, we might need to borrow money or sell assets in order to pay our taxes. Our payment of income tax would decrease our cash available for distribution to our stockholders.
Furthermore, if we fail to maintain our qualification as a REIT, we no longer would be required to distribute substantially all of our taxable income to our stockholders. In addition, unless we were eligible for certain statutory relief provisions, we could not re-elect to qualify as a REIT until the fifth calendar year following the year in which we failed to qualify. We would also fail to qualify as a REIT in the event we were treated under applicable U.S. Treasury regulations as a successor to another REIT whose qualification as a REIT was previously terminated or revoked. If a Predecessor Company failed to qualify as a REIT prior to the Business Combination, it is possible that we would be treated as a successor REIT under the foregoing rules and thus be unable to qualify as a REIT.
Our ownership of and relationship with taxable REIT subsidiaries is limited, and a failure to comply with the limits would jeopardize our REIT qualification, and our transactions with our taxable REIT subsidiaries may result in the application of a 100% excise tax if such transactions are not conducted on arms-length terms.
A REIT may own up to 100% of the stock of one or more taxable REIT subsidiaries (TRSs). A TRS may earn income that would not be qualifying income if earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. Overall, no more than 20% of the value of a REITs assets may consist of stock and securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the TRS rules impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arms-length basis.
Our wholly owned subsidiary that provides certain investment management services with respect to our assets as well as to third parties has elected to be treated as a TRS. We may elect for certain other of our subsidiaries to be treated as TRSs. Our TRSs will pay U.S. federal, state and local income tax on their taxable income, and their after-tax income will be available for distribution to us but will not be required to be distributed to us. There can be no assurance, however, that we will be able to comply with the TRS limitations or to avoid application of the 100% excise tax discussed above.
Liquidation of assets may jeopardize our REIT qualification or create additional tax liability for us.
To qualify as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income. If we are compelled to liquidate our investments for any reason, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory, other than foreclosure property.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, taxes on income from some activities conducted or sales made as a result of a foreclosure, excise taxes, and state or local income, property and transfer taxes, such as mortgage recording taxes, and other taxes. Moreover, in order to meet the REIT qualification requirements, prevent the recognition of certain types of non-cash income, or to avert the imposition of a 100% tax that applies to certain gains derived by a REIT from dealer property or inventory (other than foreclosure property), we may hold some of our assets through a TRS or other subsidiary corporation that will be subject to corporate level income tax at regular corporate rates. In addition, if a TRS borrows funds either from us or a third party, such TRS may be unable to deduct all or a portion of the interest paid, resulting in a higher corporate tax liability. Furthermore, the Code imposes a 100% excise tax on certain transactions between a TRS and a REIT that are not conducted on an arms length basis. We intend to structure any transaction with a TRS on terms that we believe are arms length to avoid incurring this 100% excise tax. There can be no assurances, however, that we will be able to avoid application of the 100% excise tax. The payment of any of these taxes would reduce our cash flow.
Rapid changes in the values of our assets may make it more difficult for us to maintain our qualification as a REIT.
If the fair market value or income potential of our qualifying assets for purposes of our qualification as a REIT declines as a result of increased interest rates, changes in prepayment rates, general market conditions, government actions or other factors, or the fair market value of or income from non-qualifying assets increases, we may need to increase our qualifying real estate assets and income or liquidate our non-qualifying assets to maintain our REIT qualification. If the change in real estate asset values or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-qualifying assets we may own. We may have to sell or acquire assets or make other decisions that we otherwise would not make absent our REIT election.
To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding net capital gain) each year, and we will be subject to regular corporate income taxes to the extent that we distribute less than 100% of our REIT taxable income each year. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. We intend to make distributions to our stockholders to comply with the REIT distribution requirements.
Our taxable income may substantially differ from our net income based on U.S. GAAP, and differences in timing between the recognition of taxable income and the actual receipt of cash may occur. For example, we may recognize interest or other income on a mortgage loan for U.S. federal income tax purposes before we receive any payments of interest on such mortgage. We may also hold or acquire distressed debt investments that are subsequently modified by agreement with the borrower. If the amendments to the outstanding debt are significant modifications under the applicable Treasury regulations, the modified debt may be considered to have been reissued to us at a gain in a debt-for-debt exchange with the borrower, with gain recognized by us to the extent that the principal amount of the modified debt exceeds our cost of purchasing it prior to modification. Moreover, under the Tax Cuts and Jobs Act, or the TCJA, we are generally required to take certain amounts into income no later than the time such amounts are reflected on certain financial statements. Although the precise application of this rule is unclear at this time, it may require the accrual of income by us earlier than would be the case prior law. However, recently promulgated Treasury regulations, which are effective for taxable years beginning on or after January 1, 2021, generally would exclude, among other items, original issue discount and market discount income from the applicability of this rule. To the extent that this rule requires the accrual of income earlier than under prior law, it could increase our phantom income. In addition, the TCJA limits the deduction for business interest expense to 30% of adjusted taxable income, which could result in the deduction allowable in the computation of taxable income to be less than the amount of interest payments actually made during the tax year. Additionally, we may also be required under the terms of indebtedness that we incur to use cash received from interest payments to make principal payments on that indebtedness.
As a result, we may generate less cash flow than taxable income in a particular year and find it difficult or impossible in certain circumstances to make distributions sufficient to satisfy the REIT distribution requirements and to avoid corporate income tax and the 4% excise tax in a particular year. In such circumstances, we may be forced to incur debt on unfavorable terms, sell | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The year ended December 31, 2020, as well as thequarterly condensed consolidated financialinformation for the2020interim periods commencing June 30, 2020included below.In connection with such restatements, the Company isalso revising itsquarterly condensed consolidated financialinformation as of and for the quarter ended March 31, 2020 to correct for a previously identifiedQ1 2020error ingoodwill impairmentthat management had previously concluded was not material to the previously issuedcondensed consolidatedfinancial statements and had therefore been initially corrected for as an out of period adjustment in Q4 2020.The following tables represent the restated and revised condensed consolidated financial information, and the reconciliations of the as originally reported amounts to the restated and revised amounts. Certain line items within thepreviously reportedcondensed consolidated financial information have been excluded as they werenot impacted.Neither the restatement or the revision had a net impact to cash flows provided by (used in) operating, investing or financing activities in the condensed consolidated Statements of Cash Flows for any of the impacted periods.
The amounts originally reported were derived from the Companys Quarterly Reports on Form 10-Q for the interim periods ended March 31, 2020, June 30, 2020 and September 30, 2020 as well as the Original Form 10-K filed with the SEC on February 23, 2021. The restatement for the three and six months ended June 30, 2020, will be effected through the filing of the amended condensed consolidated financial statements for the second quarter 2021Quarterly Report on Form 10-Q/A and the restatement for the three and nine months ended September 30, 2020, will be effected through the filing of the condensed consolidated financial statements for the third quarter 2021 in the Companys Quarterly Report on Form 10-Q.
During the three months ended June 30, 2020and September 30, 2020, there is no difference in the amounts previously reported as net loss and comprehensive loss attributable to Emerald Holding, Inc. common stockholders in the condensed consolidated statement of loss and comprehensive loss as the cumulative undeclared dividends used in the original calculation equals the amount of accretion of the redeemable convertible preferred stock to its redemption value in the updated calculation.
### Emerald Holding, Inc. (parent company only)
Condensed Balance Sheets
Emerald Holding, Inc. (parent company only)
Condensed Statements of Loss and Comprehensive Loss
### December 31, 2020, 2019 and 2018
Emerald Holding, Inc. (parent company only)
### Notes to Condensed Financial Statements
December 31, 2020, 2019 and 2018
1. Basis of Presentation
In the parent-company-only financial statements, Emerald Holding, Inc.s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since the date of acquisition. The parent-company-only financial statements should be read in conjunction with the Companys consolidated financial statements, includingNote 1,
Description of Business and Summary of Significant Accounting Policies, which describesthe restatement reflected within the Companys consolidated financial statements that is alsoreflected in these parent company onlycondensed financial statements.
A condensed statement of cash flows was not presented because Emerald Holding, Inc.s net operating activities have no cash impact and there were no investing or financing cash flow activities during the fiscal years ended December 31, 2020, 2019 and 2018.
Income taxes and non-cash stock-based compensation have been allocated to the Companys subsidiaries for the fiscal years ended December 31, 2020, 2019 and 2018.
2. Guarantees and Restrictions
On February 14, 2020, Emerald Expositions Holding, Inc., the borrower under the Amended and Restated Senior Secured Credit Facilities, was renamed Emerald X, Inc. (Emerald X).
### On May 22, 2017,
Emerald X entered into the Amended and Restated Senior Secured Credit Facilities, by and among Expo Event Midco, Inc. (EEM), Emerald X and Emerald Xs subsidiaries as guarantors, various lenders from time to time party thereto and Bank of America, N.A., as administrative agent. The include restrictions on the ability of Emerald X and its restricted subsidiaries to incur additional liens and indebtedness, make investments and dispositions, pay dividends and make intercompany loans and advances or enter into other transactions, among other restrictions, in each case subject to certain exceptions. Under the Amended and Restated Senior Secured Credit Facilities, Emerald X is permitted to pay dividends so long as immediately after giving effect thereto, no default or event of default had occurred and was continuing, (a) up to an amount equal to, (i) a basket that builds based on 50% of Emerald Xs Consolidated Net Income (as defined in the Amended and Restated Credit Facilities) and certain other amounts, subject to various conditions including compliance with a fixed charge coverage ratio of 2.0 to 1.0 and (b) in certain additional limited amounts, subject to certain exceptions set forth in the Senior Secured Credit Facilities.
Since the restricted net assets of Emerald X and its subsidiaries exceed 25% of the consolidated net assets of the Company and its subsidiaries, the accompanying condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X. This information should be read in conjunction with the accompanying consolidated financial statements.
Emerald Holding, Inc.
### Schedule II Valuation and Qualifying Accounts
Item 9.
None.
Item 9A. Controls and Procedures.
The Company maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) that are designed to ensure that information required to be disclosed in the Company's reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company will be detected.
As of the end of the period covered by this report, management, under the supervision of the Company's Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. At the time of the Original Form 10-K, the Companys Chief Executive Officer and the Chief Financial Officer had concluded that as of December 31, 2020 the disclosure controls and procedures were effective at the reasonable assurance level. However, management has subsequently determined the disclosure controls and procedures were not effective at the reasonable assurance level due to a material weakness in internal control over financial reporting related to the evaluation of the impact of the arrangements terms and conditions on the accounting and reporting for preferred stock instruments that existed as of December 31, 2020.
Restated Managements Report on Internal Control over Financial Reporting
The Companys management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Internal control over financial reporting is a process designed by, or under the supervision of, the Company's Chief Executive Officer and Chief Financial Officer and effected by the Company's board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
The Companys management assessed the effectiveness of its internal control over financial reporting as of December 31, 2020.
(2013).
The Company did not design and maintain effective controls related to the evaluation of the impact of the arrangements terms and conditions on the accounting and reporting for preferred stock instruments. This material weakness resulted in the restatement of the Companys previously filed consolidated financial statements as of and for the year ended December 31, 2020, as well as the quarterly condensed consolidated financial information for the 2020 interim periods ended June 30, September 30, and December 31,2020, related to temporary equity, permanent equity, additional paid in capital, accretion to redemption value of redeemable convertible preferred stock, net loss and comprehensive loss attributable to common shareholders, loss per share and the related disclosures.
On February 23, 2021, the Company filed the Original Form 10-K. At that time, its management, including the Chief Executive Officer and the Chief Financial Officer, had performed an evaluation and concluded that the Companys internal control over financial reporting was effective as of December 31, 2020. Subsequent to that evaluation, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2020 due to the material weakness in its internal control over financial reporting described above. Accordingly, the Companys management has restated its report on internal control over financial reporting.
This Annual Report on Form 10-K/A does not include, and we are not required to include, an attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting pursuant to Section 404 for as long as we remain an emerging growth company as defined in the JOBS Act.
### Remediation Plan for the Material Weakness
In order to remediate the material weakness, the Companys management plans to enhance the design of its control activities related to the evaluation of the impact of the terms and conditions on the accounting and reporting for preferred stock issuances. The material weakness cannot be considered remediated until the newly designed controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
There have been no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the Companys fourth fiscal quarter of 2020 that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
Item 9B. Other Information.
None.
### PART III
Item 10.
### Item 11. Executive Compensation.
Item 12.
Item 13.
### Item 14.
PART IV
Item 15.<|endoftext|>And all of our directors, director nominees and executive officers as a group. Unless otherwise indicated, the information is given as of April 23, 2021, and the persons named below have sole or shared voting and/or investment power with respect to such shares.
The following table sets forth information about the Companys common stock as of December31, 2019, that may be issued under equity compensation plans
Amounts reflected in the table below do not reflect the effect of the Companys recently completed 1-for-200 reverse stock split, which was implemented effective as of the close of business on April 14, 2020:
When the Company emerged from bankruptcy on February 9, 2021, the Company's 2014 LTIP was terminated and a new 2021 LTIP was adopted by order of the United States Bankruptcy Court for the Southern District of Texas. The new 2021 LTIP authorizes the issuance of up to 6,800,000 shares of the Company's common stock.
### ITEM 13.
Independence of Board Members
To ensure a strong and independent board, all directors of the Company, other than our Interim CEO, Mr.Wichterich, are independent. A director cannot be considered independent unless the Board of Directors affirmatively determines that he or she does not have any relationship with management or the Company that may interfere with the exercise of his or her independent judgment.
### How We Assess Director Independence
The Boards guidelines.
For a director to be considered independent, the Board must determine that he or she does not have any relationship that, in the opinion of the Board, would interfere with his or her independent judgment as a director. The Boards guidelines for director independence conform to the independence requirements in the listing standards of the Nasdaq Stock Market. In addition to applying these guidelines, the Board considers all relevant facts and circumstances when making an independence determination.
### Board Committees and Director Independence
All members of the current Board committees (the Audit Committee, Compensation Committee, Environmental and Social Governance Committee and Nominating and Corporate Governance Committee) and the former Board committees (the Audit Committee, Compensation Committee, Finance Committee and Nominating, Governance and Social Responsibility Committee) must be independent, as defined by the Boards Governance Principles.
Heightened standards for Audit Committee members.
Under a separate SEC independence requirement. Audit Committee members may not accept any consulting, advisory or other fee from Chesapeake or any of its subsidiaries, except compensation for Board service.
Heightened standards for members of the Compensation and Nominating Committees.
As a policy matter, the Board also applies a separate, heightened independence standard to members of the Compensation and Nominating Committees. No member of either committee may be a partner, member or principal of a law firm, accounting firm or investment banking firm that accepts consulting or advisory fees from Chesapeake or a subsidiary. In addition, in determining that Compensation Committee members are independent, Nasdaq rules require the Board to consider their sources of compensation, including any consulting, advisory or other compensation pair by Chesapeake or a subsidiary.
Applying the Guidelines in 2021 New Board of Directors.
In determining director independence, the Board considered all relevant transactions, relationships and arrangements in assessing independence, including relationships among Board members, their family members and the Company in 2018, 2019, 2020, and the 2021 first quarter. In accordance with our Corporate Governance Principles and the listing standards of The Nasdaq Stock Market, the Board determined that there were no material transactions or relationships with the Company that would impair the independence of any of the current non-employee directors. As such, the current Board of Directors affirmatively determined that: (i)all six of our current non-employee directors (listed in Item 10 above, beginning on page 5) are independent under the Companys guidelines and the independence standards of The Nasdaq Stock Market; and (ii)all members of the Audit, Compensation and Nominating & Corporate Governance Committees, and Environmental and Social Responsibility Committees, where applicable, also satisfy the heightened committee-specific independence requirements.
Applying the Guidelines in 2020 Former Board of Directors.
Prior to the Company's emergence from Chapter 11 in February 2021, the Company's Board of Directors consisted of the following non-employee directors: Gloria R. Boyland, Luke R. Corbett, Mark A. Edmunds, Leslie Starr Keating, R.Brad Martin, Merrill A. (Pete) Miller and Thomas L. Ryan. In determining director independence, the Board considered relevant transactions, relationships and arrangements in assessing independence, including relationships among Board members, their family members and the Company in 2018, 2019, 2020, as described below:
Relationships and Transactions Considered for Director Independence
In accordance with our Corporate Governance Principles and the listing standards of the New York Stock Exchange, the then-serving Board of Directors determined that all transactions and relationships it considered during its review were not material transactions or relationships with the Company and did not impair the independence of any of the non-employee directors. As such, the then-serving members of the Board determined that all members of the Boards former committees, including the Audit, Compensation, Nominating, Governance & Social Responsibility and Finance Committees, were independent and, where applicable, also satisfied the heightened committee-specific independence requirements.
The Company has adopted a written related party transaction policy with respect to any transaction, arrangement or relationship or series of similar transactions, arrangements or relationships (including any indebtedness or guarantee of indebtedness) in which: (1) the aggregate amount involved will or may be expected to exceed $120,000; (2) the Company is a participant; and (3) any of its currently serving directors and executive officers, or those serving as such at any time since the beginning of the last fiscal year, or greater than 5% shareholders, or any of the immediate family members of the foregoing persons, has or will have a direct or indirect material interest. The Audit Committee reviews and approves all interested transactions, as defined above, subject to certain enumerated exceptions that the Audit Committee has determined do not present a direct or indirect material interest on behalf of the related party, consistent with the rules and regulations of the SEC. Such transactions are subject to the Companys Code of Business Conduct. Certain transactions with former executive officers and directors that fall within the enumerated exceptions are reviewed by the Audit Committee. The Audit Committee approves or ratifies only those transactions that it determines in good faith are in, or are not inconsistent with, the best interests of the Company and its shareholders. All transactions described below that do not fall within the enumerated exceptions described in the policy have been reviewed or approved by the Audit Committee.
Employment of Family Members
Grant Loxton, the son-in-law of Mr. Corbett, a former non-employee director of the Company who resigned in February 2021, has been an employee of the Company since May 2011. Mr. Loxtons total 2020 cash and equity compensation was $409,684. In addition, Anna Patterson, the daughter of Frank J. Patterson, our EVP Exploration and Production, has been an employee of the Company since June 2019. Ms. Pattersons total 2020 cash and equity compensation was $159,499. The Company is a significant employer in Oklahoma City. We seek to fill positions with qualified employees, whether or not they are related to our executive officers or directors. We compensate employees who have such relationships within what we believe to be the current market rate for their position and provide benefits consistent with our policies that apply to similarly situated employees. Compensation arrangements for family members of related parties were approved by the Compensation Committee.
ITEM 14.
A summary of fees paid to our independent registered public accounting firm, PricewaterhouseCoopers LLP (PwC), for fiscal years 2019 and 2020 is set forth below:
The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of the independent auditor for the purpose of preparing or issuing audit reports or performing other services for the Company. The independent auditor reports directly to the Audit Committee. The Audit Committee pre-approves audit and non-audit services provided by the Companys independent registered public accounting firm. In addition to separately approved services, the Audit Committees pre-approval policy provides for pre-approval of specifically described audit and non-audit services and related fee levels on an annual basis. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services. The Audit Committee reviews the services performed pursuant to its pre-approval policy at its next scheduled quarterly meeting.
ITEM15.
(a)The following financial statements, financial statement schedules and exhibits are filed as a part of this report:
1.
### Financial Statements
No financial statements are filed with this Form 10-K/A.
2.
No financial statement schedules are applicable or required.
Exhibits
The exhibits listed below in the Index of Exhibits are filed, furnished or incorporated by reference pursuant to the requirements of Item 601 of Regulation S-K.
INDEX OF EXHIBITS
*
Schedules have been omitted pursuant to Item 601(b)(2) of RegulationS-K.The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.
#
### Previously filed with the Original 10-K Filing.
PLEASE NOTE: Pursuant to the rules and regulations of the Securities and Exchange Commission, we have filed or incorporated by reference the agreements referenced above as exhibits to this Annual Report on Form 10-K. The agreements have been filed to provide investors with information regarding their respective terms. The agreements are not intended to provide any other factual information about Chesapeake Energy Corporation or its business or operations. In particular, the assertions embodied in any representations, warranties and covenants contained in the agreements may be subject to qualifications with respect to knowledge and materiality different from those applicable to investors and may be qualified by information in confidential disclosure schedules not included with the exhibits. These disclosure schedules may contain information that modifies, qualifies and creates exceptions to the representations, warranties and covenants set forth in the agreements. Moreover, certain representations, warranties and covenants in the agreements may have been used for the purpose of allocating risk between the parties, rather than establishing matters as facts. In addition, information concerning the subject matter of the representations, warranties and covenants may have changed after the date of the respective agreement, which subsequent information may or may not be fully reflected in our public disclosures. Accordingly, investors should not rely on the representations, warranties and covenants in the agreements as characterizations of the actual state of facts about Chesapeake Energy Corporation or its business or operations on the date hereof.
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Businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so. If we entered into a letter of intent or other agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we are required to seek additional capital, we would need to borrow funds from the Sponsor, our management team or other third parties to operate or may be forced to liquidate. None of the Sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Up to $2.0 million of such loans may be converted into private placement-equivalent warrants at a price of $1.00 per warrant at the option of the lender. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than the Sponsor or an affiliate of the Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. If we do not complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account.
### Index
Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause an investor to lose some or all of its investment.
Even if we conduct extensive due diligence on a target business with which we combine, no assurance can be given that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise.
Withum, our independent registered public accounting firm, and the underwriters of our IPO, have not executed agreements with us waiving such claims to the monies held in the Trust Account.
### Index
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. Upon redemption of our public shares, if we do not complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Pursuant to the letter agreement, the Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Therefore, no assurance can be given that the Sponsor would be able to satisfy those obligations. In such event, we may not be able to complete our initial business combination, and a public stockholder would receive such lesser amount per share in connection with any redemption of its public shares. None of our officers, directors or members of the Sponsor will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
The securities in which we invest the proceeds held in the Trust Account could bear a negative rate of interest, which could reduce the interest income available for payment of taxes or reduce the value of the assets held in trust such that the per share redemption amount received by public stockholders may be less than $10.00 per share.
The net proceeds of the IPO and certain proceeds from the sale of the private placement warrants, in the amount of $230.0 million, are held in an interest-bearing Trust Account. government securities with a maturity of 185 days or less, or in certain money market funds which invest only in direct U.S. Treasury obligations. While short-term U.S. In the event that we are unable to complete our initial business combination, our public stockholders are entitled to receive their share of the proceeds held in the Trust Account, plus any interest income. If the balance of the Trust Account is reduced below $230.0 million as a result of negative interest rates, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
Our directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations.
### Index
While we currently expect that our independent directors would take legal action on our behalf against the Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely.
However, our officers and directors have agreed to waive (and any other persons who may become an officer or director prior to the initial business combination will also be required to waive) any right, title, interest or claim of any kind in or to any monies in the Trust Account and not to seek recourse against the Trust Account for any reason whatsoever (except to the extent they are entitled to funds from the Trust Account due to their ownership of public shares).
### Index
Our business is to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term.
To this end, the proceeds held in the Trust Account may only be invested in United States government securities within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the IPO or (B) with respect to any other provision relating to stockholders rights or pre-initial business combination activity; or (iii) absent an initial business combination within 24 months from the closing of the IPO or during any Extension Period, our return of the funds held in the Trust Account to our public stockholders as part of our redemption of the public shares.
### Index
If we have not completed an initial business combination within 24 months from the closing of the IPO, our public stockholders may be forced to wait beyond such 24 months before redemption from the Trust Account.
If we have not completed an initial business combination within 24 months from the closing of the IPO or during any Extension Period, the proceeds then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay taxes (less up to $0.1 million of the interest to pay dissolution expenses), will be used to fund the redemption of our public shares, as further described herein. Any redemption of public stockholders from the Trust Account will be effected automatically by function of our amended and restated certificate of incorporation prior to any voluntary winding up. If we are required to wind-up, liquidate the Trust Account and distribute such amount therein, pro rata, to our public stockholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the DGCL. In that case, investors may be forced to wait beyond 24 months from the closing of the IPO or the expiration of any Extension Period before the redemption proceeds of the Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from the Trust Account. We have no obligation to return funds to investors prior to the date of our redemption of public shares or liquidation unless we complete our initial business combination prior thereto and only then in cases where investors have sought to redeem their Class A common stock. Only upon our redemption or any liquidation will public stockholders be entitled to distributions if we do not complete our initial business combination.
The pro rata portion of the Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of the IPO or during any Extension Period may be considered a liquidating distribution under Delaware law. However, it is our intention to redeem our public shares as soon as reasonably possible following the end of the 24th month after the closing of the IPO or the expiration of any Extension Period in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not be complying with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for<|endoftext|>Financial reporting is effective, or if our independent registered public accounting firm is unable to express a favorable opinion as to the effectiveness of our internal controls over financial reporting when we no longer qualify as an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our securities could be negatively affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
We qualify as an emerging growth company as defined in Section2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i)the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section404 of SOX, (ii)the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii)reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i)the last day of the fiscal year (a)following June 22, 2023, the fifth anniversary of our IPO, (b)in which we have total annual gross revenue of at least $1.07billion or (c)in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock and public warrants that is held by non-affiliates exceeds $700million as of the last business day of our prior second fiscal quarter, and (ii)the date on which we have issued more than $1.0billion in non-convertible debt during the prior three-year period. Landsea Homes had total revenues during calendar year 2020 of approximately $734.6 million. If we continue to expand our business through acquisitions or continue to grow revenues organically, we may cease to be an emerging growth company prior to June 22, 2023.
As a result of our reliance on these exemptions or reduced disclosures, investors may not have access to certain information they deem important or may find our securities less attractive. This may result in a less active trading market for our securities and the price of our securities, including our Common Stock or public warrants may be more volatile.
We are a smaller reporting company and, as a result of the reduced disclosure and governance requirements applicable to smaller reporting companies, our common stock may be less attractive to investors.
We are a smaller reporting company because we had public float of less than $250 million on the applicable measurement date. As a smaller reporting company, we are subject to reduced disclosure obligations in our periodic reports and proxy statements. We cannot predict whether investors will find our common stock less attractive as a result of our taking advantage of these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active trading market for our common stock and our stock price may be more volatile.
The exercise of our warrants will result in dilution to our stockholders.
We issued warrants to purchase 15,525,000 shares of Common Stock as part of our IPO and, on the IPO closing date, we issued Private Placement Warrants (i) to the Sponsor to purchase 7,760,000 shares of Common Stock (of which 2,260,000 Private Placement Warrants were forfeited in connection with the Business Combination and 2,200,000 were transferred to the Seller in connection with the Business Combination) and (ii) to BlackRock Credit Alpha Master Fund L.P., to purchase 550,440 shares of Common Stock, in each case at $11.50 per share. The public warrants are exercisable for one-tenth of one share at an exercise price of $1.15 per one-tenth share ($11.50 per whole share) pursuant to the Warrant Amendment. The shares of Common Stock issued upon exercise of our warrants will result in dilution to the then existing holders of Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Common Stock or public warrants.
The Private Placement Warrants are identical to the public warrants except that, so long as they are held by the Seller, Sponsor or permitted transferees, (i)they will not be redeemable by us, (ii)they (including the Common Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30days after the completion of the Business Combination, (iii)they may be exercised by the holders on a cashless basis and (iv)are subject to registration rights.
The warrants may not ever be in the money, they may expire worthless and the terms of the warrants may be amended in a manner that may be adverse to holders of our warrants with the approval by the holders of at least 65% of the then outstanding public warrants. As a result, the exercise price of the warrants could be increased, the warrants could be converted into cash or stock (at a ratio different than initially provided), the exercise period could be shortened and the number of shares of our Common Stock purchasable upon exercise of a warrant could be decreased, all without a warrant holders approval.
The public warrants may not ever be in the money, and they may expire worthless. Our warrants were issued in registered form under the warrant agreement between Continental Stock Transfer & Trust Company and us (the Warrant Agreement). Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our Common Stock purchasable upon exercise of a warrant.
We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to a warrant holder, thereby making the warrants worthless.
We have the ability to redeem outstanding warrants at any time and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. Redemption of the outstanding warrants could force warrant holders to: (1) exercise their warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so (2) sell their warrants at the then-current market price when they might otherwise wish to hold their warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by the Seller, Sponsor or permitted transferees.
Our Common Stock and public warrants are listed on Nasdaq. There is no guarantee that these securities will remain listed on Nasdaq. There can be no assurance that these securities will continue to be listed on Nasdaq in the future. In order to continue listing our securities on Nasdaq, we must maintain certain financial, distribution and share price levels. In general, we must maintain a minimum number of holders of our securities.
If Nasdaq delists any of our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including: a limited availability of market quotations for our securities; reduced liquidity for our securities; a determination that the Common Stock is a penny stock which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; a limited amount of news and analyst coverage; and a decreased ability to issue additional securities or obtain additional financing in the future.
Because the Common Stock and public warrants are listed on Nasdaq, they will be covered securities. However, if we are no longer listed on Nasdaq, our securities would not be covered securities, and we would be subject to regulation in each state in which we offer our securities.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding our securities adversely, then the price and trading volume of our securities could decline.
The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of us, the price and trading volume of our securities would likely be negatively impacted. If any of the analysts that may cover us change their recommendation regarding our securities adversely, or provide more favorable relative recommendations about our competitors, the price of our securities would likely decline. If any analyst that may cover us ceases covering us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the price or trading volume of our securities to decline.
Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt, which could limit the price investors might be willing to pay in the future for our common stock.
These provisions include: a prohibition on stockholder action by written consent once the company is no longer controlled, which forces stockholder action to be taken at an annual or special meeting of our stockholders; a vote of 25% required for stockholders to call a special meeting; a synthetic anti-takeover provision in lieu of the statutory protections of Section 203 of the Delaware General Corporation Law; a vote of 80% required to approve a merger as long as the majority stockholder owns at least 20% of our stock; a provision allowing the directors to fill any vacancies on the Board, including vacancies that result from an increase in the number of directors, subject to the rights of the holders of any outstanding series of preferred stock to elect directors under specified circumstances; and the designation of Delaware as the exclusive forum for certain disputes.
Our Second Amended and Restated Certificate of Incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Shares for the payment of Series D Preferred Stock dividends accrued. As of December 31, 2020, the Company had accrued dividends of $14,306.
### Series E Convertible Preferred Stock
During year ended December 31, 2020, the Company entered into a Purchase Agreement with the Series E Investors (the Series E Purchase Agreement). In total, for $1,736,000 the Company issued 1,736 shares of Series E Preferred Stock. Each Series E Preferred Stock is convertible into 4,000 common stock shares. The Series E Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The Stated Value and liquidation preference on the Series E Preferred Stock is $1,736. The Company incurred fees due on these investments of $91,895.
Each share of Series E Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series E Certificate of Designation (the Series E Conversion Price). The conversion of Series E Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series E Preferred. If the average of the VWAPs (as defined in the Series E Certificate of Designation) for any consecutive 5 trading day period (Measurement Period) exceeds 200% of the then Series E Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series E Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. As of December 31, 2020, the Company had not issued shares as payment of Series E Preferred Stock dividends. As of December 31, 2020, the Company had accrued dividends of $67,247.
### Warrants
The following table summarizes transactions involving the Companys outstanding warrants to purchase common stock for the year ended December 31, 2020:
The Company had the following shares reserved for the warrants as of December 31, 2020:
(1)
Issued to investors for a loan in March 2018.
(2)
Exchanged in January 2020 from amount issued as part of a February 2016 private placement with senior secured debt holder
(3)
Issued to a placement agent in conjunction with a February 2016 private placement with senior secured debt holder
(4)
Issued to investors for a loan in April 2019
(5)
Issued to investors for a loan in July 2019
(6)
Issued to investors for a loan in September 2019
(7)
Issued to investors for a loan in December 2019
(8)
Issued to investors for a loan in January 2020
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
### Issued to a consultant for services in April 2020
### Issued to an investor for a loan in May 2020
Issued to an investor in exchange of debt in June 2020
(17)
Issued to a consultant for services in August 2020
Footnote (2) - On January 16, 2020, the Company entered into an exchange agreement with GPB. This exchange agreement canceled the existing outstanding warrants, which were subject to anti-dilution and ratchet provisions, to purchase 35,937,500 shares of common stock at an exercise price of $0.04 per share and resulted in the issuance of new warrants to purchase 7,185,000 share of common stock at a price of $0.20 per share. The new warrants have fixed exercise prices of $0.20. On January 8, 2021, the Company met the requirement by making the final payment of $750,000 as required by the exchange agreement with GPB, which canceled the previously issued warrants.
Warrants to purchase 70 shares of common stock were not recorded as their exercise price after considering reverse stock splits, were greater than $60,000 and deemed to be immaterial for disclosure.
On January 6, 2020, the Company entered into a finders fee agreement. The finder will receive 5% cash and 5% warrants on all funds it raises including bridge loans. The three-year common stock share warrants will have an exercise price of $0.25. During 2019 and 2020, the finder helped the Company raise $300,000, therefore a fee of $31,650 was paid and 126,600 warrants will be issued.
On January 22, 2020, the Company entered into a promotional agreement with a consultant. The consultant will provide the Company investor and public relations services. As compensation for these services, the Company will issue a total of 5,000,000 common stock warrants at a $0.25 strike price and expiring in three years, if the following conditions occur: 1,250,000 common stock warrants, 6 months after the close of the Series D Preferred Stock units, if the minimum common stock share price is a at least $0.50 based on a 30-day VWAP, with a two year term; 1,250,000 common stock warrants, 12 months after the close of the Series D Preferred Stock units, if the minimum common stock share price is at least $0.75 based on a 30-day VWAP, with a one and half year term; 1,250,000 common stock warrants, 18 months after the close of the Series D Preferred Stock units, if the minimum common stock share price is a minimum of $1.00 based on a 30-day VWAP, with a one year term; and 1,250,000 common stock warrants, 24 months after the close of the Series D Preferred Stock units, if the minimum common stock share price is a minimum of $1.25 based on a 30-day VWAP, with a one year term. The consultant agrees to a 10.0% blocker at any single point in time it cannot own 10.0% of the total common stock shares outstanding.
14.SUBSEQUENT EVENTS
GPB
On January 8, 2021, the Company made the final payment of $750,000 out of the total $1,500,000 as required by this exchange agreement with GPB Debt Holdings II LLC (GPB). Based on this final payment, the Company agreed to issue 2,236 shares of Series F Preferred Stock in accordance with the terms of the agreement (see footnote11: Convertible Debt
).
GHS
On January 29, 2021, the Company paid GHS $40,000 per the agreement to reduce the outstanding debt.
During January and February 2021, the Company entered into a Purchase Agreement with the Series F Investors (the Series F Purchase Agreement). In total, for $1,944,000 the Company agreed to issue 1,944 shares of Series F Preferred Stock. Each Series F Preferred Stock is convertible into 4,000 shares of common stock. The Series F Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The Stated Value and liquidation preference on the Series F Preferred Stock is $1,944.
On February 19, 2021, the Company exchanged $100,000 and $85,000 of long-term debt for Dr. Cartwright and Dr. Faupel in exchange for 100 and 85 shares of Series F Preferred Stock, respectively.
Each share of Series F Preferred is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series F Certificate of Designation (the Series F Conversion Price). The conversion of Series F Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series F Preferred. If the average of the VWAPs (as defined in the Series F Certificate of Designation) for any consecutive 5 trading day period (Measurement Period) exceeds 200% of the then Series F Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series F Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends.
### Powerup (Series G Callable Preferred Stock)
During January 2021, the Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $78,500, net to the Company is $75,000, for 91,000 shares of Series G Preferred Stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G Preferred Stock. Day 61-90, 110%; Day 91-120, 115%; and Day 121-180, 122%.
During February 2021, the Company finalized an investment by Power Up Lending Group Ltd. Power Up invested $53,500, net to the Company is $50,000, for 62,000 shares of Series G Preferred Stock with additional tranches of financing up to $925,000 in the aggregate over the terms of the Series G Preferred Stock. Day 61-90, 110%; Day 91-120, 115%; and Day 121-180, 122%.
### Other matters
On February 19, 2021, the Company entered into a new promissory note replacing the original note from September 4, 2018, with Mark Faupel and Gene Cartwright. For Dr. Cartwright the principal amount on the new note was $267,085, matures on February 18, 2023, and will accrue interest at a rate of 6%. For Dr. Faupel the principal amount on the new note was $153,178, matures on February 18, 2023, and will accrue interest at a rate of 6%.
On February 22, 2021, the Company based on a past agreement with Mr. Blumberg, was required to issuance 1,250,000 2-year warrants with an exercise price of $0.25, when the 30-day vwap reached $0.50.
On March 2, 2021, the Company agreed to pay a fee to Aspen Capital Corporation for investor relations. Aspen would receive a fee of $49,000, payable in cash of $24,500 and 98,000 common stock shares. In addition, they would receive 196,000 three year warrants to purchase common stock shares at an exercise price of $0.25 and expiring on March 4, 2024.
On March 10, 2021, the Company entered into a consulting agreement with Richard Blumberg. The consulting agreement requires Mr. Blumberg to provide $350,000 to the Company and additional consulting services in exchange for the following: (1) 900,000 3-year warrants with an exercise price of $0.30 and 400,000 common stock shares; (2) 900,000 3-year warrants with an exercise price of $0.40 and 400,000 common stock shares; (3) 900,000 3-year warrants with an exercise price of $0.50 and 400,000 common stock shares; and (4) 900,000 3-year warrants with an exercise price of $0.60 and 400,000 common stock shares. Based on this agreement the Company will record compensation expense of $3,144,400. In addition, $88,000 in accrued consulting fees for Mr. Blumberg will be converted into 88 series F Preferred Stock shares.
On March 22, 2021, the Company entered into an exchange agreement with Richard Fowler. As of December 31, 2020, the Company owed Mr. Fowler $546,214 ($412,624 in deferred salary and $133,590 in accrued interest). The Company will exchange the amount owed of $546,214 for 20 Series F Preferred Shares (convertible into 200,000 common stock shares), a $150,000 unsecured note and Mr. Fowler will remain on our health insurance plan. The unsecured note of $150,000 will have a four year term, with monthly payments scheduled to begin on March 15, 2022, and then monthly on the 15th thereafter, in the amount of $3,600 and accruing interest at a rate of 6%. The unsecured note will be in default on the 20th of the month. The amount forgiven by Mr. Fowler was $346,214. In addition, the Company will reimburse Mr. Fowler for $4,325 of accrued expenses. The Company will also begin repaying two outstanding notes totaling $45,118 in principal and interest on April 15, 2021. The notes will be combined into one note with a payment of $3,850 per month and have an interest rate of 6%, if the notes go into default the interest will be 18%.
Item 12.
The following table lists information regarding the beneficial ownership of our equity securities as of April 5, 2021 by (1) each person whom we know to beneficially own more than 5% of the outstanding shares of our common stock, (2) each director, (3) each officer named in the summary compensation<|endoftext|>Stock option activity under the Plans is as follows:
The weighted-average grant date fair value of options granted during the years ended December31, 2020, 2019, and 2018 was $45.02, $13.20, and $2.04 per share, respectively. The total intrinsic value of stock options exercised was $466.1 million, $30.5 million and $3.3 million during the years ended December31, 2020, 2019, and 2018, respectively. As of December31, 2020, the total unrecognized stock-based compensation related to stock options was $160.3 million, which will be recognized over a weighted-average period of approximately 3 years.
### Early Exercise of Options
Stock options granted under the 2012 Stock Plan provide certain employee and director option holders the right to exercise unvested options in exchange for restricted shares of ClassA common stock which are subject to repurchase by the Company at the original issuance price in the event the optionees employment is terminated either voluntarily or involuntarily prior to the applicable vesting date.The consideration received for the early exercised options is recorded as a liability on the consolidated balance sheets and reclassified to stockholders deficit as the shares vest. As of December31, 2020 and 2019, the total repurchase liability related to the unvested early exercised options was $247,000 and $494,000, respectively, which is included in other current and noncurrent liabilities on the consolidated balance sheets. A summary of these restricted shares issued under the Amended and Restated 2012 Stock Plan is as follows:
Stock Option Valuation Assumptions
The fair value of each employee option grant was estimated on the date of grant using the Black-Scholes option pricing model and the following assumptions for the periods indicated:
### Restricted Stock Units
The Company began granting restricted stock unit awards (RSUs) to employees and other service providers during 2020. RSU activity for the year ended December31, 2020 is as follows:
2019 Employee Stock Purchase Plan
In July 2019, the Companys board of directors adopted the 10x Genomics, Inc. 2019 Employee Stock Purchase Plan (the ESPP), which was subsequently approved by the Companys stockholders. The ESPP went into effect on September11, 2019. Subject to any limitations contained therein, the ESPP allows eligible employees to contribute, through payroll deductions, up to 15% of their eligible compensation to purchase the Companys ClassA common stock at a discounted price per share. The ESPP generally provides for consecutive, overlapping6-monthoffering periods. Unless otherwise determined by the administrator of the ESPP, a participant may not sell, transfer or otherwise dispose of any shares of the Companys ClassA common stock purchased under the ESPP for 12 months following the applicable exercise date.
During the year ended December31, 2020, 163,727 shares of Class A common stock were issued under the ESPP. No shares of Class A common stock were issued under the ESPP during 2019. The ESPP provides that the maximum number of shares of the Companys ClassA common stock made available for sale thereunder will be 2,000,000, which number will be automatically increased on the first day of each calendar year commencing on January1, 2021 and ending on January1, 2029 in an amount equal to the lesser of (i) 1% of the total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year and (ii)such number of shares of the Companys ClassA common stock as determined by the Companys board of directors. However, if on January1 of a calendar year the Companys board of directors has not either confirmed the 1% described in clause (i)or approved a lesser number of shares of the Companys ClassA common stock for such calendar year, the Companys board of directors will be deemed to have waived the automatic increase and no such increase will occur for such calendar year. The maximum number of shares available under the ESPP (and any share limitations thereunder, as applicable) will automatically be adjusted upon certain changes to the Companys capital structure.
For the year ended December31, 2020, the weighted average grant date fair value of the ESPP shares purchased, using the Black-Scholes option pricing model, was $16.61.
The following assumptions were used in estimating the fair values of shares under the ESPP:
As of December31, 2020, the total unrecognized stock-based compensation related to the ESPP was $0.9 million, which will be recognized over a weighted-average period of approximately 0.5 years.
### Stock-based Compensation
The Company recorded stock-based compensation expense in the consolidated statement of operations for the periods presented as follows (in thousands):
10.Employee Benefit Plans
The Company has made available to all full-time United States employees a 401(k) retirement savings plan. Under this plan, employee and employer contributions and accumulated plan earnings qualify for favorable tax treatment under Section401(k) of the Internal Revenue Code. The Company has not contributed to the plan.
11.Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (in thousands, except share and per share data):
The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect:
12.Subsequent Events
### Acquisition of Tetramer Shop ApS
On January 8, 2021, the Company acquired 100% of the outstanding shares of Tetramer Shop ApS, a privately held company based in Copenhagen, Denmark, for $10million in cash.
Item9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item9A. Controls and Procedures.
### Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of the end of the period covered by this report.Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of December31, 2020.
Managements Annual Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. , and includes those policies and procedures that:
(1) Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. , and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Management has used the 2013 framework set forth in the report entitled Internal Control-Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the Companys internal control over financial reporting. Management has concluded that the Companys internal control over financial reporting was effective as of December31, 2020 at the reasonable assurance level. Our independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Companys internal control over financial reporting as of December31, 2020, which is included in Part II, Item 8, above.
Changes in Internal Control over Financial Reporting
There was not any change in our internal control over financial reporting (as such term is defined in Rules13a-15(f) under the Exchange Act) during the year ended December31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item9B. Other Information.
None.
### PART III
Item10. Directors, Executive Officers and Corporate Governance.
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions. A current copy of the code is posted on the Governance section of our investor relations website, which is located at www.investors.10xgenomics.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions, or any officer or director, we will disclose the nature of such amendment or waiver on our website or in a Current Report on Form 8-K.
The remaining information required under this item is incorporated herein by reference to our definitive proxy statement (the Proxy Statement) pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, which Proxy Statement is expected to be filed with Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December31, 2020.
### Item11. Executive Compensation.
Item12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item13. Certain Relationships and Related Transactions, and Director Independence.
### Item14. Principal Accounting Fees and Services.
PART IV
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Of debt of $
202,588 for the year ended June 30, 2021. The remaining principal balance due under convertible notes after these conversions and other debt settlements (See Note 13) is zero.
During the year ended June 30, 2020, the Company issued a total of
96,265 shares of common stock for the conversion of debt in the principal amount of $
6 together with all accrued and unpaid interest, according to the conditions of the convertible notes. All these conversions resulted in a total loss on extinguishment of debt of $
41,255 for the year ended June 30, 2020.
### Stock Issued for Exercise of Warrants
1,500,000 shares of common stock to FirstFire Global Opportunities Fund, LLC for the exercise of warrants in full, according to the conditions of the convertible note dated as
### September 11, 2019
(See Note 13)
### Stock Issued for Private Placement
In December 2020, the Company issued a total of
28,869,999 shares of common stock to nine individual subscribers for an aggregate purchase price of $
433,000 at $
0.015 per share, according to the conditions of the subscription agreements signed between the Company and subscribers.
On January 13, 2021, the Company issued a total of
7,000,000 shares of common stock to one individual subscriber for purchase price of $
105,000 at $
0.015 per share, according to the conditions of the subscription agreement signed by both parties.
%) per annum.
### On December 31, 2020, the Company issued
(See Note 14)
March 10, 2022 and bears an interest rate of five percent (
%) per annum.
### On March 10, 2021, the Company issued
(See Note 14)
NOTE 10 -
### RELATED PARTY TRANSACTIONS AND BALANCES
Purchase from related party
During the year ended June 30, 2020, the Company purchased $
1,630,684 and $
37,393 from Keenest and Shenzhen Baileqi S&T which were owned by the Companys stockholders who own approximately
1.3
% and
0.7
% respectively of the Companys outstanding common stock. The amounts of $
(Lisite Science) and $
(Baileqi Electronic) were included in the cost of Revenue for the year ended June 30, 2020.
Lisite Science made advances of $
434,200 and $
357,577 to Keenest for future purchases as of June 30, 2021 and June 30, 2020, respectively.
### Sales to related party
During the year ended June 30, 2021 and 2020, Baileqi Electronic sold materials of $
0 and $
713,008 respectively to Shenzhen Baileqi S&T.
### Lease from related party
(RMB
(RMB
). (See Note 5). On July 20, 2021, Lisite Science further extended the lease with Keenest for one more year until July 20, 2022 with annual rent of approximately $
(RMB
).
Baileqi Electronic leases office and warehouse space from Shenzhen Baileqi S&T, a related party, with monthly rent of approximately $
(RMB
On June 5, 2020, Baileqi Electronic further extended the lease with Shenzhen Baileqi S&T for one more year until May 31, 2021 with monthly rent of approximately $
(RMB
). (See Note 5).
### Due to related parties
(1)
Ben Wong was the former controlling shareholder (before April 20, 2017) of Shinning Glory, which holds majority shares in the Company.
(2)
Yubao Liu has been the controlling shareholder of Shinning Glory since April 20, 2017, which holds majority shares in the Company.
(3)
Xin Sui serves as director of Welly Surplus.
(4)
Baozhen Deng is a stockholder of the Company, who owns approximately
0.7
% of the Companys outstanding common stock, and the owner of Shenzhen Baileqi S&T.
(5)
Biao Shang is a stockholder of the Company and serves as director of Fangguan Photoelectric.
(6)
Jialin Liang is a stockholder of the Company, serves as the president, CEO, and director of Fangguan Electronics and director of the Company.
(7)
Xuemei Jiang is a stockholder of the Company and serves as director of both Fangguan Electronics and the Company.
(8)
Shikui Zhang is a stockholder of the Company and serves as the general manager of Shizhe New Energy since May 2019.
(9)
Changyong Yang is a stockholder of the Company,who owns approximately
1.3
% of the Companys outstanding common stock,and the owner of Keenest.
(10)
The liability represents the advances to Fangguan Electronics by Xuemei Jiang at the acquisition date of Fangguan Electronics (December 27, 2018).
During the year ended June 30, 2021, after netting off the refund by Fangguan Electronics, Mr Liang 's advance to Fangguan amounted to $983,397, among which $464,000 (RMB 3 million) was the proceeds from a one -year term bank loan that Mr.Liang borrowed in his own name . Mr.
During the year ended June 30, 2021, Shenzhen Baileqi S&T paid back Baileqi Electronic directly for the amount of $
(RMB2,474,417). Considering this reversal,and setting off the further advance by Mr Liu, the net refund to Mr Liu was approximately $
133,733 during the year ended June 30, 2021.
During the year ended June 30, 2021, Baozhen Deng advanced $
35,839 to Baileqi Electronic. Shikui Zhang advanced approximately $
30,433 to Shizhe New Energy. Biao Shang advanced $
19,804 to Fangguan Photoelectric.
During the year ended June 30, 2020, Yubao Liu was refunded $
46,312 by Welly Surplus and Well Best after netting off his advances to Well Best.
During the year ended June 30, 2020, Baileqi Electronic refunded $
5,303 to Baozhu Deng and Baozhen Deng advanced $
5,537 to Baileqi Electronic. Shizhe New Energy refunded $
625 and $
1,869 to Liang Zhang and Zijian Yang respectively. Shikui Zhang advanced $
28,528 to Shizhe New Energy. Changyong Yang, a stockholder of the Company, advanced $
23,063 to Lisite Science.
NOTE 11
### CONCENTRATION
Major customers
Customers who accounted for 10% or more of the Companys revenues (goods sold and services) and its outstanding balance of accounts receivable are presented as follows
:
Primarily all customers are located in the PRC.
### Major suppliers
The suppliers who accounted for 10% or more of the Companys total purchases (materials and services) and its outstanding balance of accounts payable are presented as follow s:
All suppliers of the Company are located in the PRC.
NOTE 12-
### INCOME TAXES
The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rate. The Company operates in United States of America, Hong Kong and the PRC that are subject to taxes in the jurisdictions in which they operate.
United States of America
The Company is registered in the State of Nevada and is subject to the tax laws of United States of America and subject to the corporate tax rate of 21% on its taxable income.
For the year ended June 30, 2021 and 2020, the Company did not generate income in United States of America and no provision for income tax was made. Under normal circumstances, the Internal Revenue Service is authorized to audit income tax returns during a three-year period after the returns are filed. In unusual circumstances, the period may be longer. Tax returns for the years ended June 30, 2016 and after were still open to audit as of June 30, 2021.
### Hong Kong
The Companys subsidiaries, Well Best and Welly Surplus, are registered in Hong Kong and subject to income tax rate of
16.5
%. For the year ended June 30, 2021 and 2020, there is no assessable income chargeable to profit tax in Hong Kong.
### The PRC
The Companys subsidiaries in China are subject to a unified income tax rate of
%. Fangguan Electronics was certified as high-tech enterprises for three calendar years from 2016 to 2019 and is taxed at a unified income tax rate of
%. Fangguan Electronics has renewed the high-tech enterprise certificate which granted it the tax rate of
% for the three whole calendar years of 2019 to 2021
The reconciliation of income tax expense (benefit) at the U.S. statutory rate of 21% to the Company's effective tax rate is as follows
:
The provisions for income taxes (benefits) are summarized as follows
:
The tax effects of temporary differences that give rise to the Companys net deferred tax assets are as follows
:
As of June 30, 2021, the Company has approximately $
3,419,353 net operating loss carryforwards available in the U.S., Hong Kong and China to reduce future taxable income which will begin to expire from
It is more likely than not that the deferred tax assets resulted from net operating loss carryforward cannot be utilized in the future because there will not be significant future earnings from the entities which generated the net operating loss. Therefore, the Company recorded a full valuation allowance on its deferred tax assets resulted from net operating loss carryforward as of June 30, 2021.
On December 22, 2017, the Tax Cuts and Jobs Act (The 2017 Tax Act) was enacted in the United States. Under the provisions of the Act, the U.S. corporate tax rate decreased from
% to
%. Accordingly, the Company has re-measured its deferred tax assets on net operating loss carry forwards in the U.S at the lower enacted cooperated tax rate of 21%. However, this re-measurement has no effect on the Companys income tax expenses as the Company has provided a
% valuation allowance on its deferred tax assets previously.
Additionally, the 2017 Tax Act implemented a modified territorial tax system and imposing a tax on previously untaxed accumulated earnings and profits (E&P) of foreign subsidiaries (the Toll Charge). The Toll Charge is based in part on the amount of E&P held in cash and other specific assets as of December 31, 2017. The Toll Charge can be paid over an eight-year period, starting in 2018, and will not accrue interest. The 2017 Tax Act also imposed a global intangible low-taxed income tax (GILTI), which is a new tax on certain off-shore earnings at an effective rate of 10.5% for tax years beginning after December 31, 2017 (increasing to 13.125% for tax years beginning after December 31, 2025) with a partial offset for foreign tax credits
The Company has determined that this one-time Toll Charge has no effect on the Companys income tax expenses as the Company has no undistributed foreign earnings at either of the two testing dates of November 2, 2017 and December 31, 2017.
For purposes of the inclusion of GILTI, the Company determined that the Company did not have tax liabilities resulting from GILTI for the year ended June 30, 2021 and 2020 due to net operating loss carryforwards available in the U.S. Therefore, there was no accrual of GILTI liability as of June 30, 2021 and June 30, 2020.
The extent of the Companys operations involves dealing with uncertainties and judgments in the application of complex tax regulations in a multitude of jurisdictions. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state and international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be due.
NOTE 13 -
### CONVERTIBLE DEBT
Convertible notes
Convertible notes payable balance was zero as of June 30, 2021.
A s of June 30, 2020, convertible notes payable consists of:
(1)
On July 25, 2019, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd to issue and sell, upon the terms and conditions set forth in the agreement a convertible note of the Company, in the aggregate principal amount of $
103,000 and received $
94,840 in cash on August 1, 2019 after deducting legal fees and other costs.
% per annum and due on
### July 25, 2020
During the year ended June 30, 2020, Power Up Lending Group Ltd elected to convert $
64,000 of the principal amount of the convertible notes into
76,265 shares<|endoftext|>Subscription to an accounting research tool provided by Ernst & Young LLP.
Our audit committee established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. All of the services provided were pre-approved to the extent required. During the approval process, the audit committee considers the impact of the types of services and the related fees on the independence of the independent registered public accounting firm. The services and fees must be deemed compatible with the maintenance of that firms independence, including compliance with rules and regulations of the SEC. Throughout the year, the audit committee will review any revisions to the estimates of audit and non-audit fees initially approved.
Stockholder ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm is not required by our Bylaws or otherwise. However, the board of directors is submitting the selection of Ernst & Young LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain Ernst & Young LLP. Even if the selection is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of our company and our stockholders.
### PART IV
Item 15.
1.
Financial Statements: The information concerning our financial statements and required by this Item is incorporated by reference herein to the section of this Annual Report on Form 10-K/A in Item 8, titled
2.
Financial Statement Schedules: No schedules are required
3.
The exhibits listed in the following Index to Exhibits are filed or incorporated by reference as part of this report
Exhibit No.
Description
2.1
+
Business Combination Agreement by and among VectoIQ Acquisition Corp., VCTIQ Merger Sub Corp., and Nikola Corporation, dated March 2, 2020 (incorporated by reference to Exhibit 2.1 to the Registrants Current Report on Form 8-K filed on March 3, 2020).
3.1
Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrants Registration Statement on Form S-1 (File No. 333-239185) (as amended, the Resale S-1)).
3.2
Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Registrants Current Report on Form 8-K filed on June 8, 2020 (the Super 8-K)).
4.1
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Super 8-K).
4.2
Form of Warrant (incorporated by reference to Exhibit 4.2 to the Super 8-K).
4.3
Warrant Agreement by and between the Registrant and Continental Stock Transfer & Trust Company, dated May 15, 2018 (incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on May 21, 2018).
4.4
Registration Rights and Lock-Up Agreement by and among VectoIQ Acquisition Corp. and certain stockholders of VectoIQ Acquisition Corp., dated June 3, 2020 (incorporated by reference to Exhibit 4.4 to the Resale S-1).
4.5
Amendment No. 1 to Registration Rights and Lock-Up Agreement by and among VectoIQ Acquisition Corp. and certain stockholders of VectoIQ Acquisition Corp., dated July 17, 2020 (incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K filed on July 23, 2020).
4.6
Form of Lock-Up Agreement by and between the Registrant and certain stockholders, dated June 3, 2020 (incorporated by reference to Exhibit 4.5 to the Super 8-K).
4.7
Lock-Up Agreement by and between the Registrant and WI Ventures LLC, dated June 3, 2020 (incorporated by reference to Exhibit 4.6 to the Super 8-K).
4.8
( incorporated by reference to Exhibit 4.8 to the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2021)
10.1
Form of Subscription Agreement by and between the Registrant and certain purchasers, dated March 2, 2020 (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed on March 3, 2020).
10.2
Form of Subscription Agreement by and between the Registrant and entities affiliated with Fidelity Management & Research Company, dated June 3, 2020 (incorporated by reference to Exhibit 10.2 to the Super 8-K).
10.3#
Form of Indemnification Agreement by and between the Registrant and its directors and officers (incorporated by reference to Exhibit 10.3 to the Super 8-K).
10.4#
Nikola Corporation 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Super 8-K).
10.5#
Forms of Stock Option Agreement, Notice of Exercise, Stock Option Grant Notice, Restricted Stock Unit Agreement, and Restricted Stock Agreement under the Nikola Corporation 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to the Registrants Registration Statement on Form S-4 (File No. 333-237179) (as amended, the S-4)).
10.6#
Nikola Corporation 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.6 to the Super 8-K).
10.7#
Employment Agreement by and between Nikola Corporation and Trevor R. Milton, dated July 13, 2016 (incorporated by reference to Exhibit 10.7 to the S-4).
10.8#
Offer Letter from Nikola Corporation to Mark A. Russell, dated February 8, 2019 (incorporated by reference to Exhibit 10.8 to the S-4).
10.9#
Offer Letter from Nikola Corporation to Kim J. Brady, dated October 17, 2017 (incorporated by reference to Exhibit 10.9 to the S-4).
10.10#
Offer Letter from Nikola Corporation to Joseph R. Pike, dated January 1, 2018 (incorporated by reference to Exhibit 10.10 to the S-4).
Exhibit No.
Description
10.11#
Offer Letter from Nikola Corporation to Britton M. Worthen, dated March 26, 2019 (incorporated by reference to Exhibit 10.11 to the S-4).
10.12#
Executive Employment Agreement by and between the Registrant and Trevor R. Milton, dated June 3, 2020 (incorporated by reference to Exhibit 10.12 to the Super 8-K).
10.13#
Executive Employment Agreement by and between the Registrant and Mark A. Russell, dated June 3, 2020 (incorporated by reference to Exhibit 10.13 to the Super 8-K).
10.14#
Executive Employment Agreement by and between the Registrant and Kim J. Brady, dated June 3, 2020 (incorporated by reference to Exhibit 10.14 to the Super 8-K).
10.15#
Executive Employment Agreement by and between the Registrant and Joseph R. Pike, dated June 3, 2020 (incorporated by reference to Exhibit 10.15 to the Super 8-K).
10.16#
Executive Employment Agreement by and between the Registrant and Britton M. Worthen, dated June 3, 2020 (incorporated by reference to Exhibit 10.16 to the Super 8-K).
10.17#
Nikola Corporation 2017 Stock Option Plan, dated July 10, 2017 (incorporated by reference to Exhibit 10.6 to the S-4).
10.18#
Founder Stock Option Plan, dated November 9, 2018 (incorporated by reference to Exhibit 10.5 to the S-4).
10.19
Redemption Agreement by and between the Registrant and M&M Residual, LLC, dated June 3, 2020 (incorporated by reference to Exhibit 10.18 to the Super 8-K).
10.20
Lease Agreement by and between DARED 90 LLC and Nikola Corporation, dated February 13, 2018 (incorporated by reference to Exhibit 10.12 to the S-4).
10.21*
Master Industrial Agreement by and among Nikola Corporation, CNH Industrial N.V. and Iveco S.p.A., dated September 3, 2019, as amended by Amendment to Master Industrial Agreement, dated December 26, 2019, Second Amendment to Master Industrial Agreement, dated January 31, 2020, and Third Amendment to Master Industrial Agreement, dated February 28, 2020 (incorporated by reference to Exhibit 10.13 to the S-4).
10.22*
Amended and Restated European Alliance Agreement by and between Nikola Corporation, Iveco S.p.A., and solely with respect to Sections 9.5 and 16.18, CNH Industrial N.V., dated February 28, 2020 (incorporated by reference to Exhibit 10.14 to the S-4).
10.23*
Commercial Letter by and among VectoIQ Acquisition Corp., Nikola Corporation and Nimbus Holdings LLC, dated March 2, 2020 (incorporated by reference to Exhibit 10.15 to Form S-4).
10.24*
Master Agreement by and between Anheuser-Busch, LLC and Nikola Corporation (formerly Nikola Motor Company, LLC), dated February 22, 2018 (incorporated by reference to Exhibit 10.16 to the S-4).
10.25
Commercial Framework Agreement by and between Nikola Corporation and Green Nikola Holdings LLC, dated November 9, 2018 (incorporated by reference to Exhibit 10.17 to the S-4).
10.26*
Supply Agreement by and between Nel ASA and Nikola Corporation (formerly Nikola Motor Company, LLC), dated June 28, 2018 (incorporated by reference to Exhibit 10.18 to the S-4).
10.27*
European Supply Agreement by and among Nikola Iveco Europe B.V., IVECO S.p.A. and Nikola Corporation, dated April 9, 2020 (incorporated by reference to Exhibit 10.23 to the S-4).
10.28*
North American Supply Agreement by and among Nikola Iveco Europe B.V., Nikola Corporation, and solely with respect to Sections 2, 4.2, 4.8 and 6.2.2, Iveco S.p.A., dated April 9, 2020 (incorporated by reference to Exhibit 10.24 to the S-4).
10.29*
Technical Assistance Service Agreement by and between Nikola Corporation and Iveco S.p.A., dated April 9, 2020 (incorporated by reference to Exhibit 10.25 to the S-4).
10.30*
S-Way Platform and Product Sharing Contract by and between Nikola Corporation and Iveco S.p.A., dated April 9, 2020 (incorporated by reference to Exhibit 10.26 to Form S-4).
10.31*
Nikola Technology License Agreement by and among Nikola Iveco Europe B.V., Nikola Corporation, and solely with respect to Sections 4.3, 4.4, 4.5 and 4.6, Iveco S.p.A., dated April 9, 2020 (incorporated by reference to Exhibit 10.27 to the S-4).
10.32
#
Iveco Technology License Agreement by and among Nikola Iveco Europe B.V., Iveco S.p.A., and solely with respect to Sections 4.3, 4.4, 4.5, and 4.6, Nikola Corporation, dated April 9, 2020 (incorporated by reference to Exhibit 10.28 to the S-4).
10.33#
Agreement by and between the Registrant and Trevor R. Milton, dated September 20, 2020 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on September 21, 2020).
10.34#
Executive Employment Agreement by and between the Registrant and Pablo M. Koziner, dated December 22, 2020 (incorporated by reference to Exhibit 10.34 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2020).
Exhibit No.
Description
21.1
List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2020).
23.1
24.1
Power of Attorney (incorporated by reference to Exhibit 24.1 to the Registrants Annual Report on Form 10-K for the fiscal year ended December 31, 2020
).
31.1
31.2
32.1^
32.2^
101.INS
XBRL Instance Document
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
__________________________
+The schedules and exhibits to this agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K.
#Indicates management contract or compensatory plan or arrangement.
*Portions of this exhibit have been omitted in accordance with Item 601 of Regulation S-K.
^In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 34-47986, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Annual Report on Form 10-K/A and will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (the Exchange Act) or deemed to be incorporated by reference into any filing under the Exchange Act or the Securities Act of 1933 except to the extent that the registrant specifically incorporates it by reference.
### Item 16. Form 10-K Summary
None. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Grams per ton (2272.13 oz/ton).
14.
### Arsenic
The concentration of Arsenic is 20.19 PPM. This could be explained as: Arsenic concentration in this mine ranges from 0 grams per ton to 93.67 grams per ton (3.3 oz/ton).
15.
### Rubidium
The average concentration of Rubidium is 74.47 PPM. This could be explained as: Rubidium concentration in this mine ranges from 0 grams per ton to 125.56 grams per ton (4.43 oz/ton).
16.
### Strontium
The average concentration of Strontium is 74.47 PPM. This could be explained as: Strontium concentration in this mine ranges from 0 grams per ton to 1,385.08 grams per ton (48.86 oz/ton).
17.
### Zirconium
The average concentration of Zirconium is 156.27 PPM. This could be explained as: Zirconium concentration in this mine ranges from 0 grams per ton to 493.72 grams per ton (17.42 oz/ton).
18.
### Niobium
The average concentration of Niobium is 16.81 PPM. This could be explained as: Niobium concentration in this mine ranges from 0 grams per ton to 35.21 grams per ton (1.24 oz/ton).
19.
### Bismuth
The average concentration of Bismuth is 10.09 PPM. This could be explained as: Bismuth concentration in this mine ranges from 0 grams per ton to 39.13 grams per ton (1.38 oz/ton).
Local Infrastructure
### Property Infrastructure
The Fat Mule Flats mine shows 88 feet deep with 700 feet of tunnels, drifts and crosscuts on 2 separate levels. The wood collar looks like it is still in pretty good shape, but the head frame is long gone.
Mine 3 Cobin
The Indicated/Unproven/Estimated Gross gold resources are 1,006,240.29 oz based on projected 200 feet excavation.
Cobin Mine is a lode mine. As defined by the U.S.
The general course of this claim is North and South, and it is situated in the Southwest Quarter of Section 30, Township 2N, Range 41E, Mount Diablo Meridian, Esmeralda County, Nevada. This claim is 1,500 feet in width and 600 feet in height. All markers are 4" x 4" wooden posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim.
The location monument on which this notice is posted is situated within Section 30, Township 2N, Range 41E, Mount Diablo Meridian, Esmeralda County Nevada and this claim encompasses portions of the following quarter section (s), Township (s) and Range (s); L3/NW 1/4 of SW 1/4 and L4/SW 1/4 of SW 1/4 Section 30, T2N, R41E, Mount Diablo Meridian, Esmeralda County Nevada. The locality of this claim with reference to some natural object or permanent monument and additional information (if any) concerning its locality are as follows: SW corner of this claim is 595 Feet north and 340 Feet east of the SW corner of Section 30, T2N, R41E. Beginning at the SW corner of this claim thence due north 1,500 feet to the NW corner of this claim, thence due east a distance of 600 feet to the NE corner of this claim thence due south 1,500 feet to the SE comer of this claim, thence due west 600 feet back to the place of beginning, the SW Corner.
WSA Gold & Minerals, Inc. NMC1187753 in the SW Quarter of Section 30, Township 2N, Range 41E, Mount Diablo Meridian, Esmeralda County, Nevada from Gateway Gold & Minerals, Inc.
### Cobin Mine
Regional Geology
### Property Geology
### Mineralization
to 17m.y. before present.
and 16.4 m.y. before present.
### Previous Exploratory Work
goods. When old friend George S. They grub staked miners with friend Nick Abelman, bought existing mines, and by the time the partners moved to Goldfield, Nevada and made their Goldfield Consolidated Mining Company a public corporation in 1906, Nixon and Wingfield were worth over $30 million.
### Exploration Plans
Sampling and Analysis
### XRF Survey
The analysis of the XRF measurements of Cobin Mine showed that the elements promising for economic benefiting are Gold, Titanium, Manganese, Iron, Arsenic, Rubidium, Strontium, Zirconium, Niobium, Hafnium and Bismuth.
20.
### Gold
The average concentration of Gold is 16.23 PPM. This could be explained as: Gold concentration in this mine ranges from 9.62 grams per ton (0.34 oz/ton) to 43.19 grams per ton (1.52 oz/ton).
21.
### Titanium
The average concentration of Titanium is 973.95 PPM. This could be explained as: Titanium concentration in this mine ranges from 0 grams per ton to 9,231.84 grams per ton (325.64 oz/ton).
22.
### Manganese
The average concentration of Manganese is 935.11 PPM. This could be explained as: Manganese concentration in this mine ranges from 0 grams per ton to 36,124.91 grams per ton (1,274.27 oz/ton).
23.
### Iron
The average concentration of Iron is 27,409.92 PPM. This could be explained as: Iron concentration in this mine ranges from 1,216.93 grams per ton (42.93 oz/ton) to 324,696.16 grams per ton (11,453.33 oz/ton).
24.
### Arsenic
The average concentration of Arsenic is 25.84 PPM. This could be explained as: Arsenic concentration in this mine ranges from 0 grams per ton to 407.24 grams per ton (14.36 oz/ton).
25.
### Rubidium
This could be explained as: Rubidium concentration in this mine ranges from 9.26 grams per ton (0.33 oz/ton) to 237.62 grams per ton (8.38 oz/ton).
26.
### Strontium
The average concentration of Strontium is 317.53 PPM. This could be explained as: Strontium concentration in this mine ranges from 10.12 grams per ton (0.36 oz/ton) to 992.3 grams per ton (35 oz/ton).
27.
### Zirconium
The average concentration of Zirconium is 111.36 PPM. This could be explained as: Zirconium concentration in this mine ranges from 0 grams per ton to 268.85 grams per ton (9.48 oz/ton).
28.
### Niobium
The average concentration of Niobium is 9.7 PPM. This could be explained as: Niobium concentration in this mine ranges from 0 grams per ton to 76.22 grams per ton (2.69 oz/ton).
29.
### Hafnium
The average concentration of Hafnium is 121.66 PPM. This could be explained as: Hafnium concentration in this mine ranges from 0 grams per ton to 6,585.37 grams per ton (232.29 oz/ton).
30.
### Bismuth
The average concentration of Bismuth is 6.1 PPM. This could be explained as: Bismuth concentration in this mine ranges from 0 grams per ton to 99.89 grams per ton (3.52 oz/ton).
Local Infrastructure
### Property Infrastructure
Mine 4 Jasper
The Indicated/Unproven/Estimated Gross gold resources are 1,141,774.55 oz based on projected 200 feet excavation.
Jasper Mine is a lode mine as well as an open-pit mine. As defined by the U.S.
The general course of this claim is North and South, and it is situated in the Southeast Quarter of Section 1, Township 1N, Range 40E, Mount Diablo Meridian, Esmeralda County, Nevada. All markers are 4" x 4" wooden posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim. The location monument on which this notice is posted is situated within Section 1, Township 1N, Range 40E,
Mount Diablo Meridian, Esmeralda County Nevada and this claim encompasses portions of the following quarter section (s), Township (s) and Range (s); NE 1/4 of SE 1/4, NW 1/4 of SE 1/4, SE 1/4 of SE 1/4 and SW 1/4 of SE 1/4 of Section 1, T1N, R40E, Mount Diablo Meridian, Esmeralda County Nevada. The locality of this claim with reference to some natural object or permanent monument and additional information (if any) concerning its locality are as follows: SE corner of this claim is 990 Feet West and 825 Feet North of the SE corner of Section 1, T1N, R40E. Beginning at the SE corner of this claim thence 1,500 feet due north to the NE corner of this claim, thence 600 feet due west to the NW corner of this claim, thence 1,320 feet due south to the SW corner of this claim, thence due east 600 feet back to the place of beginning, the SE corner.
WSA Gold & Minerals, Inc. NMC1191786 in SE Quarter of Section 1, Township 1N, Range 40E, Mount Diablo Meridian, Esmeralda County, Nevada from Gateway Gold & Minerals, Inc.
### Jasper Mine
Location and Access
### Regional Geology
### Property Geology
### Mineralization
to 17m.y. before present.
and 16.4 m.y. before present.
Exploration Plans
### Sampling and Analysis
### XRF Survey
The analysis of the XRF measurements of Jasper Mine showed that the elements promising for economic benefiting are Gold, Titanium, Manganese, Iron, Arsenic, Rubidium, Strontium, Zirconium, Niobium and Bismuth.
31.
### Gold
The average concentration of Gold is 20.83 PPM. This could be explained as: Gold concentration in this mine ranges from 12.57 grams per ton (0.44 oz/ton) to 90.79 grams per ton (3.2 oz/ton).
32.
### Titanium
The average concentration of Titanium is 2,811.30 PPM. This could be explained as: Titanium concentration in this mine ranges from 0 grams per ton to 10,438.72 grams per ton (368.22 oz/ton).
33.
### Manganese
The average concentration of Manganese is 1,203.15 PPM. This could be explained as: Manganese concentration in this mine ranges from 0 grams per ton to 16,790.27 grams per ton (592.26 oz/ton).
34.
### Iron
The average concentration of Iron is 37,510.99 PPM. This could be explained as: Iron concentration in this mine ranges from 1,325.3 grams per ton (46.75 oz/ton) to 131,471.27 grams per ton (4,637.52 oz/ton).
35.
### Arsenic
The average concentration of Arsenic is 195.68 PPM. This could be explained as: Arsenic concentration in this mine ranges from 0 grams per ton to 5475.13 grams per ton (193.13 oz/ton).
36.
### Rubidium
The average concentration of Rubidium is 97.51 PPM. This could be explained as: Rubidium concentration in this mine ranges from 0 grams per ton to 233.47 grams per ton (8.24 oz/ton).
37.
### Strontium
The average concentration of Strontium is 411.72 PPM. This could be explained as: Strontium concentration in this mine ranges from 21.96 grams per ton (0.77 oz/ton) to 853.27 grams per ton (30.1 oz/ton).
38.
### Zirconium
The average concentration of Zirconium is 161.78 PPM. This could be explained as: Zirconium concentration in this mine ranges from 0 grams per ton to 372.46 grams per ton (13.14 oz/ton).
39.
### Niobium
This could be explained as: Niobium concentration in this mine ranges from 0 grams per ton to 34.38 grams per ton (1.21 oz/ton).
40.
### Bismuth
The average concentration of Bismuth is 38.22 PPM. This could be explained as: Bismuth concentration in this mine ranges from 0 grams per ton to 1,026.39 grams per ton (36.2 oz/ton)
Local Infrastructure
### Property Infrastructure
There are remains of what is believed to be a good-sized cabin outside.
Mine 5 Barracks Nine
The Indicated/Unproven/Estimated Gross gold resources are 1,001,531.19 oz based on projected 200 feet excavation.
The mine is lode and open-pit mine. As defined by the U.S.
The general course of this claim is North and South, and it is situated in the NE Quarter of Section 9, Township 1N, Range 41E, Mount Diablo Meridian, Esmeralda County, Nevada. This claim is 600 feet wide and 1,500 feet tall. All markers are 4" x 4" wooden posts that are buried 1.5' in the ground and protrude 4.5' above the ground embossed with the name of the claim and its location in relation to the claim.
The location monument on which this notice is posted is situated within Section 9, Township 1N, Range 41E, Mount Diablo Meridian, Esmeralda County Nevada and this claim encompasses portions of the following quarter section (s), Township (s) and Range (s); NE 1/4 of NE 1/4 and SE 1/4 of NE Section 9, T1N, R41E, Mount Diablo Meridian, Esmeralda County Nevada. The locality of this claim with reference to some natural object or permanent monument and additional information (if any) concerning its locality are as follows: NE corner of this claim is the NE corner of Section 9, T1N, R41E. Beginning at the NE corner of this claim thence 600 feet due west to the NW corner of this claim, thence 1,500 feet due south<|endoftext|>Combination, there is no basis to evaluate the possible merits or risks of any particular target businesss operations, results of operations, cash flows, liquidity, financial condition or prospects.
Accordingly, any stockholders who choose to remain stockholders following our initial business combination could suffer a material reduction in the value of their securities. unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business combination contained an actionable material misstatement or material omission.
In addition, our sponsor, upon consummation of an initial business combination, will be entitled to nominate three individuals for election to our board of directors.
There could be overlap between companies that would be suitable for a business combination with us and companies that present an attractive investment opportunity for our directors or officers, and entities with which they currently are or may in the future be affiliated.
Our public stockholders will be entitled to receive funds from the trust account only upon the earliest to occur of: (i) our completion of an initial business combination, and then only in connection with those shares of Class A common stock that such stockholder properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any Public Shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our Public Shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders rights or pre-initial business combination activity and (iii) the redemption of our Public Shares if we do not complete an initial business combination within 24 months from the closing of the Initial Public Offering or during any stockholder approved extension period, subject to applicable law and as further described herein. Holders of warrants will not have any right to the funds held in the trust account with respect to the warrants.
For instance, our stock price would generally be required to be at least $4.00 per share, our stockholders equity would generally be required to be at least $5,000,000 and we would be required to have a minimum of 300 round-lot holders of our unrestricted securities (with at least 50% of such round-lot holders holding unrestricted securities with a market value of at least $2,500).
As a result, if the surviving company redeems your warrants for securities pursuant to the warrant agreement, you may receive a security in a company of which you did not have information at the time of your investment in the warrants.
If this exemption, or another exemption is not available, holders will not be able to exercise their warrants on a cashless basis. In the event of an exercise on a cashless basis under these circumstances, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of Class A common stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the excess of the fair market value of our Class A common stock (defined above) over the exercise price of the warrants by (y) the fair market value and (B) 0.361 shares of Class A common stock per whole warrant, and the number of shares of our Class A common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised the warrant for cash.
Second, if we call the Public Warrants for redemption when the price per share of our Class A common stock equals or exceeds $10.00, holders who wish to exercise their warrants may do so on a cashless basis. In the event of an exercise on a cashless basis under those circumstances, a holder would receive that number of shares determined by reference to an agreed table contained in the warrant agreement based on the redemption date and the fair market value of Class A common stock.
In either case, a cashless exercise will have the effect of reducing the potential upside of the holders investment in our company because the warrant holder will hold a smaller number of shares of our Class A common stock upon a cashless exercise of the warrants they hold.
If any action, the subject matter of which is within the scope of the forum provisions of our warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a foreign action) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an enforcement action), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holders counsel in the foreign action as agent for such warrant holder.
If
(i) we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at a price (the Newly Issued Price) of less than $9.20 per share;
(ii) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions); and
(iii) the Market Value is below $9.20 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the higher of (i) the volume weighted average trading price of our common stock during the 20 trading day period starting on the trading day prior to the day on which we consummate our initial business combination (such price, the Market Value) and (ii) the Newly Issued Price, and the $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration at a price of $0.01 per warrant upon a minimum of 30 days prior written notice of redemption, provided that the closing price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities) for any 10 trading days within a 20 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met.
In addition, we have the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant upon a minimum of 30 days prior written notice of redemption, provided that the closing price of our Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities) for any 10 trading days within a 20 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met, including that holders will only be able to exercise their warrants on a cashless basis prior to redemption for a number of shares of Class A common stock determined based on the redemption date and the fair market value of shares of our Class A common stock.
Our warrants and Class B common stock may have an adverse effect on the market price of our Class A common stock and make it more difficult to effectuate our initial business combination.
We issued Public Warrants to purchase 16,560,000 shares of Class A common stock as part of the units offered in the Initial Public Offering and Private Placement Warrants to purchase an aggregate of 8,624,000 shares of Class A common stock at $11.50 per share. Our initial stockholders currently own an aggregate of 8,280,000 shares of Class B common stock. The shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment. In addition, if our Sponsor makes any working capital loans, up to $2,000,000 of such loans may be converted into warrants at a price of $1.00 per warrant at the option of the lender.
Therefore, our warrants and Class B common stock may make it more difficult to effectuate an initial business combination or increase the cost of acquiring the target business.
The Private Placement Warrants are identical to the Public Warrants except that, so long as they are held by our Sponsor, Anchor Investor or their permitted transferees, (i) they will not be redeemable by us (except in certain limited circumstances), (ii) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after the completion of our initial business combination, (iii) they may be exercised by the holders on a cashless basis and (iv) they are entitled to registration rights.
We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of our initial business combination since the warrants will be exercisable in the aggregate for one-half of the number of shares compared to units that each contain a whole warrant to purchase one share, thus making us, we believe, a more attractive merger partner for target businesses.
, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis.
However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Class A common stock issuable upon exercise of the warrants, and thereafter will use our commercially reasonable efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement. If the shares of Class A common stock issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis, in which case the number of shares of our Class A common stock that you will receive upon cashless exercise will be based on a formula subject to a | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Resulted in an increase of $11.3 million in the fair value of the Series B Tranche Rights during the year ended December 31, 2020 which was recognized as a loss in the consolidated statement of operations and comprehensive loss. The balance of the Series B Tranche Rights of $13.1 million was reclassified at settlement to increase the Series B carrying value on the consolidated balance sheet.
A rollforward of the Series B Tranche Rights liability for the years ended December 31, 2020 and 2019 is as follows (in thousands):
7.
Prior to the closing of the IPO, the Company had 180,725,292 shares of preferred stock, par value $0.0001 per share, in authorized capital, which consisted of 76,499,992 authorized, issued and outstanding shares of Series A-1 and 104,225,300 authorized, issued and outstanding shares of Series B.
Upon the IPO closing, all of the outstanding shares of Series A-1 and Series B automatically converted into an aggregate of 14,951,554 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO and as of December 31, 2020, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company changed its authorized capital to include 10,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share.
Issuance of Series B
In August 2019, the Company authorized and agreed to sell 92,477,021 shares of Series B in two tranches. The first tranche closed on dates between August 5, 2019 and August 27, 2019. On those dates, the Company sold a total of 55,486,215 shares of Series B at $0.8597 per share, for gross proceeds to the Company of $47.7 million.
In November 2019, the Company authorized and agreed to sell 11,748,279 additional shares of its Series B to new investors on the same terms and conditions as the previous sale of Series B. The first tranche of this sale occurred on November 27, 2019, in which the Company sold 7,048,968 shares of Series B for gross proceeds of $6.1 million. The Company paid $0.4 million of issuance costs related to these sales.
In September 2020, the Company achieved the second tranche milestones which related to the clinical development of its lead product candidate, ONCR-177. Upon achievement of the milestones, the Series B investors became obligated to purchase additional shares of Series B in a second tranche closing and the Company issued an aggregate of 41,690,117 shares of Series B at $0.8597 per share, for gross proceeds to the Company of $35.8 million. Upon closing of the second tranche, the Company considered whether there was any potential beneficial conversion feature, concluding that there was not, as the effective conversion price of the Series B was in excess of the fair value of the Companys common stock.
The following is a description of the rights and privileges of the Series B and A-1 prior to their conversion to common stock upon the IPO in October 2020:
### Liquidation
In the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the affairs of the Company or Deemed Liquidation Event (as defined below), each holder of a share of SeriesB was entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of Series A-1 and common stock, an amount equal to $0.8597per share, plus any accrued but unpaid dividends. After payment of the full liquidation preference to the holders of SeriesB, each holder of a share of Series A-1 was entitled to receive, in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common stock, an amount equal to an issuance price of $0.80 per share, plus any accrued but unpaid dividends. If upon such liquidation event, the assets of the Company available for distribution were insufficient to permit payment in full to the holders of the SeriesB, the proceeds were to be ratably distributed among the holders of SeriesB. If the assets of the Company available for distribution were sufficient to pay the Series B holders in full, but insufficient to permit payment in full to the holders of Series A-1, the remaining proceeds were to be ratably distributed among the holders of SeriesA-1. Any remaining proceeds after full payment to the holders of SeriesB and SeriesA-1 were available to the holders of SeriesB, SeriesA-1 and common stock to share proportionately on an as-converted basis.
Unless otherwise elected by 68% of the Series B holders, including certain identified Series B holders, a merger or consolidation involving the Company in which the stockholders of the Company did not own a majority of the outstanding shares of the surviving company was considered to be a Deemed Liquidation Event. A sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company was also considered a Deemed Liquidation Event.
### Redemption
Upon the demand of the holders of at least 68% of the then outstanding shares of Series B, including certain identified SeriesB holders, but not prior to August 5, 2026, the Company was obligated to redeem from each holder of SeriesB and Series A-1 on an equal basis, in three annual installments, the then outstanding shares of SeriesB and A-1 at an amount equal to the greater of (a)the SeriesB andA-1 at their original issue prices of $0.8597 and $0.80 per share, respectively, plus any declared but unpaid dividends or (b)the then fair market value of the SeriesB and SeriesA-1 on the date of receipt of the redemption request. This redemption feature resulted in the SeriesB and Series A-1 being redeemable at the option of the holder (based on the passage of time). As a result, the SeriesB and Series A-1 were recorded outside of permanent equity and subject to subsequent measurement under the guidance provided under ASC 480-10-S99. While the SeriesB and Series A-1 were not then currently redeemable, the SeriesB and SeriesA-1 were probable of becoming redeemable, and the Company elected to recognize changes in the redemption amount over the period from the date of issuance to the earliest possible redemption date of the SeriesB and Series A-1.
Conversion
Each share of SeriesB and Series A-1 was convertible at the option of the holder at any time and without the payment of any additional consideration into that number of fully paid and non-assessable shares of common stock as was determined by dividing the original issue price of the SeriesB or Series A-1 by the conversion price in effect at the time of conversion. The initial conversion prices of the SeriesB and Series A-1 were equal to the original issuance prices of the SeriesB and Series A-1, respectively.
All outstanding shares of SeriesB and Series A-1 were automatically convertible into common stock, based upon either: (i)the vote or written consent of holders of at least 68% of the Series B outstanding at that time, including certain identified SeriesB holders, or (ii)the closing of a firm commitment, underwritten initial public offering, in which the aggregate proceeds to the Company were at least $50.0million, and having a valuation of the Company, immediately prior to the initial public offering, of at least $200.0million.
### Pay to Play Requirement
All Series B holders were subject to a pay-to-play clause according to which non-participating investors in the second tranche described above would have been required to convert all their Series B to common stock at a conversion ratio of one share of common stock for every 10 shares of SeriesB.
Voting Rights
The holders of Series B were entitled to vote, together with the holders of Series A-1 and common stock, on all matters submitted to stockholders for a vote. Each share of SeriesB and Series A-1 were entitled to the number of votes equal to the number of shares of common stock into which each share of SeriesB and Series A-1 were convertible at the time of such vote. At all times during which at least 2,250,000 shares of SeriesA-1 remained outstanding, the holders of the outstanding shares of SeriesA-1 had the exclusive right, separately from the SeriesB and common stock, to elect three directors of the Company. The holders of the Series B had the right, exclusively and as a separate class, to elect one director of the Company.
### Dividends
Series B holders were entitled to receive dividends at an annual rate of $0.06877 per share, which accrued from day to day, whether or not such dividends were declared by the Board of Directors, and were cumulative. The dividends were payable only when and if declared by the Board of Directors. The Company could not declare, pay or set aside any dividends on any other shares of capital stock unless the SeriesB holders first received, or simultaneously received, a dividend in an amount at least equal to the amount of the aggregate accumulated dividends that were accrued but not previously paid, or an amount equal to a formula, which was tied to dividends paid on other classes of stock.
Holders of the Series A-1 were entitled to dividends at an annual rate of $0.064 per share. Prior to the issuance of the Series B, Series A-1 dividends were payable only when, as, and if declared by the Board of Directors, and the Company was under no obligation to pay any dividends. Upon the issuance of Series B, the Series A-1 dividend terms were modified such that the Series A-1 dividends became cumulative and began accruing from the dates of original issuance of the Series A-1. Dividends were first payable to the SeriesB holders and, thereafter, to the holders of Series A-1 in the same manner as in the case of Series B (i.e., accrued dividends not yet paid or a payment formula tied to dividends paid on other classes of stock). That is, upon declaring a dividend to common stock, the holders of the Series B and Series A-1 had a right to receive (i)any unpaid cumulative dividends or (ii)dividends that function ed on an as-if converted basis, with the Series B holders having had a dividend preference over the holders of Series A-1 in the order of payout.
No dividends were paid to the holders of Series B or Series A-1 prior to the conversion of the redeemable convertible preferred stock into common stock in connection with the IPO.
8. Common Stock
Each share of common stock is entitled to one vote. The holders of shares of common stock are entitled to receive dividends, if and when declared by the Board of Directors. Prior to the IPO, the voting, dividend, and liquidation rights of the holders of common stock were subject to, and qualified by, the rights, powers, and preferences of the holders of SeriesB and SeriesA-1 as described above.
Upon the closing of the IPO, the Company changed its authorized capital stock to include 100,000,000 shares designated as common stock with a par value of $0.0001 per share.
### Restricted Stock
The Company issued restricted stock to its founders and certain officers of the Company. In general, the shares of restricted stock vest over a four-year period, with 25% of the shares vesting after one year, followed by monthly vesting over the remaining three years. A summary of non-vested restricted stock during the year ended December31, 2020 is as follows:
Common Stock Warrants
The Company has issued common stock warrants that allow for the holders to purchase an aggregate of 71,544 shares of common stock at $1.21 per share. As of December31, 2020, all of the common stock warrants were fully exercisable. The common stock warrants expire in 2031.
### Reserved Shares
The Company has reserved shares of common stock for the conversion or exercise of the following securities:
9. Equity Incentive Plan
The Company adopted the 2016 Equity Incentive Plan (the 2016 Plan) on March31, 2016. The Plan, as amended, provided for the granting of stock options, restricted stock<|endoftext|>A total of 4,998,622 options previously granted under the Telaria Plans, with a weighted-average exercise price per share of $3.80, remaining terms ranging to February 2030 and remaining vesting periods ranging to January 2024.
We also assumed 2,416,824 shares of unvested restricted stock with a remaining vesting period to March 2024. In addition, 7,291,151 shares of common stock remaining available under the Telaria, Inc. 2013 Equity Incentive Plan were added to the 2014 Equity Incentive Plan, which shares will be used solely with respect to new hire awards or awards to former employees of Telaria prior to the merger. As of December31, 2020, 7,272,204 shares were available for issuance under the Telaria, Inc. 2013 Equity Incentive Plan.
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information regarding beneficial ownership of our equity interests as of May4, 2021 by: each stockholder or group of stockholders known by us to be the beneficial owner of more than 5% of our outstanding equity interests;
Beneficial ownership is determined in accordance with the rules of the SEC, and thus represents voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Percentage ownership of our common stock is based on 128,859,048 shares of our common stock outstanding as of May4, 2021.
*
Indicates ownership of less than one percent.
(1)
Except as noted, the address of the named beneficial owner is c/o Magnite, Inc., 6080 Center Drive, 4th Floor, Los Angeles, California 90045.
(2)
The number of shares beneficially owned by each stockholder is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes shares (i)as to which the individual or entity has sole or shared voting power or investment power, and (ii)the individual owns or has the right to acquire beneficial ownership of within 60 days of May4, 2021. Shares not owned but which the individual has the right to acquire beneficial ownership within 60 days of May4, 2021 are included in the numerator and denominator for that specific individual in calculating that individuals beneficial ownership percentage, but not deemed outstanding in the aggregate for computing the ownership percentage for others.
(3)
At the closing of the acquisition SpotX, Inc. on April30, 2021, we issued 12,374,315 shares to RTL US Holdings Inc.
(4)
Beneficial ownership is based solely on the Schedule 13G/A filed with SEC on January29, 2021 by BlackRock, Inc. (BlackRock) with respect to our common stock. The Schedule 13G/A states that BlackRock has sole voting power as to 7,873,494 shares and sole dispositive power as to 8,030,030 shares. The address for BlackRock is 55 East 52nd Street, New York, NY 10055.
(5)
Includes 227,784 restricted stock units that will vest within 60 days of May4, 2021 and 1,196,025 shares issuable pursuant to outstanding stock options exercisable by Mr.Barrett within 60 days of May4, 2021, of which 1,161,376 were fully vested as of May4, 2021.
(7)
Includes 85,332 restricted stock units that will vest within 60 days of May4, 2021 and 130,550 shares issuable pursuant to outstanding stock options exercisable by Mr.Kershaw within 60 days of May4, 2021, of which 114,656 were fully vested as of May4, 2021.
(9)
Includes 60,729 restricted stock units that will vest within 60 days of May4, 2021 and 130,632 shares issuable pursuant to outstanding stock options exercisable by Mr.Soroca within 60 days of May4, 2021, of which 119,755 were fully vested as of May4, 2021.
(10)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Mr.Frankenberg within 60 days of May4, 2021, all of which were fully vested as of such date.
(11)
Includes 18,882 restricted stock units that will vest within 60 days of May4, 2021.
(12)
Includes 36,066 shares issuable pursuant to outstanding stock options exercisable by Mr.Rossman within 60 days of May4, 2021, all of which were fully vested as of such date.
(13)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Mr.Spillane within 60 days of May4, 2021, all of which were fully vested as of such date.
(14)
Includes 86,500 shares issuable pursuant to outstanding stock options exercisable by Ms.Troe within 60 days of May4, 2021, all of which were fully vested as of such date.
(15)
Includes 560,565 restricted stock units that will vest within 60 days of May4, 2021 and 2,246,360 shares issuable pursuant to outstanding stock options exercisable within 60 days of May4, 2021, of which 2,148,972 were fully vested as of such date.
Item13.
There are no transactions since January 1, 2020 to which the company has been a participant, in which the amount involved in the transaction exceeded or will exceed $120,000, and in which any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or their family members, had or will have a direct or indirect material interest. Compensation arrangements with our directors and officers are described under Director Compensation and Executive Compensation.
We have entered into indemnification agreements with each of our current directors, executive officers and certain other officers. The indemnification agreements and our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.
We have adopted a formal written policy providing that related person transactions may be consummated or continued only if approved or ratified by the audit committee. The policy defines related person transactions as transactions in which we are or will be a participant, the aggregate amount involved since the beginning of the companys last fiscal year exceeds or may be expected to exceed $100,000, and a related person has or will have a direct or indirect interest. For purposes of this policy, a related person is a person who is or was since the beginning of our last fiscal year a director, nominee for director, or executive officer; a greater than 5% beneficial owner of our common stock; or an immediate family member of any such person. The policy provides that our legal department will review each proposed related person transaction and prepare a description for the audit committee, which will review the proposed transaction and consider such factors, as it deems appropriate, including at least the following factors: the terms of the transaction as compared to terms available for a similar transaction with a non-related party; the extent of the related persons interest in the transaction; the disclosure requirements associated with the transaction; the effect of the transaction upon the independence of any director involved; the effect of the transaction upon the ability of the related person to fulfill his or her duties to the company; and the appearance of the transaction.
### DIRECTOR INDEPENDENCE
Our common stock is listed on the Nasdaq Global Select Market of The Nasdaq Stock Market LLC (Nasdaq), which requires that a majority of a listed companys board of directors be independent. In addition, the rules of Nasdaq require that, subject to specified exceptions, each member of a listed companys audit, compensation and nominating/corporate governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an independent director if, in the opinion of the board of directors, that director does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Our board of directors has undertaken a review of the independence of each director and considered whether each director has any material relationships with us. As a result of this review, our board of directors has determined that Mr. Frankenberg, Ms. Harden, Mr. Knopper, Ms. Lam, Mr. Rossman, Mr. Spillane and Ms. Troe are independent directors as defined under the listing requirements and rules of Nasdaq for purposes of service on the board of directors. Mr. Barrett is not considered independent because he currently serves as our Chief Executive Officer. Mr. Caine is not considered independent due to his previous service as Executive Chairman and Interim Chief Executive Officer of Telaria.
In addition to qualifying as independent under the listing requirements and rules of Nasdaq, members of the boards audit committee and compensation committee members must also satisfy additional, heightened independence standards under applicable SEC rules and regulations and Nasdaq listing requirements. Our board of directors has determined that each member of our audit committee and compensation committee satisfies these heightened independence standards.
Item14.
The aggregate fees billed for audit and other services provided in the last two fiscal years by Deloitte are as follows:
(1)
Audit Fees cover professional services rendered for the audit of our annual financial statements and review of financial statements included in our quarterly reports on Form 10-Q, and services normally provided by the accountant in connection with statutory and regulatory filings or engagements.
(2)
Audit-Related Fees cover assurance and related services that are reasonably related to the performance of audit or review of our financial statements and not reported as Audit Fees.
(3)
Tax Fees cover tax compliance, advice, and planning services and consist primarily of review of consolidated federal income tax returns and foreign tax issues.
(4)
All Other Fees 2019 related to license fees for accounting research software. All Other Fees in 2020 are related to license fees for accounting research software and Merger and Acquisition support.
The audit committee has adopted policies and procedures relating to the pre-approval of all audit and non-audit services that are to be provided by our independent registered public accounting firm. The audit committee will not approve non-audit services that the independent registered public accounting firm is not permitted to perform under the rules of the SEC and Public Company Accounting Oversight Board.
On an annual basis, the independent registered public accounting firm will propose to the audit committee an audit plan and engagement letter describing the services the auditor expects to provide and related fees. The final engagement letter and fees agreed by the company acting pursuant to the direction of the audit committee, and all of the services covered by the final engagement letter, will be considered pre-approved by the audit committee.
The audit committee or the Chair of the audit committee acting by delegated authority will approve, if necessary, any changes in terms, conditions and fees under the engagement letter resulting from changes in the audit scope, company structure or other matters.
The audit committee has delegated to the Chair of the audit committee the authority to approve on a case-by-case basis any audit or non-audit services, in amounts up to $200,000 (1) per engagement, (2) per additional category of services, or (3) in excess of pre-approved amounts for the specified service. The Chair then reports any services so approved to the audit committee at its next regularly scheduled meeting.
All services rendered for fiscal 2020 and fiscal 2019 were pre-approved by the audit committee in accordance with the audit committees pre-approval policies and procedures described above.
### PART IV
Item15. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Held directly by Spectrum Cayman.
(8)
According to a Schedule 13D Amendment filed with the SEC on November 14, 2018, the record owner of these shares is Sparkle Byte Limited. By virtue of holding 100% of the equity interest of Sparkle Byte Limited, Snow Moon Limited may be deemed to have sole voting and dispositive power with respect to these shares. By virtue of holding 100% of the equity interest of Snow Moon Limited, Tianjin Jingran Management Center (Limited Partnership) may be deemed to have sole voting and dispositive power with respect to these shares. By virtue of being the general partner of Tianjin Jingran Management Center (Limited Partnership), He Xie Ai Qi Investment Management (Beijing) Co., Ltd. may be deemed to have sole voting and dispositive power with respect to these shares. By virtue of being the shareholders and/or directors of He Xie Ai Qi Investment Management (Beijing) Co., Ltd., Jianguang Li, Dongliang Lin, Fei Yang and Hugo Shong may be deemed to have shared voting and dispositive power with respect to these shares.
(9)
Beneficial ownership is based on the books and records of the Company. According to a Schedule 13G filed on October 11, 2018 and amendments to the Schedule 13G filed on February 19, 2020 by Wealth Strategy Holding Limited (WSH), WSH has sole voting power and dispositive power over the shares.
(10)
Beneficial ownership is based on the books and records of the Company and based in part on a Schedule 13D filed on January 12, 2018, a Schedule 13D/A filed on April 4, 2018 and a second amendment to Schedule 13D/A filed on March 24, 2020, Emerging Technology Partners, LLC (ETP), a Delaware limited liability company, is the general partner of ETP Global Fund L.P. (ETP Global), a Delaware limited partnership. ETP is the general partner of ETP BioHealth III Fund, L.P. (ETP BioHealth), a Delaware limited partnership. ETP Global has shared voting and dispositive power with respect to 8,766,914 shares of common stock. ETP BioHealth has shared voting and dispositive power with respect to 3,000,000 shares of common stock. ETP has shared voting and dispositive power with respect to 12,207,986 shares of common stock. Dr. He, as founder and managing member of each of ETP and ETP Global, may be deemed the indirect beneficial owner of the 12,207,986 shares of common stock owned by ETP, ETP Global and ETP BioHealth.
(11)
Based solely on a Schedule 13G filed jointly by Consonance Capital Management LP, Consonance Capital Opportunity Fund Management LP, Mitchell Blutt and Consonance Capman GP LLC on February 17, 2021.Consonance Capital Management LP shares voting and dispositive power with respect to 5,401,296 shares.
Consonance Capital Opportunity Fund Management LP shares voting and dispositive power with respect to 2,175,135 shares.Mitchell Blutt shares voting and dispositive power with respect to 7,576,431 shares.Consonance Capman GP LLC shares voting and dispositive power with respect to 7,576,431 shares. The reported number of shares does not include any shares that may have been purchased in the Companys March 2021 public offering.
(12)
Based solely on a Schedule 13G filed on February 12, 2021 jointly by Federated Hermes, Inc. and Voting Shares Irrevocable Trust, each of which has sole voting and dispositive power with respect to 7,000,000 shares, and Thomas R. Donahue, Rhodora J. Donahue and J. Christopher Donahue, each of whom has shared voting and dispositive power with respect to 7,000,000 shares.
*
Represents less than 1% of the common stock outstanding.
ITEM13.
Any member of the Board of Directors who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.
Spectrum/Acrotech.
The Company has certain product rights and perpetual exclusive licenses from Spectrum Pharmaceuticals, Inc. (Spectrum) to develop and commercialize EVOMELA
(MelphalanHydrochlorideFor Injection) (EVOMELA), ZEVALIN
(Ibritumomab Tiuxetan) (ZEVALIN) and MARQIBO
(Vincristine Sulfate Liposome Injection) (MARQIBO) in the greater China region. Spectrum is a greater than 6.8% shareholder of the Company as of December 31, 2020.
Under the terms of the original licenses, the Company had supply agreements with Spectrum for the purchase of EVOMELA, ZEVALIN, and MARQIBO in China for quality testing purposes to support the Companys application for import drug registration and for commercialization purposes. The Company also accrued $2.6 million for material costs related to EVOMELA during the year ended December 31, 2019, which are included in accrued expenses. As of December 31, 2020, all amounts due to Spectrum have been settled.
### Juventas.
The transactions with Juventas are considered to be related party transactions because the Companys CEO and Chairman is the chairman and one of the founding shareholders of Juventas. As previously reported, in June 2019, the Company entered into a license agreement for exclusive worldwide license and commercialization rights to an autologous anti-CD 19 T-cell therapy product (CNCT19) from Juventas Cell Therapy Ltd. (Juventas). In connection with this license agreement, CASI Pharmaceuticals (Wuxi) Co., Ltd. made an upfront equity investment of RMB 80 million (approximately USD $11.6 million) inJuventasthrough a wholly owned Chinese subsidiary in lieu of the upfront payment for the license.
On September 22, 2020,Juventasand its shareholders (including CASI Wuxi Bio) agreed to certain terms and conditions required by a new third-party investor in connection withJuventas Series B financing. In order to facilitate the Series B financing, the Company agreed to amend and supplement its original licensing agreement to provideJuventasand the Company with co-marketing and profit-sharing rights for CNCT19. Under the terms of the amended licensing agreement, the Company andJuventaswill share a percentage of total net profits, with CASI receiving a tiered percentage increasing up to 50% of the net profit from commercial sales of CNCT19 depending on annual net sales. The amended agreement also specifies a minimum annual target net profit to be distributed toJuventasas a percentage of net profit from commercial sales. In addition, the Company will continue to be obligated to payJuventasa single digit royalty fee equal to a percentage of net sales that varies by region. As part of the consideration for the amended agreement,
Juventaswaived a RMB 70 million milestone payment due from the Company. In addition, the Company invested in an additional Series A plus equity interest in Juventas, resulting in the Companys equity ownership increasing to 16.45% (post-Juventas Series B financing) on a fully diluted basis. The Company is also entitled to appoint a director to Juventas board of directors and has a put right upon the occurrence of specified events.
A committee of the Companys independent directors reviewed the terms of the original license agreement and the amended license agreement and recommended the transactions to the board of directors for approval.
The Companys Chairman and CEO did not participate in the committees deliberations or the board of directors approval of the transaction.
On July 1, 2019, the Company entered into a one-year equipment lease with Juventas in the amount of RMB 80,000 (approximately $15,000) a month. In August 2020, the lease was renewed for another year with the same monthly lease income. During the year ended December 31, 2020, the Company recognized lease income of $140,000 and expects to recognize $70,000 of additional lease income in 2021 related to this lease. The lease can be further extended after one year
### BioCheck.
In June 2019, the Company entered into a one-year agreement primarily for the sublease of certain office and lab space with BioCheck Inc. (BioCheck) in the amount of $60,000 ($5,000 a month), which is classified as an operating lease. Transactions with BioCheck are considered to be related party transactions as Dr. Wei-Wu He, the Companys CEO and Chairman is also the Chairman of BioCheck. Transactions with ETP, parent of BioCheck, and a more than 5% shareholder of the Company, are also considered to be related party transactions as Dr. Wei-Wu He, the Companys CEO and Chairman is also the general partner of ETP.
Since the Company required additional office space, in January 2020, the agreement was amended for annualized rents in the amount of $144,000 ($12,000 a month) with a stipulation that the new rent was retroactive to October 1, 2019. During the year ended December 31, 2020, the Company recognized rent expense of $144,000 and expects to recognize $63,000 of additional rent expense in 2021 related to this lease
### Director Independence
Our Board of Directors currently consists of six members and is divided into three classes.
The Board of Directors affirmatively determined that each of the directors and nominees, with the exception of Dr. Wei-Wu He, our Chairman and CEO, qualify as independent as defined by applicable NASDAQ and SEC rules. In making this determination, the Board of Directors concluded that none of these members has a relationship which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Dr. He does not serve on any independent committees.
### Audit Committee
See Item 10. Audit Committee above.
ITEM14.
The following table presents aggregate fees for professional services rendered by our independent registered public accounting firm, KPMG Huazhen LLP, for the years ended December31, 2020 and 2019.
### KPMG
Services rendered by KPMG (for fiscal years 2020 and 2019) in connection with fees presented above were as follows:
Audit Fees
The Company incurred from KPMG audit fees of $747,579 in fiscal year 2020, covering professional services rendered for (1)the audit of the Companys annual financial statements included in the Companys Annual Report on Form10-K for the fiscal year ended December31, 2020 and (2)the reviews of the financial statements included in the Companys quarterly reports on Form10-Q for the first three quarters of 2020.
The Company incurred from KPMG audit fees of $906,736 for fiscal year 2019, covering professional services rendered for (1) the audit of the Companys annual financial statements included in the Companys Annual Report on Form10-K for the fiscal year ended December31, 2019, (2) the reviews of the financial statements included in the Companys quarterly reports on Form 10-Q for the first three quarters of 2019 and (3) the audit of the effectiveness of internal control over financial reporting as of December 31, 2019.
### Audit-Related Fees
The Company did not incur audit-related fees in fiscal years 2020 or 2019.
Tax Fees
The Company did not incur any tax fees in fiscal year 2020 or 2019 from KPMG.
### All Other Fees
The Company did not incur any other fees in fiscal years 2020 or 2019.
The Audit Committee pre-approves all audit services provided by our independent registered public accounting firm in accordance with the Audit Committees pre-approval policy for audit services.
PARTIV
ITEM15.
Our consolidated financial statements, notes thereto, and schedules, required to be filed in our Annual Report on Form 10-K are included in the Original Filing.
### Exhibits
The exhibits required to be filed by Item 15 are set forth in, and filed with or incorporated by reference in the Original Filing. The exhibits listed in the Exhibit Index that appears at the end of this Amendment set forth additional exhibits required to be filed with this Amendment and are filed as part of this Annual Report on Form 10-K/A.<|endoftext|>Still open for examination for tax years beginning after 2015. We are not a member ofany consolidated federal tax group and assess our liability for uncertain tax positions in our partnership returns.
We had no uncertain tax positions in 20
,
9 and 2018
Noncurrent liabilities included no accrued interest related to uncertain tax positions at
December
31, 20
20 and 201
There were no amounts recorded related to interest and penalties in the years ended
December
31, 20
9 and 201
The federal income tax benefit on the interest accrued on uncertain tax positions, if any, is recorded as liability in lieu of deferred income taxes.
5.
SHORT-TERM
### BORROWINGS
At
December
31, 2020 and 2019, outstanding short-term borrowings under our CP Program and Credit Facility consisted of the following:
____________
(a)
The weighted average interest rate s for commercial paper w ere
0.17% and 1.84% at
### December
31, 2020 and
December
31, 2019, respectively.
(b)
At
### December
31, 2020, the applicable interest rate for any outstanding borrowings was LIBOR plus 1.25%.
(c)
Interest rates on outstanding letters of credit at
### December
31, 2020 and
December
31, 2019 were 1.45% and 1.2
%, respectively, based on our credit ratings.
### CP Program
In
March 201
8, we established the CP Program, under which we may issue CP Notes on a private placement basis up to a maximum aggregate face or principal amount outstanding at any time of $2.0 billion
The proceeds of CP Notes issued under the CP Program are used for working capital and general corporate purposes. The CP Program obtains liquidity support from our Credit Facility discussed below.We may utilize either CP Program or the Credit Facility at our option, to meet our funding needs.
### Credit Facility
In
November 201
7, we entered into a $2.0 billion unsecured Credit Facility to be used for working capital and general corporate purposes, issuances of letters of credit and support for any commercial paper issuances.In
### November 202
November 202
3.We may request increases in our borrowing capacity in increments of not less than $100 million
, not to exceed $400 million in the aggregate, provided certain conditions are met, including lender approvals.The Credit Facility also gives us the option of requesting up to two one-year extensions, with such extensions subject to certain conditions and lender approvals.
The Credit Facility contains terms pursuant to which the interest rates charged under the agreement may be adjusted depending on our credit ratings.Borrowings under the Credit Facility bear interest at per annum rates equal to, at our option, (i) adjusted
### LIBOR plus a spread ranging from
1.125% to 1.750% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt or (ii) an alternate base rate (the highest of (1) the prime rate of JPMorgan Chase, (2) the greater of the federal funds effective rate or the overnight banking rate, plus 0.50%, and (3) adjusted LIBOR plus 1.00%) plus a spread ranging from 0.125% to 0.750% depending on credit ratings assigned to our senior secured non-credit enhanced long-term debt.Amounts borrowed under the Credit Facility, once repaid, can be borrowed again from time to time.
An unused commitment fee is payable quarterly in arrears and upon termination or commitment reduction at a rate equal to 0.075% to 0.225% (such spread depending on certain credit ratings assigned to our senior secured debt) of the daily unused commitments under the Credit Facility.Letter of credit fees on the stated amount of letters of credit issued under the Credit Facility are payable to the lenders quarterly in arrears and upon termination at a rate per annum equal to the spread over adjusted LIBOR.Customary fronting and administrative fees are also payable to letter of credit fronting banks.
At
### December
31, 2020, letters of credit bore interest at 1.45%, and a commitment fee (at a rate of 0.10%
) per annum) was payable on the unfunded commitments under the Credit Facility, each based on our current credit ratings.
Under the terms of the Credit Facility, the commitments of the lenders to make loans to us are several and not joint.Accordingly, if any lender fails to make loans to us, our available liquidity could be reduced by an amount up to the aggregate amount of such lenders commitments under the facility.
### LONG-TERM DEBT
Our secured debt is secured by a first priority lien on certain transmission and distribution assets equally and ratably with all of Oncors other secured indebtedness.See Deed of Trust below for additional information.At
December
31, 20
20 and 201
, our long-term debt consisted of the following:
### Long-Term
Debt-Related Activity in 20
### Senior Secured Notes
2030 Notes and 2050 Notes Issuances
On
### March
20, 2020, we completed a sale of $400 million aggregate principal amount of 2.75% Senior Secured Notes due
May
May
15, 2050 (2050 Notes). We used the proceeds (net of the initial purchasers discount, fees and expenses) of approximately
$790 million from the sale of the 2030 Notes and 2050 Notes for general corporate purposes, including the repayment of short-term and long-term debt.
The
2030 and 2050
Notes were issued pursuant to the provisions of an Indenture, dated as of
### August
1, 2002, between Oncor and The Bank of New York Mellon Trust Company, N.A. (as successor to The Bank of New York Mellon, formerly The Bank of New York) (as amended and supplemented, the Indenture). The 2030 Notes and the 2050 Notes each constitute a separate series of notes under the Indenture, but will be treated together with Oncors other outstanding debt securities issued under the Indenture for amendments and waivers and for taking certain other actions.
The 2030 Notes bear interest at a rate of 2.75% per annum and mature on
May
15, 2030. The 2050 Notes bear interest at a rate of 3.70% per annum and mature on
May
15, 2050. Interest on the 2030 Notes and 2050 Notes is payable in cash semiannually in arrears on
May
15 and
### November
15 of each year, and the first interest payment was due on
November
15, 2020. Prior to
### February
November
15, 2049, in the case of the 2050 Notes, we may redeem such notes at any time, in whole or in part, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. On and after
### February
November
15, 2049, in the case of the 2050 Notes, we may redeem such Notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of such Notes, plus accrued and unpaid interest.
The 2030 Notes and 2050 Notes were issued in a private placement and were not registered under the Securities Act.
In
### August 202
0, we completed an offering with the holders of the 2030 Notes and 2050 Notes to exchange their respective notes for notes that have terms identical in all material respects to the 2030 Notes and 2050 Notes (Exchange Notes), except that the Exchange Notes do not contain terms with respect to transfer restrictions, registration rights and payment of additional interest for failure to observe certain obligations in a certain registration rights agreement. The Exchange Notes were registered on a Form S-4, which was declared effective in
July 202
0.
### Debt Exchange and 2052 Notes Issuance
On
September
23, 2020, we issued $300 million aggregate principal amount of 5.35% Senior Secured Notes due 2052 (the 2052 Notes) in exchange for a like aggregate principal amount of certain of our existing senior secured debt, consisting of (i)
$35 million aggregate principal amount of our 7.25% Senior Notes, Series B, due
### December
30, 2029 (Series B Notes), (ii)
$80 million aggregate principal amount of our 6.47% Senior Notes, Series A, due
### September
30, 2030 (Series A Notes), (iii)
$6 million aggregate principal amount of our 7.00% Senior Secured Notes due
May
1, 2032, (iv)
$27 million aggregate principal amount of our 7.25% Senior Secured Notes due
### January
15, 2033, and (v) $152 million aggregate principal amount of our 5.30% Senior Secured Notes due
June
1, 2042.
### We received no proceeds from the exchange.
The 2052 Notes were issued pursuant to the provisions of the Indenture. The 2052 Notes constitute a separate series of notes under the Indenture, but will be treated together with our other outstanding debt securities issued under the Indenture for amendments and waivers and for taking certain other actions.
The 2052 Notes bear interest at a rate of 5.35% per annum and mature on
### October
1, 2052. Interest on the 2052 Notes is payable in cash semi-annually in arrears on
April
1 and
### October
April
1, 2021. Prior to
### April
1, 2052, we may redeem the 2052 Notes at any time, in whole or in part, at a price equal to 100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. On and after
April
1, 2052, we may redeem the 2052 Notes at any time, in whole or in part, at a redemption price equal to
100% of the principal amount of such 2052 Notes, plus accrued and unpaid interest.
The 2052 Notes were issued in a private placement and were not registered under the Securities Act. We have agreed, subject to certain exceptions, to register with the SEC notes having substantially identical terms as the 2052 Notes (except for provisions relating to the transfer restriction and payment of additional interest) as part of our offer to exchange freely tradable exchange notes for the 2052 Notes. We have agreed to use commercially reasonable efforts to cause the exchange offer to be completed within 315 days after the issue date of the 2052 Notes. If a registration statement for the exchange offer is not declared effective by the SEC within 270 days after the issue date of the 2052 Notes or the exchange offer is not completed within 315 days after the issue date of the 2052 Notes (an exchange default), then the annual interest rate of the 2052 Notes will increase
50 basis points per annum until the earlier of the expiration of the exchange default or the second anniversary of the issue date of the 2052 Notes.
2025 Notes Issuance
On
### September
28, 2020, we issued $450 million aggregate principal amount of 0.55% Senior Secured Notes due 2025 (the 2025 Notes). We intend to use the proceeds (net of the initial purchasers discount, fees and expenses) of approximately
$443 million from the sale of the 2025 Notes to finance or refinance, in whole or in part, eligible projects consisting of investments in or expenditures with minority- and women-owned business suppliers pursuant to our sustainable bond framework. The net proceeds may be temporarily invested in cash, cash equivalents and/or U.S. government securities in accordance with our cash management policies or used to repay certain other indebtedness, or both.
The 2025 Notes were issued pursuant to the provisions of the Indenture. The 2025 Notes constitute a separate series of notes under the Indenture, but will be treated together with our other outstanding debt securities issued under the Indenture for amendments and waivers and for taking certain other actions.
The 2025 Notes bear interest at a rate of 0.55% per annum and mature on
### October
1, 2025. Interest on the 2025 Notes is payable in cash semi-annually in arrears on
April
1 and
### October
April
1, 2021. Prior to
### September
1, 2025, we may redeem the 2025 Notes at any time, in whole or in part, at a price equal to
100% of their principal amount, plus accrued and unpaid interest and a make-whole premium. On and after
### September
1, 2025, we may redeem the 2025 Notes at any time, in whole or in part, at a redemption price equal to 100% of the principal amount of the 2025 Notes, plus accrued and unpaid interest.
The 2025 Notes were | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
An amount equal to the following: 36 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment agreement, that Mr.
We may terminate Mr. Wright's employment at any time for other than just cause by delivering to Mr. In such a case, we agreed to pay Mr. Wright severance in an amount equal to the following: 36 months' salary plus an amount, if any, equal to the following: one month's salary multiplied by the number of calendar years, starting on the effective date of the employment, that Mr.
Subject to applicable employment laws or similar legislation, we may terminate Mr. Wright's employment in the event he has been unable to perform his duties for a period of eight consecutive months or a cumulative period of 12 months in any consecutive 24-month period, because of a physical or mental disability. Mr. Wright's employment will automatically terminate on his death. In the event Mr. Wright's employment with our company terminates by reason of Mr. Wright's death or disability, then upon and immediately effective on the date of termination we agreed to promptly pay and provide Mr. Wright (or in the event of Mr. Wright's death, Mr. Wright's estate); any unpaid salary and any outstanding and accrued regular and special vacation pay through the date of termination; reimbursement for any unreimbursed expenses incurred through to the date of termination; and any outstanding amounts due under any awards which will be dealt with in accordance with our 2013 equity incentive plan, 2018 stock option plan or 2020 equity incentive plan and the award agreement. In the event Mr. Wright's employment is terminated due to a disability, we agreed to pay to Mr. Wright the severance referred to above.
We may terminate Mr. Wright's employment for just cause at any time by delivering to Mr. In the event that Mr. Wright's employment with our company is terminated by our company for just cause, Mr. Wright will not be entitled to any additional payments or benefits (except as otherwise provided in his employment agreement), other than for amounts due and owing to Mr. Wright by our company as of the date of termination, except for any awards under our 2013 equity incentive plan, 2018 stock option plan or 2020 equity incentive plan will be dealt with in accordance with the plan and award agreement.
The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of March 31, 2021:
Compensation of Directors
The particulars of compensation paid to our directors who are not named executive officers for the fiscal year ended March 31, 2021 are set out in the following director compensation table:
Note:
(1)
Reflects the issuance of 200,000 of restricted stock awards effective April 30, 2020 (valued at $200,000).
(2
)
Reflects the issuance of 250,000 stock options with an exercise price of $0.53 per share effective April 3, 2020 (valued at $132,500) and the issuance of 250,000 stock options with an exercise price of $1.07 effective March 31, 2021 (valued at $267,500).
(
)
Bruce Leitch resigned as a director of our company effective October 8, 2020.
(4
)
(5
)
(6
)
Effective October 8, 2020, Frank Lazaran was appointed as a director of our company.
(7
)
(8
)
On April 3, 2020, we granted 10,000 stock options to Bruce Leitch, a former director of our company. Upon Mr. Leitch's resignation as a director of our company effective October 8, 2020, these stock options were terminated. On April 3, 2020, we granted 100,000 stock options to Brian Sudano, a director of our company. and vested as to one third on the date of grant and one third vest or will vest on each anniversary of the date of grant. On April 3, 2020, we granted 250,000 stock options to Aaron Keay, a director of our company. and vested as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant.
On April 30, 2020, we granted an award of 25,000 shares of our common stock to Bruce Leitch, a former director of our company. These shares vested on the date of grant. On April 30, 2020, we granted an award of 25,000 shares of our common stock to Brian Sudano, a director of our company. 50% of these shares vested on the one-year anniversary of grant and 50% of these shares will vest on the second year anniversary of the date of grant. On April 30, 2020, we granted an award of 200,000 shares of our common stock to Aaron Keay, a director of our company. These shares vested on the one-year anniversary of the date of grant. We granted these shares as "restricted awards" under our 2020 equity incentive plan.
On March 31, 2021, we granted 250,000 stock options to Aaron Keay, a director of our company. These stock options are exercisable at the exercise price of $1.09 per share until March 31, 2031 and vested as to 50% on the date of grant and 50% on the one-year anniversary of the date of grant. On March 31, 2021, we granted 50,000 stock options to Brian Sudano, a director of our company. On March 31, 2021, we granted 50,000 stock options to Frank Lazaran, a director of our company.
On March 31, 2021, we granted an award of 25,000 shares of our common stock to Brian Sudano, a director of our company. On March 31, 2021, we granted an award of 150,000 shares of our common stock to Aaron Keay, a director of our company. On March 31, 2021, we granted an award of 25,000 shares of our common stock to Frank Lazaran, a director of our company. We granted these shares as "restricted awards" under our 2020 equity incentive plan.
We have no formal plan for compensating our directors for their services in their capacity as directors. Our directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on their behalf other than services ordinarily required of a director.
ITEM 12.
The following table sets forth, as of July 1, 2021, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of any class of our voting securities and by each of our directors and our named executive officers (as defined in the "Executive Compensation") and by our current executive officers and directors as a group.
* Less than 1%.
(1)
Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants but are not deemed outstanding for purposes of computing the percentage ownership of any other person.
(2)
Percentage of common stock is based on 89,761,122 shares of our common stock issued and outstanding as of July 1, 2021.
(3)
Includes 375,000 stock options exercisable within 60 days.
(4)
Includes 250,000 stock options exercisable within 60 days.
(5)
Includes 825,000 stock options exercisable within 60 days.
(6)
Includes 25,000 stock options exercisable within 60 days.
(7)
Includes 91,666 stock options exercisable within 60 days.
(8)
Includes 1,591,666 stock options exercisable within 60 days.
### Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.
ITEM 13.
Other than as disclosed below, there has been no transaction, since April 1, 2019, or currently proposed transaction, in which our company was or is to be a participant and the amount involved exceeds $120,000, being the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:
(a)
### Any director or executive officer of our company;
(b)
Any person who beneficially owns, directly or indirectly, more than 5% of any class of our voting securities;
(c)
Any person who acquired control of our company when it was a shell company or any person that is part of a group, consisting of two or more persons that agreed to act together for the purpose of acquiring, holding, voting or disposing of our common stock, that acquired control of our company when it was a shell company; and
(d)
Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.
On February 14, 2018, December 31, 2018 and March 30, 2020, David A. Guarino, our chief financial officer, secretary, treasurer and director, entered into two separate guarantee agreements with CNH Specialty Finance in order for CNH Specialty Finance to agree to provide our company two separate $400,000 temporary order advances under the credit facility agreement. Under the guarantee agreements, Mr. Guarino personally, absolutely, and unconditionally, jointly and severally, guaranteed the prompt, complete and full payment of our obligations to repay each of the temporary order advances only, under the credit agreement, with CNH Specialty Finance.
On May 25, 2016, we entered into an agreement with BMC Strategic Associates (
"BMCSA"
), a division of Beverage Marketing Corporation, with regard to a possible strategic transaction "relationship" involving the Alkaline88 brand and all assets related to such brand. Brian Sudano, a director of our company, is Managing Partner of Beverage Marketing Corporation and BMC Strategic Associates. During the term of the agreement, BMCSA has the exclusive right to represent our company in the developing a strategic relationship (defined as any investment, joint venture, etc. involving the Alkaline88 brand and all assets related to such brand and a strategic party who is more than a mere financier). The agreement provides that if our company consummates a strategic relationship during the term of the agreement with any party, licensor, joint venture partner, etc., or within 18 months of the date of termination of the agreement, then we must pay BMCSA, at closing of such strategic relationship, a commission based upon the value of the strategic relationship as follows: 5% for the first $2 million, 4% for next $2 million, 3% for next $2 million, 2% for next $2 million and 1% of the total amount above $8 million, provided however, in no event will the commission be less than $500,000. We agreed to reimburse BMCSA on a monthly basis for all reasonable out-of-pocket expenses incurred by BMCSA in connection with the performance of services provided under the agreement. The agreement continues in force until terminated by either party in writing upon at least 30 days' written notice. Since April 1, 2017, we paid BMCSA an aggregate of $25,145 in consideration of the consulting services provided by BMCSA under the agreement.
### Ronald DaVella
On May 1, 2019, we appointed Ronald DaVella as our Executive Vice President of Finance. On April 25, 2019, we entered into an employment agreement with Ronald DaVella pursuant to which Mr. DaVella agreed to act as our Executive Vice President of Finance and to perform such duties as are regularly and customarily performed by the executive vice president of finance of a corporation, and any other duties consistent with Mr. Da Vella's position in our company. Pursuant to the terms of the employment agreement we agreed to: (i) pay Mr. DaVella $14,000 per month or such other amount as may be determined<|endoftext|>Such involuntary termination.
All such payments and benefits are contingent on the officers execution and non-revocation of a general release of claims against us and satisfaction of other typical conditions.
With the exception of certain housing expense reimbursement provided to Ms. Baird during 2020, we generally do not provide our named executive officers with perquisites or other personal benefits.
The 401(k) plan is intended to qualify under Section 401(k) of the Internal Revenue Service Code, so that contributions to the 401(k) plan by employees or by us, and the investment earnings thereon, are not taxable to the employees until withdrawn, and so that contributions made by us, if any, will be deductible by us when made.
Our named executive officers did not participate in, or otherwise receive any benefits under, any pension or retirement plan or non-qualified deferred compensation plan sponsored by us during the year ended December 31, 2020.
### Equity Compensation
Stock options allow employees to purchase shares of Class A Common Stock of Hims at a price per share at least equal to the fair market value of our common stock on the date of grant and may or may not be intended to qualify as incentive stock options for U.S. federal income tax purposes.
As described above under
### Outstanding Equity Awards at 2020 Fiscal YearEnd
The following table provides information regarding outstanding equity awards held by our named executive officers as of December 31, 2020. The number of shares subject to each award and, where applicable, the exercise price per share, reflect all changes as a result of our capitalization adjustments prior to the Hims & Hers Recapitalization and the Business Combination.
Please note that the share numbers and exercise prices (where applicable) in the table below are presented on a pre-Business Combination basis, reflecting such awards as of December 31, 2020.
### As described above under
(1)
As there was no public market for our common stock on December 31, 2020, we have assumed that the fair value on such date was $15.43, the closing price of our common stock on January 21, 2021.
(2)
The option vests in full if the per share closing trading price of our common stock on a public stock exchange is at least equal to $38.31 while Mr.
(3)
The option vests in full if the per share closing trading price of our common stock on a public stock exchange is at least equal to $22.99 while Mr.
(4)
(5)
The restricted stock units vest over a four-year period based on the officers continuous service with us, with 6.25% of the restricted stock units vesting following completion of each period of three months of service on each of March 15, June 15, September 15 and December 15 (each, a Company Quarterly Vesting Date), with the first such vesting date to be the next occurring Company Quarterly Vesting Date that occurs on or after the vesting commencement date set indicated above.
(6)
Following the Business Combination, each of Mr. Maltz, Mr. Bard, and Ms. Green served on our compensation committee.
### Director Compensation
With respect to the year ended December 31, 2020, except as noted in the table below our non-employee directors did not receive cash compensation for their service on our Board and we did not have a formal non-employee director compensation program in 2020. Mr. Dudum, our Chief Executive Officer during fiscal year 2020, did not and does not receive any additional compensation for his service as a member of our Board.
Subject to the directors continuous service, the Annual Equity Award will vest in full on the earlier of (x) the date that is 12 months following the date of grant of the Annual Equity Award or (y) the date of our next-occurring annual stockholder meeting.
*
Mr. Abraham resigned from our Board effective as of October 21, 2020
**
Dr. Cosgrove, Ms. Green and Mr. Wells were elected to our Board effective as of September 30, 2020.
***
Ms. OKeefe was elected to our Board effective as of November 13, 2020.
(1)
The amounts in this column include the aggregate grant date fair value of restricted stock units granted to the director during the year ended December 31, 2020, computed in accordance with FASB ASC Topic 718. See Note 8 to our consolidated financial statements included in our Current Report on Form 8-K, as filed with the SEC on January 26, 2021 and subsequently amended on March 22, 2021, for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards, for a discussion of the assumptions made by us in determining the grant date fair values of our equity awards.
(2)
Reflects amounts paid to Dr. Cosgrove pursuant to our letter agreement with him dated September 18, 2019. Such arrangement terminated upon the closing of the Business Combination, following which Dr. Cosgrove will be eligible to receive compensation pursuant to our non-employee director compensation program, described above. During our fiscal year 2019, Dr. Cosgrove received $8,333 in cash fees.
(3)
Represents restricted stock units covering 322,613 shares of our common stock granted on December 23, 2020, with an aggregate grant date fair value of $1,419,497, vesting over four years of continuous service following December 15, 2020, in 16 substantially equal quarterly installments.
(4)
Represents restricted stock units covering 322,613 shares of our common stock granted on November 13, 2020, with an aggregate grant date fair value of $1,367,879, vesting over four years of continuous service following December 15, 2020, in 16 substantially equal quarterly installments.
As of December 31, 2020, Dr. Cosgrove held an outstanding option to purchase 200,000 shares of our common stock, and each of Ms. OKeefe and Mr. Wells held restricted stock units covering 322,613 shares of our common stock. In January 2021, and prior to our non-employee director compensation program becoming effective, each of Ms. Green, Mr. Maltz and Mr. Bard were granted 78,651 restricted stock units, with such awards vesting over four years of continuous service provided by each director. The share numbers referenced in this paragraph are presented on a pre-Business Combination basis.
### Item 12.
The following table sets forth information regarding the beneficial ownership of our Class A Common Stock and Class V Common Stock as of April 21, 2021 by: each person known by us to be the beneficial owner of more than 5% of outstanding Class A Common Stock;
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, including options and warrants that are currently exercisable or exercisable within 60 days and shares of Class A Common Stock underlying restricted stock units that may be settled within 60 days of April 21, 2021.
The beneficial ownership of our Class A Common Stock is based on 183,409,192 shares of Class A Common Stock and 8,377,623 shares of the Class V Common Stock issued and outstanding as of April 21, 2021.
*
Less than 1%
(1)
(2)
Beneficial ownership as of April 21, 2021 is based on (A) 183,409,192 shares of our Class A Common Stock outstanding as of such date and (B) 8,377,623 shares of our Class V Common Stock outstanding as of such date.
(3)
Percentage of total voting power represents voting power with respect to all shares of Class A Common Stock and Class V Common Stock, held beneficially as a single class. The holders of Class V Common Stock are entitled to 175 votes per share, and holders of Class A Common Stock are entitled to one vote per share.
(4)
Includes (i) 11,073,381 shares of Class A Common Stock held by trusts affiliated with Mr. Dudum, (ii) 8,377,623 shares of Class V Common Stock held by a trust affiliated with Mr. Dudum, (iii) 7,077,074 shares of Class A Common Stock underlying stock options exercisable within 60 days, (iv) 405,548 shares of Class A Common Stock issuable pursuant to restricted stock units (RSUs) that will be time-based vested and may be subject to settlement within 60 days, (v) 110,610 warrants exercisable for shares of Class A Common Stock held by trusts affiliated with Mr. Dudum, (vi) 8,268,565 shares of Class A Common Stock held by Atomic Labs II, L.P., and (vii) 46,238 warrants exercisable for shares of Class A Common Stock held by Atomic Labs II, L.P. Mr. Dudum may be deemed to share voting or dispositive power over the shares held by Atomic Labs II, L.P.
(5)
Includes (i) 1,909,314 shares of Class A Common Stock underlying stock options exercisable within 60 days and (ii) 107,645 shares of Class A Common Stock issuable pursuant to RSUs that will be time-based vested and may be subject to settlement within 60 days.
(6)
Includes (i) 140,458 shares of Class A Common Stock, (ii) 556 warrants exercisable for shares of Class A Common Stock,(iii) 2,203,938 shares of Class A Common Stock underlying stock options exercisable within 60 days and (iv) 128,611 shares of Class A Common Stock issuable pursuant to RSUs that will be time-based vested and may be subject to settlement within 60 days.
(7)
Includes the shares of Class A Common Stock referenced in footnote 18.
(8)
Includes (i) 90,596 shares of Class A Common Stock underlying a stock option exercisable within 60 days and (ii) 3,389 shares of Class A Common Stock issuable pursuant to RSUs that will be time-based vested and may be subject to settlement within 60 days.
(9)
Includes the shares of Class A Common Stock referenced in footnote 15.
(10)
Includes the shares of Class A Common Stock referenced in footnote 16.
(11)
Includes (i) 157,639 shares of Class A Common Stock held by Define Ventures Fund I, L.P. and (ii) 881 warrants exercisable for shares of Class A Common Stock held by Define Ventures Fund I, L.P. Ms. Chou OKeefe may be deemed to share voting or dispositive power over the shares held by Define Ventures Fund I, L.P.
(12)
Includes (i) 610,490 shares of Class A Common Stock and 3,412 warrants exercisable for shares of Class A Common Stock held by Maverick Advisors Fund, L.P. and (ii) 1,098,602 shares of Class A Common Stock and 6,140 warrants exercisable for shares of Class A Common Stock held by Maverick Ventures Investment Fund, L.P. Mr. Bhattacharyya disclaims beneficial ownership of the securities held by Maverick Advisors Fund, L.P.
(13)
Includes (i) 62,212,910 shares of Class A Common Stock, (ii) 12,142,486 shares of Class A Common Stock underlying stock options exercisable within 60 days, (iii) 679,986 shares of Class A Common Stock issuable pursuant to RSUs that will be time-based vested and may be subject to settlement within 60 days, (iv) 396,363 warrants exercisable for shares of Class A Common Stock and (v) 8,377,623 shares of Class V Common Stock.
(14)
According to the Schedule 13G, holdings include (i) 1,301,976 shares of Class A Common Stock and 7,280 warrants exercisable for shares of Class A Common Stock held by Atomic Labs I, L.P., (ii) 973,211 shares of Class A Common Stock and 5,442 warrants exercisable for shares of Class A Common Stock held by Atomic Labs I-B, L.P., (iii) 8,268,565 shares of Class A Common Stock and 46,238 warrants exercisable for shares of Class A Common Stock held by Atomic Labs II, L.P. and (iv) 278,871 shares of Class A Common Stock and 1,559 warrants exercisable for shares of Class A Common Stock held by Atomic Incentives, LLC. and Atomic Labs, I-B, L.P. Atomic Labs GP I, LLC has designated its management rights as manager of Atomic Labs I, L.P. and Atomic Labs I-B, L.P. to Atomic Labs, LLC. to Atomic Labs, LLC. As majority member and sole manager of Atomic Labs, LLC, Jack Abraham may be deemed to have voting and dispositive power over the shares held by Atomic Labs I, L.P., Atomic Labs I-B, L.P., Atomic Labs II, | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Business combination. Generally, we must maintain a minimum number of holders of our securities (generally 300 round lot holders). For instance, our stock price would generally be required to be at least $4.00 per share, our aggregate market value would be required to be at least $100,000,000, and the market value of our publicly-held shares would be required to be at least $80,000,000.
Because our Class A common stock and warrants are listed on the NYSE, our units, Class A common stock and warrants are covered securities.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 20% of the shares sold in our initial public offering without our prior consent, which we refer to as the Excess Shares.
Furthermore, we are obligated to offer holders of our public shares the right to redeem their shares for cash at the time of our initial business combination, in conjunction with a stockholder vote or via a tender offer. Target businesses will be aware that this may reduce the resources available to us for our initial business combination.
We believe that, upon the closing of our initial public offering, the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the next 24 months;
If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or we may be forced to liquidate.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will surface all material issues in relation to a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise.
While short-term U.S. In the event that we do not complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro rata share of the proceeds held in the trust account, plus any interest income, net of taxes paid or payable (less, in the case we do not complete our initial business combination, $100,000 of interest).
Upon redemption of our public shares, if we do not complete our business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Pursuant to the letter agreement the form of which is filed as an exhibit to the registration statement on Form S-1 that was filed in connection with our initial public offering, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
If after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.
If before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
To this end, the proceeds held in the trust account may only be invested in United States (ii) the redemption of any public shares properly submitted in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months from the closing of our initial public offering; or (iii) the redemption of our public shares and any Class A Units of Opco (other than those held by Rice Acquisition Corp.) if we do not complete our business combination within 24 months from the closing of our initial public offering, subject to applicable law. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete a business combination, or may result in our liquidation.
In particular, we are required to comply with certain SEC and other legal requirements and numerous complex tax laws.
However, it is our intention to redeem our public shares as soon as reasonably possible following the 24 th month from the closing of our initial public offering in the event we do not complete our business combination and, therefore, we do not intend to comply with the foregoing procedures.
Because we will not comply with Section 280, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our dissolution. However, because we are a blank check company, rather than an operating company, and our operations will are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24 months from the closing of our initial public offering is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days, after the closing of our initial business combination, we will use our best efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If the shares issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis, in which case, the number of shares of Class A common stock that you will receive upon cashless exercise will be based on a formula subject to a maximum amount of shares equal to 0.361 shares of Class A common stock per warrant (subject to adjustment). In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of our Class A common stock included in the units. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of our Class A common stock for sale under all applicable state securities laws.
Pursuant to the agreement entered into concurrently with the issuance and sale of the securities in our initial public offering, our initial stockholders and their permitted transferees can demand that we register the shares of our Class A common stock into which founder shares and sponsor shares are exchangeable, holders of our private placement warrants and their permitted transferees can demand that we register the private placement warrants and the shares of our Class A common stock issuable upon exercise of the private placement warrants or upon exchange of any Class A Units of Opco issued upon exercise of the private placement warrants and holders of warrants that may be issued upon conversion of working capital loans may demand that we register such warrants or the Class A common stock issuable upon exercise of such warrants or upon exchange of any Class A Units of Opco issued upon exercise of such warrants. Assuming the founder shares and sponsor shares are exchanged on a one for one basis and no warrants are issued upon conversion of working capital loans, an aggregate of up to 5,940,096 shares of our Class A common stock and up to 6,771,000 warrants are subject to registration under these agreements. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the securities owned by our initial stockholders, holders of our private placement warrants, holders of working capital loans or their respective permitted transferees are registered.
Although we expect to focus our search for a target business in the broadly defined energy transition or sustainability arena, we may complete a business combination with<|endoftext|>Are $20
Manager elects to have holding period measured for purposes of profit allocation for Company B
### For purposes of calculating profit allocation:
An entitys adjusted net assets will be equal to, as of any date, the sum of (i) such entitys consolidated total assets (as determined in accordance with GAAP) as of such date, plus (ii) the absolute amount of such entitys consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) as of such date, minus (iii) the absolute amount of such entitys adjusted total liabilities as of such date.
An entitys adjusted total liabilities will be equal to, as of any date, such entitys consolidated total liabilities (as determined in accordance with GAAP) as of such date after excluding the effect of any outstanding third-party indebtedness of such entity.
A business allocated share of our companys overhead will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of such business quarterly share of our companys overhead for each fiscal quarter ending during such measurement period.
A business average allocated share of our consolidated equity will be equal to, with respect to any measurement period as of any calculation date, the average (i.e., arithmetic mean) of a business quarterly allocated share of our consolidated equity for each fiscal quarter ending during such measurement period.
### Capital gains
(i) means, with respect to any entity, capital gains (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net sales price of such capital stock or assets, as the case may be, exceeded (y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on our companys consolidated balance sheet prepared in accordance with GAAP; provided, that such amount shall not be less than zero.
Capital losses
(i) means, with respect to any entity, capital losses (as determined in accordance with GAAP) that are calculated with respect to the sale of capital stock or assets of such entity and which sale gave rise to a sale event and the calculation of profit allocation and (ii) will be equal to the amount, adjusted for minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale, as reflected on our consolidated balance sheet prepared in accordance with GAAP, exceeded
(y) the net sales price of such capital stock or assets, as the case may be; provided
, that such absolute amount thereof shall not be less than zero.
Our consolidated net equity will be equal to, as of any date, the sum of (i) our consolidated total assets (as determined in accordance with GAAP) as of such date, plus
(ii) the aggregate amount of asset impairments (as determined in accordance with GAAP) that were taken relating to any businesses owned by us as of such date, plus
(iii) our consolidated accumulated amortization of intangibles (as determined in accordance with GAAP), as of such date minus
(iv) our consolidated total liabilities (as determined in accordance with GAAP) as of such date.
A business contribution-based profits will be equal to, for any measurement period as of any calculation date, the sum of (i) the aggregate amount of such business net income (loss) (as determined in accordance with GAAP and as adjusted for minority interests) with respect to such measurement period (without giving effect to (x) any capital gains or capital losses realized by such business that arise with respect to the sale of capital stock or assets held by such business and which sale gave rise to a sale event and the calculation of profit allocation or (y) any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement, in each case, to the extent included in the calculation of such business net income (loss)), plus
(ii) the absolute aggregate amount of such business loan expense with respect to such measurement period, minus
(iii) the absolute aggregate amount of such business allocated share of our companys overhead with respect to such measurement period.
Our cumulative capital gains will be equal to, as of any calculation date, the aggregate amount of capital gains realized by our company as of such calculation date, after giving effect to any capital gains realized by our company on such calculation date, since its inception.
Our cumulative capital losses will be equal to, as of any calculation date, the aggregate amount of capital losses realized by our company as of such calculation date, after giving effect to any capital losses realized by our company on such calculation date, since its inception.
Our cumulative gains and losses will be equal to, as of any calculation date, the sum of (i) the amount of cumulative capital gains as of such calculation date, minus
(ii) the absolute amount of cumulative capital losses as of such calculation date.
The high water mark will be equal to, as of any calculation date, the highest positive amount of capital gains and losses as of such calculation date that were calculated in connection with a qualifying trigger event that occurred prior to such calculation date.
The high water mark allocation will be equal to, as of any calculation date, the product of (i) the amount of the high water mark as of such calculation date, multiplied by
(ii) 20%.
A business level 1 hurdle amount will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.00% (8% annualized), multiplied by
A business level 2 hurdle amount will be equal to, as of any calculation date, the product of (i) (x) the quarterly hurdle rate of 2.5% (10% annualized, which is 125% of the 8% annualized hurdle rate), multiplied by
A business loan expense will be equal to, with respect to any measurement period as of any calculation date, the aggregate amount of all interest or other expenses paid by such business with respect to indebtedness of such business to either our company or other company businesses with respect to such measurement period.
The measurement period will mean, with respect to any business as of any calculation date, the period from and including the later of (i) the date upon which we acquired a controlling interest in such business and (ii) the immediately preceding calculation date as of which contribution-based profits were calculated with respect to such business and with respect to which profit allocation were paid (or, at the election of the allocation member, deferred) by our company up to and including such calculation date.
Our companys overhead will be equal to, with respect to any fiscal quarter, the sum of (i) that portion of our operating expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of profit allocation or any amount arising under the supplemental put agreement to the extent included in the calculation of our operating expenses), including any management fees actually paid by our company to our manager, with respect to such fiscal quarter that are not attributable to any of the businesses owned by our company (i.e., operating expenses that do not correspond to operating expenses of such businesses with respect to such fiscal quarter), plus
(ii) our accrued interest expense (as determined in accordance with GAAP) on any outstanding third party indebtedness of our company with respect to such fiscal quarter, minus
(iii) revenue, interest income and other income reflected in our unconsolidated financial statements as prepared in accordance with GAAP.
A qualifying trigger event will mean, with respect to any business, a trigger event that gave rise to a calculation of total profit allocation with respect to such business as of any calculation date and (ii) where the amount of total profit allocation so calculated as of such calculation date exceeded such business level 2 hurdle amount as of such calculation date.
A business quarterly allocated share of our consolidated equity will be equal to, with respect to any fiscal quarter, the product of (i) our consolidated net equity as of the last day of such fiscal quarter, multiplied by
(ii) a fraction, the numerator of which is such business adjusted net assets as of the last day of such fiscal quarter and the denominator of which is the sum of (x) our adjusted net assets as of the last day of such fiscal quarter, minus
(y) the aggregate amount of any cash and cash equivalents as such amount is reflected on our consolidated balance sheet as prepared in accordance with GAAP that is not taken into account in the calculation of any business adjusted net assets as of the last day of such fiscal quarter.
A business quarterly share of our companys overhead will be equal to, with respect to any fiscal quarter, the product of (i) the absolute amount of our companys overhead with respect to such fiscal quarter, multiplied by
(ii) a fraction, the numerator of which is such business adjusted net assets as of the last day of such fiscal quarter and the denominator of which is our adjusted net assets as of the last day of such fiscal quarter.
An entitys third party indebtedness means any indebtedness of such entity owed to any third party lenders that are not affiliated with such entity.
### Supplemental Put Provision
In addition to the provisions discussed above, in consideration of our managers acquisition of the allocation shares, our operating agreement contains a supplemental put provision pursuant to which our manager will have the right to cause our company to purchase the allocation shares then owned by our manager upon termination of the management services agreement.
If the management services agreement is terminated at any time or our manager resigns, then our manager will have the right, but not the obligation, for one year from the date of such termination or resignation, as the case may be, to elect to cause our company to purchase all of the allocation shares then owned by our manager for the put price as of the put exercise date.
For purposes of this provision, the put price is equal to, as of any exercise date, (i) if we terminate the management services agreement, the sum of two separate, independently made calculations of the aggregate amount of managers profit allocation as of such exercise date or (ii) if our manager resigns, the average of two separate, independently made calculations of the aggregate amount of managers profit allocation as of such exercise date, in each case, calculated assuming that (x) all of the businesses are sold in an orderly fashion for fair market value as of such exercise date in the order in which the controlling interest in each business was acquired or otherwise obtained by our company, (y) the last day of the fiscal quarter ending immediately prior to such exercise date is the relevant calculation date for purposes of calculating managers profit allocation as of such exercise date. Each of the two separate, independently made calculations of our managers profit allocation for purposes of calculating the put price will be performed by a different investment bank that is engaged by our company at its cost and expense. The put price will be adjusted to account for a final true-up of our managers profit allocation.
Our manager and our company can mutually agree to permit our company to issue a note in lieu of payment of the put price when due; provided, that if our manager resigns and | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Stock to an non-employee in consideration for services rendered to our Company. The total fair value of the shares is $221,400 based on the $1.08 per share closing price of the Company's common stock on the NASDAQ stock exchange on January 14, 2021.
### Restricted Awards
On April 30, 2020, the Company granted awards of an aggregate of 1,065,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees, and consultants. Of these shares, 645,000 vest on the one-year anniversary of the grant date, 200,000 vest as to 50% on the one-year anniversary of the grant date and 50% vest on the second-year anniversary of the grant date, 165,000 vest as to one-third on each anniversary of the grant date and 55,000 vest immediately. On April 30, 2020, the Company issued the immediately vested awards, 35,000 to a non-employee, and 20,000 to an employee. Of these restricted awards granted on April 30, 2020, an award of 200,000 shares of our common stock went to Richard Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David The Company granted these shares as "restricted awards" under our 2020 Equity Incentive Plan. The total fair value of the 1,065,000 shares of the Company's common stock granted as "restricted awards" is $1,065,000, based upon the $1.00 per share closing price of the Company's common stock on the NASDAQ stock exchange on April 29, 2020.
On August 27, 2020, the Company granted an award of 20,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to new employee. These shares vest one-third on each anniversary date over three years. The grantee has no rights or privileges as stockholders of our company with respect to the unvested shares including, without limitation, the right to vote such shares and receive all dividends or other distributions paid with respect to such shares. The total fair value of the 20,000 shares of the Company's common stock granted as "restricted awards" is $30,400 based upon the $1.52 per share closing price of the Company's common stock on the NASDAQ stock exchange on August 27, 2020.
On March 31, 2021, the Company granted awards of an aggregate of 565,000 shares of our common stock as "restricted awards" under our 2020 Equity Incentive Plan to certain directors, officers, employees, and consultants. Of these restricted awards granted on April 30, 2020, an award of 150,000 shares of our common stock went to Richard Wright, our president, chief executive officer and director, and an award of 100,000 shares of our common stock went to David The Company granted these shares as "restricted awards" under our 2020 Equity Incentive Plan.
The Company's total stock compensation expense on account of the 1,065,000 shares of its common stock granted on April 30, 2020, the 20,000 shares of its common stock granted on August 27, 2020, and the 565,000 shares of its common stock granted on March 31, 2021, as "restricted awards" for the year ended March 31, 2021, was $828,967. Additional expense will be recognized in the next 3 fiscal years of $818,067, $56,800, and $7,417, respectively.
During October 2020, the Company issued 50,000 shares of our common stock to an employee upon his exercise of vested restricted awards under our 2020 Equity Incentive Plan.
### NOTE 7 - OPTIONS AND WARRANTS
Stock Option Plans
The purpose of the plan is to (a) enable our company and any of our affiliates to attract and retain the types of employees, consultants and directors who will contribute to our company's long-range success; (b) provide incentives that align the interests of employees, consultants, and directors with those of the stockholders of our company;
We adopted the plan in connection with our prior application to list our common stock on the TSX Venture Exchange.
Effective February 28, 2020, our board of directors adopted and approved our 2020 equity incentive plan, pursuant to which we may grant stock options to acquire up to a maximum of 9,000,000 shares of our common stock and non-stock option awards to acquire up to a maximum of 1,650,000 shares of our common stock. The plan was approved by a majority of our stockholders on March 30, 2020. Non-stock option awards mean a right granted to an award recipient under the plan, which may include the grant of stock appreciation rights, restricted awards, performance compensation awards or other equity-based awards.
### Issuance of Options
Effective April 28, 2017, we granted a total of 1,790,000 stock options to our directors, officers, consultants, employees. The stock options are exercisable at the exercise price of $1.29 per share for a period of ten years from the date of grant. 360,000 of the stock options vest as follows: (i) 120,000 upon the date of grant; and (ii) 120,000 on each anniversary date of grant for 2 years. 1,430,000 of the stock options vest as follows: (i) 357,500 upon the date of grant; and (ii) 357,500 on each anniversary date of grant for 3 years. We granted the stock options to 12 U.S. Persons and 3 non-U.S. Persons (as that term is defined in Regulation S of the Securities Act of 1933) and in issuing securities we relied on the registration exemption provided for in Regulation S and/or Section 4(a)(2) of the Securities Act of 1933. During the years ended March 31, 2020, and March 31, 2019, a total of 239,000 and 161,100 options were exercised, respectively, all on a cashless exercise basis.
For the years ended March 31, 2020 and March 31, 2019 the Company has recognized compensation expense of $3,725,465 and $1,591,555 respectively, on the stock options granted in April 2017 that vested. As of March 31, 2021, all of the stock options granted in April, 2017 have vested.
On April 3, 2020, the Company granted an aggregate of 2,737,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 2,737,000 shares of our common stock pursuant to our 2018 Stock Option Plan. Each stock option is exercisable at a price of $0.53 per share until April 2, 2030. Of these stock options, 1,217,000 vest as to 50% on the grant date and 50% on the one-year anniversary of the grant date, 640,000 vest as to one-third on the grant date and one-third on each anniversary of the grant date and 880,000 vest as to one-third on each anniversary of the grant date. Wright, our president, chief executive officer and director, and 150,000 were granted to David A. The fair value of each of the 2,737,000 stock options issued was calculated as $0.53 per share, which was the Black-Scholes valuation as of the grant date, corresponding to a total fair value of $1,450,610 for these options. In connection with the above grant, the Company repriced a total of 600,900 stock options originally issued on April 28, 2017, from their original exercise price of $1.29 to $0.53, resulting in an additional stock compensation expense of $42,664.
Effective August 10, 2020, we granted 125,000 stock options to the new employee issued restricted shares above with an exercise price of $1.71 per share. The fair value of these 125,000 stock options issues was calculated at $1.57 per share, which was the Black-Scholes valuation (using the exercise price of $1.57, 10 years to maturity, annual risk-free interest rate of 0.6% and annualized volatility of 107%) as of the date of grant, corresponding to a total fair value of $185,625 for these options.
Effective November 18, 2020, the Company granted 45,000 stock options to the new employee issued restricted shares above with an exercise price of $1.09 per share. The fair value of these 45,000 stock options issues was calculated at $1.03 per share, which was the Black-Scholes valuation (using the exercise price of $1.09, 10 years to maturity, annual risk-free interest rate of 0.6% and annualized volatility of 121%) as of the date of grant, corresponding to a total fair value of $46,350 for these options.
Effective March 31, 2021, the Company granted an aggregate of 1,990,000 stock options to certain directors, officers, consultants and employees for the purchase of up to 1,990,000 shares of our common stock pursuant to our 2018 Stock Option Plan. Each stock option is exercisable at a price of $1.09 per share until March 31, 2031. Of these stock options, 1,060,000 vest as to 50% on the grant date and 50% on the one-year anniversary of the grant date and the remaining amount of 930,000 options vest one-half on the first anniversary date and one-half on the second anniversary date. Wright, our president, chief executive officer and director, and 200,000 were granted to David A. These stock options are exercisable at the exercise price of $1.09 per share until March 31, 2031. The fair value of each of the 1,990,000 stock options issued was calculated as $1.07 per share, which was the Black-Scholes valuation as of the grant date, corresponding to a total fair value of $2,129,300 for these options.
The Company's total stock compensation expense for the year-ended March 31, 2021, relating to stock option grants was $1,621,199. Additional stock compensation expense will be recognized in fiscal years 2022, 2023 and 2024 of $1,679,627, $484,477, and $49,661, respectively
### Exercise of Options
Effective as of April 29, 2020, the Company issued an aggregate of 116,000 shares of our common stock upon exercise of stock options for gross proceeds of $61,480.
Effective as of July 9, 2020 the Company issued an aggregate of 188,081 shares of our common stock upon a cash-less exercise of stock options.
Effective as of August 4, 2020 the Company issued an aggregate of 48,158 shares of our common stock upon a cash-less exercise of stock options.
Stock option activity summary covering options is presented in the table below:
### Warrants
On March 1, 2018, pursuant to Warrant Amendment Agreements dated February 22, 2018 with 16 holders (the "Holders") of our common stock purchase warrants (the "Existing Warrants"), we issued an aggregate of 3,900,000 shares of our common stock upon exercise of the Existing Warrants at an exercise price of $0.50 per share for aggregate gross proceeds of $1,950,000. The Existing Warrants were issued by us as part of an offering that closed on March 4, 2016. In addition, pursuant to the Warrant Amendment Agreements, we issued new common stock purchase warrants of our company (the "New Warrants") in the form of the Existing Warrants to purchase up to a number of shares of our common stock equal to the number of Existing Warrants exercised by the Holders, provided that (i) the exercise price of the New Warrants is $0.60 per share, subject to adjustment in the New Warrants, (ii) the expiry date of the New Warrants is September 1, 2019 and (iii) the New Warrants are non-transferable.
On May 31, 2018, the Company issued 5,131,665 Units of the Company at a price of $0.75 per Unit for aggregate gross proceeds of $3,848,749. Each Unit consisted of one share of common stock of the Company (each, a "
### Share
") and one-half of one share purchase warrant (each whole warrant, a "Warrant"). One Warrant entitles the holder thereof to purchase one additional Share of the Company (each, a
"
Warrant Share
"
) at a price of $0.90 per Warrant Share for a period of two years from closing.
On October 1, 2018, the Company closed a non-brokered private placement financing (the "Financing") of 1,619,947 units (each, a "Unit") at a price of CDN$2.50 per Unit for gross proceeds of $2,979,596. Each Unit consists of one share of common stock of the Company (each, a "Share") and one share purchase warrant (each, a "Warrant"), with each Warrant entitling the holder thereof to purchase one additional Share at a price of CDN$2.90 per Share for a period of two years. All securities issued in the Financing were subject to a Canadian holding period which expired<|endoftext|>Reported under SEC rules when the total costs are equal to or greater than $10,000 in the aggregate for a NEO.
(4)
Mr. Grachev served from January 6, 2020 until his resignation effective June 26, 2020. The amount included in Other Compensation for Mr. Grachev consists of severance payments he received in connection with his resignation from the Company pursuant to his employment agreement.
### Employment Agreements
James V. Caruso.
Caruso as of June 15, 2015, as amended on April 15, 2019, pursuant to which Mr. Caruso serves as President and Chief Executive Officer of the Company. Under the agreement, the Company pays Mr. Caruso a base salary that is adjusted from time to time. Mr. Caruso is also eligible for an annual bonus, based on performance, with an initial target of up to 50% of his base salary at the discretion of the Compensation Committee. If Mr. Caruso is terminated other than for cause or by Mr. Caruso for good reason within 12 months after a change in control (i.e. double trigger), he is entitled to severance in an amount equal to (i) 18 months of base salary, (ii) his then applicable target bonus payable over 18 months (a total of 1.5x the annual target bonus payable at the time of termination) and (iii) 18 months of payment or reimbursement of health insurance, each payable in installments over 18 months following a termination of employment by the Company without cause or by Mr. Caruso for good reason, and contingent upon the execution of a release agreement in favor of the Company, he is entitled to severance in an amount equal to 12 months base salary plus payment or reimbursement of health insurance for 12 months.
### Dov Elefant.
Elefant as of August 15, 2019, pursuant to which Mr. Elefant serves as Vice President and Chief Financial Officer of the Company. Elefant a base salary that is adjusted from time to time. Mr. Elefant is eligible for an annual bonus, based on performance, with an initial target of up to 30% of his base salary. If Mr. Elefant is terminated other than for cause or by Mr. Elefant for good reason within 12 months after a change in control (i.e. double trigger), Mr. Elefant is entitled to severance in an amount equal to (i) 12 months of base salary, (ii) 12 months of annual bonus and (iii) 12 months of payment or reimbursement of health insurance, each payable in installments over 12 months. Following a termination by the Company without cause or by Mr. Elefant for good reason, and contingent upon the execution of a release agreement in favor of the Company, the agreement provides for a payment equal to 75% of Mr. Elefants annual base salary and payments for the cost of health insurance for nine months and outplacement services not to exceed $7,500.
Jarrod Longcor.
Longcor as of July 15, 2016, as amended on April 15, 2019 and November 10, 2019, pursuant to which Mr. Longcor serves as the Chief Business Officer of the Company. Longcor a base salary that is adjusted from time to time. Mr. Longcor is eligible for an annual bonus, based on performance, with an initial target of up to 30% of his base salary. If Mr. Longcors employment is terminated other than for cause or by Mr. Longcor for good reason within 12 months after a change in control (i.e. double trigger), Mr. Longcor is entitled to severance in an amount equal to (i) 12 months of base salary and (ii) 12 months of payment or reimbursement of health insurance, each payable in installments over 12 months. Following a termination of employment by the Company without cause or by Mr. Longcor for good reason, and contingent upon the execution of a release agreement in favor of the Company, the agreement provides for a payment equal to 75% of Mr. Longcors annual base salary, a payment amount equal to the annual bonus Mr. Longcor would have received for the calendar year in which the termination occurred prorated for the number of days elapsed in such year, payments for the cost of health insurance for nine months and outplacement services not to exceed $7,500.
### John E. Friend II, M.D.
We entered into an employment agreement with Dr. Friend as of July 1, 2020, pursuant to which Dr. Friend serves as Vice President and Chief Medical Officer of the Company. Under the agreement, the Company is paying Dr. Friend a base salary that is adjusted from time to time. Dr. Friend is eligible for an annual bonus, based on performance, with an initial target of up to 30% of his base salary. If Dr. Friend is terminated other than for cause or by Dr. Friend for good reason within 12 months after a change in control (i.e. double trigger), Dr. Friend is entitled to severance in an amount equal to (i) 12 months of base salary, (ii) 12 months of annual bonus and (iii) 12 months of payment or reimbursement of health insurance, each payable in installments over 12 months. Following a termination of employment by the Company without cause or by Dr. Friend for good reason, and contingent upon the execution of a release agreement in favor of the Company, the agreement provides for a payment equal to 75% of Dr. Friends annual base salary and payments for the cost of health insurance for nine months and outplacement services not to exceed $7,500.
The following table sets forth certain information with respect to outstanding equity awards at December 31, 2020 with respect to our NEOs:
(1)
These shares vest in increments of one-third at first anniversary from grant date and then vesting in 24 equal monthly installments over a 24-month period beginning on the first anniversary of the grant date.
(2)
This option grant was divided into a definitive grant of 70,950 shares, which vested on October 12, 2019, and a contingent grant of 79,050 shares, which vest in 24 equal monthly installments over a 24-month period beginning on the first anniversary of the grant date.
(3)
(4)
These shares vest quarterly in increments of one-twelfth over three years from the date of grant.
(5)
These shares vest annually in increments of one-fourth over four years from the date of grant.
(6)
This option grant was divided into a definitive grant of 29,820 shares which vested on October 12, 2019, and a contingent grant of 33,180 shares, which vest in 24 equal monthly installments over a 24-month period beginning on the first anniversary of the grant date.
(7)
Pursuant to the terms of the option award agreements, options granted pursuant to the 2015 Plan become fully vested upon a termination event within one year following a change in control, as defined therein. A termination event is defined as either termination of employment other than for cause or constructive termination resulting from a significant reduction in either the nature or scope of duties and responsibilities, a reduction in compensation or a required relocation.
### Director Compensation
The following table sets forth certain information about the compensation of our non-employee directors who served during the year ended December 31, 2020:
(1)
Director fees consist of annual cash fees for service.
(2)
Granted on June 24, 2020 at an exercise price of $1.28 per share, which vest over a period of three years from the grant date, with one-third vesting on the first anniversary of the grant date and the remainder vesting in 24 equal monthly installments over a 24 month period beginning on the first anniversary of the grant date. All assumptions made regarding the valuation of equity awards can be referenced in Note 7 to the financial statements included in our Annual Report on Form 10-K filed with the SEC on March 2, 2021.
During 2020, we paid each of our non-employee directors an annual cash fee of $60,000. We reimbursed directors for reasonable out-of-pocket expenses incurred in attending Board and committee meetings and undertaking certain matters on our behalf. Mr. Swirsky receives additional option awards for his service as Chairman of the Board of the Company. Directors who are our employees do not receive additional fees for their services as directors.
The aggregate number of option awards outstanding as of December 31, 2020 for each non-employee director was as follows:
### Item 12.
At the close of business on April 26, 2021, there were 52,726,278 shares of our common stock outstanding. The following table provides information regarding beneficial ownership of our common stock as of April 26, 2021: each person known by us to be the beneficial owner of more than 5% of our common stock; each of our directors; each executive officer named in the summary compensation table;
The address of each executive officer and director is c/o Cellectar Biosciences, Inc., 100 Campus Drive, Florham Park, New Jersey 07932, except as otherwise indicated. The persons named in this table have sole voting and investment power with respect to the shares listed, except as otherwise indicated. In these cases, the information with respect to voting and investment power has been provided to us by the security holder. The identification of natural persons having voting or investment power over securities held by a beneficial owner listed in the table below does not constitute an admission of beneficial ownership of any such natural person. Shares included in the Right to Acquire column consist of shares that may be purchased through the exercise of options or warrants that are exercisable within 60 days of April 26, 2021.
* Less than 1%
(1)
As reported in Schedule 13G filed with the SEC on February 17, 2021. Based on such 13G filing, Consonance Capital Management LP has sole voting power over 0 shares, shared voting power over 4,703,435 shares, sole dispositive power over 0 shares and shared dispositive power over 4,703,435 shares. Consonance Capital Opportunity Fund Management LP has sole voting power over 0 shares, shared voting power over 2,844,444 shares, sole dispositive power over 0 shares and shared dispositive power over 2,844,444 shares. Mitchell Blutt has sole voting power over 0 shares, shared voting power over 4,587,679 shares, sole dispositive power over 0 shares and shared dispositive power over 4,587,679 shares. Consonance Capman GP LLC has sole voting power over 0 shares, shared voting power over 4,587,679 shares, sole dispositive power over 0 shares and shared dispositive power over 4,587,679 shares. The address of Consonance Capital Management LP is 1370 Avenue of the Americas, Floor 33, New York, New York 10019.
(2)
As reported in Schedule 13G/A filed with the SEC on February 16, 2021. Based on such 13G/A filing, Laurence W. Lytton has sole voting power over 4,730,003 shares, shared voting power over 14,000 shares, sole dispositive power over 4,730,003 shares and shared dispositive power over 14,0000 shares. The principal business office address of Laurence W. Lytton is 467 Central Park West, New York, New York 10025.
(3)
As reported in Schedule 13G filed with the SEC on February 16, 2021. Based on such 13G filing, Sio Capital Management, LLC has sole voting power over 0 shares, shared voting power over 2,331,123 shares, sole dispositive power over 0 shares and shared dispositive power over 2,331,123 shares. The address of Sio Capital Management, LLC is 600 Third Avenue, 2nd Floor, New York, New York 10016.
(4)
Consists of shares of common stock held by Venture Investors Early Stage Fund IV Limited Partnership and Advantage Capital Wisconsin Partners I, Limited Partnership. VIESF IV GP LLC is the general partner of Venture Investors Early Stage Fund IV Limited Partnership and Venture Investors LLC is the submanager and special limited partner of Advantage Capital Wisconsin Partners I, Limited Partnership. The investment decisions of VIESF IV GP LLC and Venture Investors LLC are made collectively by five managers, including Mr. Neis. Each such manager and Mr. Neis disclaim such beneficial ownership except to the extent of his pecuniary interest therein. The address of Mr. Neis is c/o Venture Investors LLC, 505 South | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Than $1,500,000. For the trailing twelve (12) month period from the closing date, EBITDA for the Goedeker Business was ($2,825,000) so Goedeker is not entitled to an earn our payment for that period.
To the extent Goedeker is entitled to all or a portion of an earn out payment, the applicable earn out payment(s) (or portion thereof) shall be paid on the date that is three (3) years from the closing date, and shall accrue interest from the date on which it is determined Goedeker is entitled to such earn out payment (or portion thereof) at a rate equal to five percent (5%) per annum, computed on the basis of a 360 day year for the actual number of days elapsed.
The Company determined the fair value of the earnout on the date of acquisition was $81,494. Such amount was recorded as a contingent consideration liability within the accounts payable and accrued expense line item on the consolidated balance sheet and is revalued to fair value each reporting period until settled. The year 1 contingent liability of $32,246 was written-off in the year ended December 31, 2019 as the target was not met and the balance of the liability at December 31, 2019 is $49,248. Management reviewed the contingent consideration due at December 31, 2020 and adjusted the balance to the present value of the amount it estimates will be due in April 2022.
The fair value of the purchase consideration issued to Goedeker was allocated to the net tangible assets acquired. The Company accounted for the acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net liabilities assumed was approximately $550,316. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill. Provisional goodwill was estimated at $4,603,953 at December 31, 2019 due to the preliminary valuation. During the year ended December 31, 2020, the Company subsequently adjusted the value of goodwill by $121,736 to $4,725,689 based on the finalized purchase price allocation.
1847 GOEDEKER INC.
NOTES TO
The table below shows the analysis of the Goedeker asset purchase:
NOTE 11LINES OF CREDIT
### Burnley Capital LLC
On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Burnley Capital LLC (Burnley) for revolving loans in an aggregate principal amount that will not exceed the lesser of (i)the borrowing base (as defined in the loan and security agreement) or (ii)$1,500,000 minus reserves established Burnley at any time in accordance with the loan and security agreement. In connection with the closing of the acquisition of Goedeker on April 5, 2019, the Company borrowed $744,000 under the loan and security agreement and issued a revolving note to Burnley in the principal amount of up to $1,500,000. As of December 31, 2019, the balance of the line of credit was $571,997.
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the revolving note in full and the loan and security agreement was terminated. The total payoff amount was $118,194, consisting of principal of $32,350, interest of $42 and prepayment, legal, and other fees of $85,802.
### Northpoint Commercial Finance LLC
On June 24, 2019, the Company, as borrower, entered into a loan and security agreement with Northpoint Commercial Finance LLC, which was amended on August 2, 2019, for revolving loans up to an aggregate maximum loan amount of $1,000,000 for the acquisition, financing or refinancing by the Company of inventory at an interest rate of LIBOR plus 7.99%. As of December31, 2019, the balance of the line of credit was $678,993. The loan and security agreement was terminated on May 18, 2020 and there is no outstanding balance as of December 31, 2020.
1847 GOEDEKER INC.
NOTES TO
DECEMBER 31, 2020 AND 2019
### NOTE 12NOTES PAYABLE AND WARRANT LIABILITY
Arvest Loan
On August 25, 2020, the Company entered into a promissory note and security agreement with Arvest Bank for a loan in the principal amount of$3,500,000. As of December 31, 2020, the outstanding balance of this loan is $3,185,369 comprised of principal of $3,283,628, net of unamortized loan costs of $98,259. The Company classified $663,339 as a current liability and the balance as a long-term liability.
Pursuant to the terms of the loan agreement, the Company is required to make monthly payments of $63,353 beginning on September 25, 2020 and until the maturity date, at which time all unpaid principal and interest will be due. The Company may prepay the loan in full or in part at any time without penalty. The loan is secured by all financial assets credited to the Companys securities account held by Arvest Investments, Inc.
### Maturities of the debt are as follows:
Small Business Community Capital II, L.P.
On April 5, 2019, the Company, as borrower, and Holdco entered into a loan and security agreement with Small Business Community Capital II, L.P. (SBCC) for a term loan in the principal amount of$1,500,000, pursuant to which the Company issued to SBCC a term note in the principal amount of up to $1,500,000 and a ten-year warrant to purchase shares of the most senior capital stock of the Company equal to 5.0% of the outstanding equity securities of the Company on a fully-diluted basis for an aggregate price equal to $100. As of December 31, 2019, the balance of the note was $999,201.
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the term note in full and the loan and security agreement was terminated. The total payoff amount was $1,122,412 consisting of principal of $1,066,640, interest of $11,773 and prepayment, legal, and other fees of $43,999.
The Company classified the warrant as a derivative liability on the balance sheet at June 30, 2020 of $2,250,000 based on the estimated value of the warrant in the IPO. The increase in the value of the warrant from the estimated value of $122,344 at December 31, 2019 resulted in a charge of $2,127,656 during the year ended December 31, 2020. Immediately prior to the closing of the IPO on August 4, 2020, SBCC converted the warrant into 250,000 shares of common stock.
### NOTE 13NOTES PAYABLE, RELATED PARTIES
As noted in Note 10, a portion of the purchase price for the acquisition was paid by the issuance by the Company to Steve Goedeker, as representative of Goedeker, of a 9% subordinated promissory note in the principal amount of $4,100,000. As of December 31, 2019, the balance of the note was $
3,300,444.
1847 GOEDEKER INC.
NOTES TO
Pursuant to the settlement agreement described above (see Note 10), the parties entered into an amendment and restatement of the note that became effective as of the closing of the IPO on August 4, 2020, pursuant to which (i) the principal amount of the existing note was increased by $250,000, (ii) upon the closing of the IPO, the Company agreed to make all payments of principal and interest due under the note through the date of the closing, and (iii) from and after the closing, the interest rate of the note was increased from 9% to 12%. In accordance with the terms of the amended and restated note, the Company used a portion of the proceeds from the IPO to pay $1,083,842 of the balance of the note representing a $696,204 reduction in the principal balance and interest accrued through August 4, 2020 of $387,638.
The Company repaid this note payable with proceeds from the Arvest Loan. In connection with the refinance, the Company recorded a $757,239 loss on extinguishment of debt consisting of a $250,000 forbearance fee, write-off of unamortized loan discount of $338,873, and write-off of unamortized debt costs of $168,366.
### NOTE 14CONVERTIBLE PROMISSORY NOTE
On April 5, 2019, 1847 Holdings, Holdco and the Company (collectively, 1847) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (Leonite), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286.
On May 11, 2020, 1847 and Leonite entered into a first amendment to secured convertible promissory note, pursuant to which the parties agreed (i) to extend the maturity date of the note to October 5, 2020, (ii) that 1847s failure to repay the note on the original maturity date of April 5, 2020 shall not constitute and event of default under the note and (iii) to increase the principal amount of the note by $207,145, as a forbearance fee. The Company accounted for this transaction as a loss on extinguishment of debt.
The Company accounted for the issuance of the 200,000 additional warrants as a $566,711 loss on debt restructuring and an increase in additional paid-in-capital, representing the estimated fair value of the 200,000 additional warrants for a five-year period.
1847 Holdings issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. In the second quarter of 2020, the $137,500 value of the shares was transferred from a liability to 1847 Holdings to additional paid-in-capital. The Company amortized $129,343 of financing costs related to the shares and warrants in the year ended December 31, 2020.
The Company accounted for this transaction as a $100,000 reduction in the principal amount of the debt, a $175,000 loss on extinguishment of debt, and a $275,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date.
The Company accounted for this transaction as a $50,000 reduction in the principal amount of the debt, a $50,000 loss on extinguishment of debt, and a $100,000 increase in additional paid-in-capital representing the fair value of the 1847 Holdings common shares on the conversion date.
1847 GOEDEKER INC.
NOTES TO
As a result of the activity on this note, $948,856 was recorded as loss on extinguishment of debt for the year ended December 31, 2020.
On August 4, 2020, the Company used a portion of the proceeds from the IPO to repay the note in full. The total payoff amount was $780,653, consisting of principal of $771,431 and interest of $9,222.
### NOTE 15OPERATING LEASE
On April 5, 2019, the Company entered into a lease agreement with S.H.J., L.L.C., a Missouri limited liability company and affiliate of the Company at that time. The lease is for a term five (5) years and provides for a base rent of $45,000 per month. In addition, the Company is responsible for all taxes and insurance premiums during the lease term. The lease contains customary events of default, including if: (i) the Company shall fail to pay rent within five (5) days after the due date; (ii) any insurance required to be maintained by the Company pursuant to the lease shall be canceled, terminated, expire, reduced, or materially changed; (iii) the Company shall fail to comply with any term, provision, or covenant of the lease and shall not begin and pursue with reasonable diligence the cure of such failure within fifteen (15) days after written notice thereof to the Company; (iv) the Company shall become insolvent, make an assignment for the benefit of creditors, or file a petition under any section or chapter of the Bankruptcy Code, or under any similar law or statute of the United States of America or any State thereof; or (v) a receiver or trustee shall be appointed for the leased premises or for all or substantially all of the assets of the Company.
During the year ended December 31, 2020 and the period April 6 to December 31, 2019, the Company paid and expensed rent payments of $540,000 and $397,500, respectively.
At December 31, 2019, the operating lease right of use asset was $2,000,755. Supplemental balance sheet information related to lease at December<|endoftext|>10% of her base salary.
On December 11, 2020, Messrs. Andrews, Levine, and Parker, and Ms. Sundar received payment of their deferred compensation and accrued interest. Mr. Andrews received payment in cash and Messrs. Levine and Parker and Ms. Sundar received payment in cash and shares of Oncocyte common stock valued at the closing price of the common stock on the NYSE American on December 8, 2020.
### Change in Control and Severance Plan
We have adopted the OncoCyte Corporation Change in Control and Severance Plan (the CIC Plan) which provides change in control and other severance benefits to a select group of our management or highly compensated employees, including our executive officers, who have executed a Change in Control and Severance Agreement (CIC Agreement) and who otherwise satisfy the conditions set forth in their CIC Agreement and the provisions of the CIC Plan. Pursuant to the CIC Plan, we have entered into CIC Agreements with certain executive officers, including our President and Chief Executive Officer, Ronald Andrews, our Chief Financial Officer, Mitchell Levine, our Chief Commercial Officer, Padma Sundar, and our former Chief Operating Officer, Albert Parker. Each of their CIC Agreements has the effect of modifying the executives employment agreement and provides that if we terminate the executives employment without cause or if the executive resigns for good reason, the executive will receive a severance payment in the amount of 12 months of his or her base salary and accelerated vesting of stock options, restricted stock units, and any other equity awards (Equity Awards) that were schedule to vest based on the passage of time during the 12 months following the termination of employment. In addition to those severance benefits, if a termination of the executives employment without cause or a resignation for good reason occurs within three months before or twelve months after a change in control, the executive will also receive his or her target bonus for the year and the vesting of all Equity Awards will be fully accelerated. In addition to the foregoing, the terminated executive will receive a lump sum payment (which shall not be grossed up for applicable income and employment taxes) equal to twelve months of the premium costs of group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to the same extent provided under Oncocytes group health plan. In order to receive the severance benefits, the executive must execute and comply with a separation agreement and general release of all claims against Oncocyte.
Equity Awards Outstanding at Year End
The following table summarizes certain information concerning stock options and other equity awards granted by us under the Option Plan and the Incentive Plan held as of December 31, 2020 by our Named Executive Officers:
Equity Awards Outstanding At Year-End
(1)
Except as otherwise indicated below, one quarter of the options shall vest upon completion of 12 full months of continuous employment measured from the date of grant, and the balance of the options will vest in 36 equal monthly installments commencing on the first anniversary of the date of grant, based upon the completion of each month of continuous employment.
(2)
The date of grant was April 2, 2018 for services of Mr.
(3)
The date of grant of the RSUs was July 1, 2019. The RSUs will vest upon completion of two years of continuous service as an employee from the grant date.
(4)
The date of grant was August 30, 2018 for services of Mr.
(5)
Mr. Andrews agreed to accept RSUs for 106,221 shares of common stock under our Incentive Plan in lieu of $279,360 in cash as part of his discretionary bonus. The 106,221 shares of RSUs were determined based on the cash payable value of $279,360 divided by the $2.63 per share closing price of Oncocyte common stock on May 7, 2020. The market value of the RSUs shown above was determined based on the closing price of Oncocyte common stock on December 31, 2020.
(6)
The date of grant was July 1, 2019.
(7)
The date of grant was July 1, 2020.
(8)
These options were granted to Mr. Levine upon his appointment as Chief Financial Officer on November 16, 2017.
(9)
The date of grant was May 23, 2018. Included in the number of options exercisable is 41,666 options which vested in June 2020 based on certain performance conditions for vesting having been met
(10)
(11)
(12)
The date of the grant was April 28, 2020 and the 20,000 restricted stock units will vest one year from the date of grant.
(13)
The date of grant was August 6, 2018. The number of exercisable options includes 65,000 options that vested during June 2020 upon on the attainment of certain performance conditions required for vesting, and includes additional stock options that vested through acceleration, pursuant to Mr.
(14)
(15)
(16)
The date of grant was May 22, 2019.
(17)
### The Incentive Plan
The following summary of the Incentive Plan is a summary only and does not purport to include all of the terms of the Inventive Plan, and is qualified by the full terms of the Incentive Plan.
We have adopted the Incentive Plan that permits us to grant awards, or Awards, consisting of stock options, the grant or sale of restricted stock (Restricted Stock), the grant of stock appreciation rights (SARs), and the grant of hypothetical units issued with reference to our common stock (Restricted Stock Units or RSUs), for up to 11,000,000 shares of our common stock. The Incentive Plan also permits Oncocyte to issue such other securities as our Board of Directors (the Board) or the Compensation Committee (the Committee) administering the Incentive Plan may determine. Awards of stock options, Restricted Stock, SARs, and RSUs (Awards) may be granted under the Incentive Plan to Oncocyte employees, directors, and consultants.
Awards may vest and thereby become exercisable or have restrictions on forfeiture lapse on the date of grant or in periodic installments or upon the attainment of performance goals, or upon the occurrence of specified events. Awards may not vest, in whole or in part, earlier than one year from the date of grant. Vesting of an Award after the date of grant may be accelerated only in the limited circumstances specified in the Incentive Plan. In the case of the acceleration of vesting of any performance-based Award, acceleration of vesting shall be limited to actual performance achieved, pro rata achievement of the performance goal(s) on the basis for the elapsed portion of the performance period, or a combination of actual and pro rata achievement of performance goals.
No person shall be granted, during any one-year period, options to purchase, or SARs with respect to, more than 1,000,000 shares in the aggregate, or any Awards of Restricted Stock or RSUs with respect to more than 500,000 shares in the aggregate. If an Award is to be settled in cash, the number of shares on which the Award is based shall not count toward the individual share limit.
No Awards may be granted under the Incentive Plan more than ten years after the date upon which the Incentive Plan was adopted by the Board, and no options or SARS granted under the Incentive Plan may be exercised after the expiration of ten years from the date of grant.
### Stock Options
Options granted under the Incentive Plan may be either incentive stock options within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended, or non-qualified stock options that do not qualify incentive stock options. Incentive stock options may be granted only to Oncocyte employees and employees of subsidiaries. The exercise price of stock options granted under the Incentive Plan must be equal to the fair market of our common stock on the date the option is granted. In the case of an optionee who, at the time of grant, owns more than 10% of the combined voting power of all classes of Oncocyte stock, the exercise price of any incentive stock option must be at least 110% of the fair market value of the common stock on the grant date, and the term of the option may be no longer than five years. The aggregate fair market value of common stock (determined as of the grant date of the option) with respect to which incentive stock options become exercisable for the first time by an optionee in any calendar year may not exceed $100,000.
The exercise price of an option may be payable in cash or in common stock having a fair market value equal to the exercise price, or in a combination of cash and common stock, or other legal consideration for the issuance of stock as the Board or Committee may approve.
Generally, options will be exercisable only while the optionee remains an employee, director or consultant, or during a specific period thereafter, but in the case of the termination of an employee, director, or consultants services due to death or disability, the period for exercising a vested option shall be extended to the earlier of 12 months after termination or the expiration date of the option.
In lieu of granting options, we may enter into purchase agreements with employees under which they may purchase or otherwise acquire Restricted Stock or RSUs subject to such vesting, transfer, and repurchase terms, and other restrictions. The price at which Restricted Stock may be issued or sold will be not less than 100% of fair market value. Employees or consultants, but not executive officers or directors, who purchase Restricted Stock may be permitted to pay for their shares by delivering a promissory note or an installment payment agreement that may be secured by a pledge of their Restricted Stock. Restricted Stock may also be issued for services actually performed by the recipient prior to the issuance of the Restricted Stock. Unvested Restricted Stock for which we have not received payment may be forfeited, or we may have the right to repurchase unvested shares upon the occurrence of specified events, such as termination of employment.
Subject to the restrictions set with respect to the particular Award, a recipient of Restricted Stock generally shall have the rights and privileges of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld for the recipients account, and interest may be credited on the amount of the cash dividends withheld. The cash dividends or stock dividends so withheld and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the recipient in cash or, at the discretion of the Board or Committee, in shares of common stock having a fair market value equal to the amount of such dividends, if applicable, upon the release of restrictions on the Restricted Stock and, if the Restricted Stock is forfeited, the recipient shall have no right to the dividends.
The terms and conditions of a grant of RSUs shall be determined by the Board or Committee. No shares of common stock shall be issued at the time a RSU is granted. A recipient of Restricted Stock Units shall have no voting rights with respect to the RSUs. Upon the expiration of the restrictions applicable to a RSU, we will either issue to the recipient, without charge, one share of common stock per RSU or cash in an amount equal to the fair market value of one share of common stock.
At the discretion of the Board or Committee, each RSU (representing one share of common stock) may be credited with cash and stock dividends paid in respect of one share (Dividend Equivalents). Dividend Equivalents shall be withheld for the recipients account, and interest may be credited on the amount of cash Dividend Equivalents withheld. Dividend Equivalents credited to a recipients account and attributable to any particular RSU (and earnings thereon, | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
14, 2019.
10.12*
Incentive Stock Option Agreement between and James Early, incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on October 20, 2016.
10.13*
Employment Agreement between and James Early, effective as of March 16, 2018, incorporated by reference to Exhibit 10.44 of the Companys Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 23, 2018.
Exhibit No.
Description
10.14*
Severance and Consulting Agreement and General Release, dated January 29, 2020, by and between Interpace Biosciences, Inc. and James Early, incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on January 31, 2020.
10.15*
Employment Agreement, dated as of January 29, 2020, by and between Interpace Biosciences, Inc. and Fred Knechtel, incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on January 31, 2020.
10.16*
Incentive Stock Option Agreement between and Jack E. Stover, incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on October 20, 2016.
10.17*
Amended and Restated Employment Agreement dated December 5, 2018, between the Company and Jack E. Stover, incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on December 11, 2018.
10.18*
First Amendment to Amended and Restated Employment Agreement, dated January 29, 2020, by and between Interpace Biosciences, Inc. and Jack E. Stover, incorporated by reference to Exhibit 10.3 of the Companys Current Report on Form 8-K, filed with the SEC on January 31, 2020.
10.19*
Employment Separation Agreement between Interpace Diagnostics, LLC and Gregory Richard, effective as of March 25, 2015, incorporated by reference to Exhibit 10.39 of the Companys Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 21, 2019.
10.20*
Employment Agreement, dated November 23, 2020, between Thomas W. Burnell and Interpace Biosciences, Inc., incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on November 25, 2020.
10.21*
Separation and Consulting Agreement and General Release, dated November 23, 2020, between Jack E. Stover and Interpace Biosciences, Inc., incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on November 25, 2020.
10.22*
Form of Indemnification Agreement by and between and its directors and executive officers, incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on August 8, 2016.
10.23*
Form of Indemnification Agreement by and between Interpace Biosciences, Inc. and Indemnitee, incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on January 17, 2020.
10.24
License Agreement, dated August 13, 2014, by and between Interpace Diagnostics, LLC and Asuragen, Inc., incorporated by reference to Exhibit 10.31 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 5, 2014.
10.25
CPRIT License Agreement, dated August 13, 2014, by and between Interpace Diagnostics, LLC and Asuragen, Inc., incorporated by reference to Exhibit 10.32 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 5, 2014.
10.26
Supply Agreement, dated August 13, 2014, by and between Interpace Diagnostics, LLC and Asuragen, Inc., incorporated by reference to Exhibit 10.33 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 5, 2014.
10.27
Guaranty, dated August 13, 2014 by the Company in favor of Asuragen, Inc., incorporated by reference to Exhibit 10.34 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed with the SEC on November 5, 2014.
10.28
Morris Corporate Center Lease, incorporated by reference to Exhibit 10.1 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, filed with the SEC on November 5, 2009.
10.29
First Amendment to Lease, dated May 24, 2017, by and between Brookwood MC Investors, LLC, Brookwood MC II, LLC, and the Company, incorporated by reference to Exhibit 10.52 of the Companys Registration Statement on Form S-1 (333-218140), as amended, filed with the SEC on June 13, 2017.
10.30
Lease, dated June 28, 2015, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.42 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
Exhibit No.
Description
10.31
Amendment No. 1 to Lease, dated September 18, 2007, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.43 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.32
Amendment No. 2 to Lease, dated August 29, 2008, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.44 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.33
Amendment No. 3 to Lease, dated April 8, 2009, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.45 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.34
Amendment No. 4 to Lease, dated September 16, 2010, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.46 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.35
Amendment No. 5 to Lease, dated September 15, 2011, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.47 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.36
Amendment No. 6 to Lease, dated March 5, 2014, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.48 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.37
Amendment No. 7 to Lease, dated August 29, 2014, by and between WE 2 Church Street South LLC and JS Genetics, LLC, incorporated by reference to Exhibit 10.49 of the Companys Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 5, 2015.
10.38
Amendment No. 8 to Lease, dated December 31, 2019, by and between WE 2 Church Street South LLC and Interpace Diagnostics Lab Inc., , incorporated by reference to Exhibit 10.34 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.39
Lease Agreement, dated March 31, 2017, by and between Saddle Lane Realty, LLC and the Company, incorporated by reference to Exhibit 10.53 of the Companys Registration Statement on Form S-1 (333-218140), as amended on June 13, 2017.
10.40
First Amendment, dated September 26, 2017, by and between Saddle Lane Realty, LLC and Interpace Diagnostics Corporation, incorporated by reference to Exhibit 10.36 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time
10.41
Amendment No. 2 to Lease, dated March 15, 2018, between Saddle Lane Realty, LLC and Interpace Diagnostics Corporation, incorporated by reference to Exhibit 10.45 of the Companys Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 23, 2018.
10.42
Form of Securities Purchase Agreement, dated January 20, 2017, by and between and certain purchasers named therein, incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on January 20, 2017.
10.43
Warrant Agency Agreement, dated June 21, 2017, by and between and American Stock Transfer & Trust Company, LLC, incorporated by reference to Exhibit 1.2 of the Companys Current Report on Form 8-K, filed with the SEC on June 21, 2017.
10.44
Form of Warrant Exercise Agreement dated October 12, 2017, incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on October 12, 2017.
Exhibit No.
Description
10.45
Securities Purchase Agreement, dated July 15, 2019, by and between and Ampersand 2018 Limited Partnership, incorporated by reference to Exhibit 10.2 of the Companys Current Report on Form 8-K, filed with the SEC on July 19, 2019.
10.46
Transition Services Agreement, dated July 15, 2019, by and between Interpace BioPharma, Inc. and Cancer Genetics, Inc., incorporated by reference to Exhibit 10.1 of the Companys Current Report on Form 8-K, filed with the SEC on July 19, 2019.
10.47
Form of Voting Agreement, incorporated by reference to Exhibit 10.4 of the Companys Current Report on Form 8-K, filed with the SEC on July 19, 2019.
10.48
Office Lease Agreement, dated October 9, 2007, by and between Meadows Office, L.L.C. and Cancer Genetics, Inc., incorporated by reference to Exhibit 10.44 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.49
First Amendment to Lease, dated October 30, 2017, by and between Meadows Landmark LLC and Cancer Genetics, Inc., incorporated by reference to Exhibit 10.45 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.50
Consent to Assignment, dated July 19, 2019, by and among Meadows Landmark LLC, Cancer Genetics, Inc., and Interpace BioPharma, Inc, incorporated by reference to Exhibit 10.46 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.51
Lease Agreement, dated June 12, 2004, by and between Southport Business Park Limited Partnership and Gentris Corporation, incorporated by reference to Exhibit 10.47 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.52
Letter Amendment, dated October 21, 2004, by and between Southport Business Park Limited Partnership and Gentris Corporation, incorporated by reference to Exhibit 10.48 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.53
Second Amendment to Lease, dated June 17, 2005, by and between Southport Business Park Limited Partnership and Gentris Corporation, incorporated by reference to Exhibit 10.49 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.54
Third Amendment to Lease, dated May 25, 2006, by and between Southport Business Park Limited Partnership and Gentris Corporation, incorporated by reference to Exhibit 10.50 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from time to time.
10.55
Fourth Amendment to Lease, dated December 20, 2007, by and between Southport Business Park Limited Partnership and Gentris Corporation, incorporated by reference to Exhibit 10.51 of the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on April 22, 2020, as amended from<|endoftext|>Balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419 under the Securities Act (Rule 419).
Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets as of the date of the liquidation of the Trust Account, in each case including interest earned on the funds held in the Trust Account and not previously released to us to pay our income taxes, less income taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, in each case including interest earned on the funds held in the Trust Account and not previously released to us to pay our income taxes, less income taxes payable, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
If, after we distribute the proceeds in the Trust Account to our public shareholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, a liquidator may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby potentially exposing the members of our board of directors and us to claims of punitive damages.
If, after we distribute the proceeds in the Trust Account to our public shareholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/creditor and/or insolvency laws as a voidable preference. As a result, a liquidator could seek to challenge the transaction and recover some or all amounts received by our shareholders.
If, before distributing the proceeds in the Trust Account to our public shareholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public shareholders, we file a winding up petition or a winding up petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable insolvency law, and may be included in our liquidation estate and subject to the claims of third parties with priority over the claims of our shareholders. To the extent any liquidation claims deplete the Trust Account, the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced.
(ii) the redemption of any public shares properly submitted in connection with a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association that would affect the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial business combination within 24 months (or 27 months, as applicable) from the closing of our Initial Public Offering; and (iii) the redemption of our public shares if we are unable to complete our initial business combination within 24 months (or 27 months, as applicable) from the closing of our Initial Public Offering, subject to applicable law.
We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable to a fine and to imprisonment in the Cayman Islands or both.
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual general meeting) serving a three-year term.
However, under the terms of the warrant agreement governing the terms of our warrants, we have agreed that as soon as practicable, but in no event later than 20 business days, after the closing of our initial business combination, we will use our commercially reasonable efforts to file a registration statement under the Securities Act covering such shares. We will use our commercially reasonable efforts to cause the same to become effective, but in no event later than 60 business days after the closing of our initial business combination, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement.
Pursuant to an agreement entered into in connection with our Initial Public Offering, we have agreed with our initial shareholders and Tortoise to register the Class A ordinary shares into which Founder Shares are convertible, the Private Placement Warrants and the Class A ordinary shares issuable upon exercise of the Private Placement Warrants, any Class A ordinary shares held upon the completion of our Initial Public Offering or acquired prior to or in connection with our initial business combination and warrants that may be issued upon conversion of working capital loans or the Class A ordinary shares issuable upon exercise of such warrants.
This is because the shareholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A ordinary shares that is expected when the securities owned by our initial shareholders, Tortoise or their respective permitted transferees are registered.
We may be treated as a passive foreign investment company (PFIC), which could result in adverse U.S. investors.
If we are treated as a PFIC for any taxable year in which a U.S. Holder holds our Class A ordinary shares (regardless of whether we remain a PFIC for subsequent taxable years), such U.S. Our PFIC status for our current and subsequent taxable years may depend on, among other things, whether we qualify for the PFIC start-up exception, the timing of our business combination, the amount of our passive income and assets in the year of the business combination, whether we combine with a U.S. or non-U.S. target company, and the amount of passive income and assets of the acquired business. Our actual PFIC status for our current taxable year or any subsequent taxable year will not be determinable until after the end of such taxable year (and in the case of our start-up year, possibly not until after the close of the second taxable year following our start-up year). We cannot assure you that we will not be a PFIC in our current taxable year or in any future taxable year.
If we determine we are a PFIC for any taxable year, upon written request by a U.S. Holder, we will endeavor to provide to such U.S. Holder such information as the Internal Revenue Service (the IRS) may require, including a PFIC annual information statement, in order to enable such U.S. Holder to make and maintain a qualified electing fund (QEF) election with respect to its Class A ordinary shares, but there is no assurance that we will timely provide such required information. The rules dealing with PFICs and with the QEF election are very complex and are affected by various factors in addition to those described in this prospectus. Accordingly, U.S. investors are strongly urged to consult with and rely solely upon their own tax advisors regarding the application of the PFIC rules to them in their particular circumstances.
For instance, it is unclear whether the redemption rights with respect to our Class A ordinary shares suspend the running of a U.S. Holders holding period for purposes of determining whether any gain or loss realized by such holder on the sale or exchange of Class A ordinary shares is long-term capital gain or loss and for determining whether any dividend we pay would be eligible for favorable U.S. federal income tax treatment. Each prospective investor is urged to consult with and rely solely upon its own tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our Class A ordinary shares.
The U.S. federal income tax treatment of the redemption of Class A ordinary shares as a sale of such Class A ordinary shares depends on a shareholders specific facts.
The U.S. federal income tax treatment of a redemption of Class A ordinary shares will depend on whether the redemption qualifies as a sale of such Class A ordinary shares under Section 302(a) of the Code, which will depend largely on the total number of ordinary shares treated as held by the shareholder electing to redeem Class A ordinary shares relative to all of the ordinary shares outstanding before and after the redemption. If such redemption is not treated as a sale of Class A ordinary shares for U.S. federal income tax purposes, the redemption will instead be treated as a corporate distribution.
As a result, we may be able to complete our business combination even though a substantial majority of our public shareholders do not agree with the transaction and have redeemed their shares or, if we seek shareholder approval of our initial business combination and do not conduct redemptions in connection with our business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our Sponsor, officers, directors, advisors or any of their affiliates.
Although our ability to amend the terms of the public warrants with the consent of at least 50% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or shares (at a ratio different than initially provided), shorten the exercise period or decrease the number of our Class A ordinary shares purchasable upon exercise of a warrant.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Dividing the amount contributed to us by the number of founder shares issued. In November 2019 we effected a stock dividend of 0.2shares for each share outstanding, resulting in there being an aggregate of 4,312,500 founder shares outstanding. The number of founder shares issued was determined based on the expectation that the total size of our IPO would be a maximum of 17,250,000 units (if the underwriters over-allotmentoption was exercised in full), and therefore that such founder shares would represent 20% of the outstanding shares after our IPO. In addition, our sponsor purchased 5,200,000 private warrants each exercisable to purchase one share of our Class A common stock at $11.50 per share, at a price of $1.00 per warrant in a private placement that closed simultaneously with the closing of our IPO. If we do not complete our initial business combination within 24months from the closing of our IPO, the private warrants will expire worthless. In addition, we may obtain loans from our sponsor, our officers or directors, or any of their affiliates. The personal and financial interests of our executive officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following our initial business combination. This risk may become more acute as the 24-monthanniversary of the closing of our IPO nears, which is the deadline for our completion of an initial business combination.
Our public stockholders may be forced to wait beyond 24 months from the closing of our IPO before redemption of our shares from the trust account.
If we are unable to consummate our initial business combination within 24months from the closing of our IPO, the proceeds then on deposit in the trust account, including interest earned on the trust account not previously released to us to pay our tax obligations and less up to $50,000 of interest to pay dissolution expenses, will be used to fund the redemption of our public shares, as further described herein. Any redemption of public stockholders from the trust account will be affected automatically by function of our amended and restated certificate of incorporation prior to any voluntary winding up. In that case, investors may be forced to wait beyond 24months from the closing of our IPO before the redemption proceeds of the trust account become available to them, and they receive the return of their pro rata portion of the proceeds from the trust account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we seek to amend our certificate of incorporation as described herein or consummate our initial business combination prior thereto and only then in cases where investors have sought to redeem their our Class A common stock.
Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding public warrants approve of such amendment (which would include any public warrants purchased by our sponsor or any of our officers or directors).
Our units, Class A common stock and warrants are listed on the NYSE.
Additionally, in connection with our initial business combination, we will likely be required to demonstrate compliance with the NYSEs initial listing requirements, which are more rigorous than the NYSEs continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE.
If the NYSE delists any of our securities from trading on its exchange and we are not able to list such securities on another national securities exchange, we expect such securities could be quoted on an over-the-countermarket. a determination that our Class A common stock are a penny stock which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
Because our units our Class A common stock and warrants are listed on the NYSE, our units, our Class A common stock and warrants qualify as covered securities under the statute.
Marcum LLP, our independent registered public accounting firm, and the underwriters of the offering, will not execute agreements with us waiving such claims to the monies held in the trust account.
Accordingly, the per-shareredemption amount received by our public stockholders could be less than the $10.00 per public share initially held in the trust account, due to claims of such creditors. Pursuant to a letter agreement, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per share due to reductions in the value of the trust assets, in each case less taxes payable, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying our public stockholders from the trust account prior to addressing the claims of creditors.
The pro rata portion of the trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24months from the closing of our IPO may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-daynotice period during which any third-partyclaims can be brought against the corporation, a 90-dayperiod during which the corporation may reject any claims brought, and an additional 150-daywaiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholders pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following the 24 th month from the closing of our IPO in the event we do not complete our initial business combination and, therefore, we do not intend to comply with the foregoing procedures.
Furthermore, if the pro rata portion of the trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination within 24months from the closing of our IPO is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
We are not registering the shares of our Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants and causing such warrants to expire worthless.
We are not registering the shares of our Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement covering the registration under the Securities Act of our Class A common stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 days following our initial business combination and to maintain a current prospectus relating to the shares of our Class A common stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement. Under the terms of the warrant agreement, we have agreed to use our best efforts to take such action as is necessary to register or qualify for sale the shares of our Class A common stock issuable upon exercise of the warrants in such states, to the extent an exemption is not available. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of our Class A common stock included in our units.
If you exercise your public warrants on a cashless basis, you will receive fewer shares of our Class A common stock from such exercise than if you were to exercise such warrants for cash.
For instance, if we call our warrants for redemption, we can force all holders to exercise their warrants on a cashless basis. Additionally, If a registration statement covering the shares of our Class A common stock issuable upon exercise of the warrants is not effective by the 60 th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of our Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of our Class A common stock underlying the warrants, multiplied by the excess of the fair market value (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The fair market value is the average volume weighted average last reported sale price of our Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the<|endoftext|>Subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder will have a new basis and holding period in the ordinary shares acquired upon the exercise of the warrants for purposes of the PFIC rules.
The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A QEF election may not be made with respect to our warrants. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the tax year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a retroactive QEF election under their particular circumstances.
In order to comply with the requirements of a QEF election, a U.S. Holder must receive a PFIC annual information statement from us. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.
If a U.S. Holder has made a QEF election with respect to our ordinary shares, and the special tax and interest charge rules do not apply to such shares (because of a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such shares or a purge of the PFIC taint pursuant to a purging election, as described above), any gain recognized on the sale of our ordinary shares generally will be taxable as capital gain and no interest charge will be imposed under the PFIC rules. As discussed above, U.S. Holders of a QEF are currently taxed on their pro rata shares of its earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend to such U.S. Holders. The tax basis of a U.S. Holders shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the above rules.
Although a determination as to our PFIC status will be made annually, an initial determination that our company is a PFIC will generally apply for subsequent years to a U.S. Holder who held ordinary shares or warrants while we were a PFIC, whether or not we meet the test for PFIC status in those subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) our ordinary shares, however, will not be subject to the PFIC tax and interest charge rules discussed above in respect to such shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such shares for any taxable year of us that ends within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and the U.S. Holder holds (or is deemed to hold) our ordinary shares, the PFIC rules discussed above will continue to apply to such shares unless the holder makes a purging election, as described above, and pays the tax and interest charge with respect to the gain inherent in such shares attributable to the pre-QEF election period.
Alternatively, if a U.S. Holder, at the close of its taxable year, owns shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) ordinary shares in us and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above in respect to its ordinary shares. Instead, in general, the U.S. Holder will include as ordinary income each year the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holders basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares will be treated as ordinary income. Currently, a mark-to-market election likely may not be made with respect to our warrants.
The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the SEC, including the NYSE, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect to our ordinary shares under their particular circumstances.
If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, U.S. Holders generally would be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, the lower-tier PFIC or the U.S. Holders otherwise were deemed to have disposed of an interest in the lower-tier PFIC. We will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. However, there is no assurance that we will have timely knowledge of the status of any such lower-tier PFIC. In addition, we may not hold a controlling interest in any such lower-tier PFIC and thus there can be no assurance we will be able to cause the lower-tier PFIC to provide the required information. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.
A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder, may have to file an IRS Form 8621 (whether or not a QEF or market-to-market election is made) and such other information as may be required by the U.S. Treasury Department.
The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of our ordinary shares or warrants should consult their own tax advisors concerning the application of the PFIC rules to our ordinary shares or warrants under their particular circumstances.
If our management following a business combination is unfamiliar with United States securities laws, they may have to expend time and resources becoming familiar with such laws which could lead to various regulatory issues.
Following a business combination, our management will likely resign from their positions as officers of the company and the management of the target business at the time of the business combination will remain in place. We cannot assure you that management of the target business will be familiar with United States securities laws. If new management is unfamiliar with our laws, they may have to expend time and resources becoming familiar with such laws.
If restrictions on repatriation of earnings from the target business home jurisdiction to foreign entities are instituted, our business following a business combination may be materially negatively affected.
It is possible that following an initial business combination, the home jurisdiction of the target business may have restrictions on repatriations of earnings or additional restrictions may be imposed in the future. If they were, it could have a material adverse effect on our operations.
If we effect our initial business combination with a company located outside of the United States, we would be subject to a variety of additional risks that may negatively impact our operations.
If we effect our initial business combination with a company located outside of the United States, we would be subject to any special considerations or risks associated with companies operating in the target business home jurisdiction, including any of the following: rules and regulations or currency redemption or corporate withholding taxes on individuals; tariffs and trade barriers; longer payment cycles; rates of inflation; employment regulations; and deterioration of political relations with the United States which could result in any number of difficulties, both normal course such as above or extraordinary such as sanctions being imposed.
Because of the costs and difficulties inherent in managing cross-border business operations after we acquire it, our results of operations may be negatively impacted following a business combination.
Managing a business, operations, personnel or assets in another country is challenging and costly. Management of the target business that we may hire (whether based abroad or in the U.S.) may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively impact our financial and operational performance.
target, all revenues and income would likely be received in a foreign currency, the dollar equivalent of our net assets and distributions, if any, could be adversely affected by reductions in the value of the local currency.
Because our business objective includes the possibility of acquiring one or more operating businesses with primary operations in markets outside the United States, we will focus on changes in the exchange rate between the U.S. dollar and the currency of any relevant jurisdiction may affect our ability to achieve such objective. If the U.S. dollar declines in value against the relevant currency, any business combination will be more expensive and therefore more difficult to complete. Furthermore, we may incur costs in connection with conversions between U.S. dollars and the relevant currency, which may make it more difficult to consummate a business combination.
Because foreign law could govern almost all of our material agreements, we may not be able to enforce our rights within such jurisdiction or elsewhere, which could result in a significant loss of business, business opportunities or capital.
Foreign law could govern almost all of our material agreements. The target business may not be able to enforce any of its material agreements or that remedies will be available outside of such foreign jurisdictions legal system. The system of laws and the enforcement of existing laws and contracts in such jurisdiction may not be as certain in implementation and interpretation as in the United States. Judiciaries in such jurisdiction may | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Grant of equity by BGC Partners or BGC Holdings; and to any BGC U.S. OpCo or BGC Global OpCo partner, as the case may be, in connection with a conversion of an issued unit and interest into a different class or type of unit and interest.
There will be no additional classes of partnership interests in BGC U.S. OpCo or BGC Global OpCo.
### Distributions
OpCo units and BGC Global OpCo units outstanding, other than in the case of certain litigation matters, the impact of which is allocated to the BGC U.S. OpCo and BGC Global OpCo partners who are members of the BGC Holdings group.
BGC U.S. OpCo and BGC Global OpCo each distribute to each of its partners (subject to the allocation of certain litigation matters to BGC U.S. OpCo and BGC Global OpCo partners, as the case may be, who are members of the BGC Holdings group): on or prior to each estimated tax due date (the 15th day of each April, June, September and December, in the case of a partner that is not an individual, and the 15th day of each April, June, September and January in the case of a partner who is an individual, or, in each case, if earlier with respect to any quarter, the date on which BGC Partners is required to make an estimated tax payment), such partners estimated proportionate quarterly tax distribution for such fiscal quarter; on or prior to each estimated tax due date for partners who are members of the BGC Holdings group, an amount (positive or negative) for such fiscal quarter in respect of items of income, gain, loss or deduction allocated in respect of certain litigation matters; and as promptly as practicable after the end of each fiscal quarter (or on such other date and time as determined by the general partner) , an amount equal to (a)all amounts allocated to such partners capital account with respect to such quarter pursuant to the BGC U.S. OpCo limited partnership agreement or BGC Global OpCo limited partnership agreement, as the case may be, after the date of such agreement over (b)the amount of any prior distributions to such partner so long as such reduction does not bring the amount below zero.
BGC U.S. , may, with the prior written consent of the holders of an OpCos majority in interest of the limited partnership interests, decrease the total amount distributed by BGC U.S. In addition, if BGC U.S. , is unable to make the distributions required above as a result of any losses of the
OpCos arising from the certain litigation claims, then BGC U.S. , will use reasonable best efforts to borrow such amounts as are necessary to make distributions that would have been received by the BGC Partners group in the absence of any such potential litigation claims and to make the estimated proportionate quarterly tax distribution to the Cantor group. The borrowing costs of any such borrowing will be treated as part of such potential litigation claims.
The limited partnership agreements of BGC U.S. OpCo and BGC Global OpCo also provide that at the election of BGC Partners, in connection with a repurchase of its ClassA common stock or similar actions, BGC U.S. OpCo and BGC Global OpCo may redeem and repurchase from BGC Partners a number of units equivalent to the number of shares of common stock repurchased by BGC Partners in exchange for cash in the amount of the gross proceeds to be paid in connection with such stock repurchase. OpCo and BGC Global OpCo shall be determined by BGC Partners.
### Transfers of Interests
In general, subject to the exceptions described below, no BGC U.S. OpCo partner or BGC Global OpCo partner, as the case may be, may transfer or agree to transfer all or any portion of, or any rights, title and interest in and to, its interest in BGC U.S.
Limited partners of BGC U.S. OpCo and BGC Global OpCo may transfer their limited partnership interests in the following circumstances: if the transferee limited partner will be a member of the BGC Partners group or the BGC Holdings group; or with the prior written consent of the general partner and the limited partners (by affirmative vote of an OpCos majority in interest, not to be unreasonably withheld or delayed).
The special voting limited partner may transfer the special voting limited partnership interest in connection with the contribution and the BGC separation or to a wholly-owned subsidiary of BGC Holdings (except that in the event such transferee ceases to be a wholly-owned subsidiary of BGC Holdings, the special voting partnership interest will automatically be transferred to BGC Holdings, without any further action required on the part of BGC U.S. , BGC Holdings or any other person).
The general partner may transfer its general partnership interest in the following circumstances: to a new general partner; or with the special voting limited partners prior written consent.
The special voting limited partner may in its sole and absolute discretion remove any general partner, with or without cause. The general partner may resign as the general partner of BGC U.S. , for any reason, or for no reason whatsoever, except that as a condition to any removal or resignation, the special voting limited partner will first appoint a new general partner who will be admitted to BGC U.S. , and the resigning or removed general partner will transfer its entire general partnership interest to the new general partner.
No partner may charge or encumber its BGC U.S. OpCo or BGC Global OpCo interest, as the case may be, or otherwise subject such interest to any encumbrance, except those created by the BGC U.S. OpCo limited partnership agreement or BGC Global OpCo limited partnership agreement, as the case may be.
### Amendments
Each of the BGC U.S. OpCo and BGC Global OpCo limited partnership agreements cannot be amended except with the approval of each of the general partner and the limited partners (by the affirmative vote of an OpCos majority in interest) of BGC U.S. In addition, each of the BGC U.S. OpCo and BGC Global OpCo limited partnership agreements cannot be amended to: amend any provisions which require the consent of a specified percentage in interest of the limited partners without the consent of that specified percentage in interest of the limited partners;
The general partner of BGC U.S. , may authorize any amendment to correct any technically incorrect statement or error in order to further the parties intent or to correct any formality or error or defect in the execution of the BGC U.S. OpCo or BGC Global OpCo limited partnership agreement, as the case may be.
### Corporate Opportunity; Fiduciary Duty
The BGC U.S. OpCo limited partnership agreement and BGC Global OpCo limited partnership agreement contain similar corporate opportunity provisions to those included in the BGC Partners certificate of incorporation with respect to BGC Partners and/or BGC Holdings and their respective representatives.
Parity of Interests
The BGC U.S. OpCo limited partnership agreement and BGC Global OpCo limited partnership agreement provide that it is the non-binding intention of each of the partners of BGC U.S. OpCo that the number of outstanding BGC U.S. OpCo units equals the number of outstanding BGC Global OpCo units except with respect to units issued in connection with acquisitions. It is the non-binding intention of each of the partners of BGC U.S. OpCo that there be a parallel issuance or repurchase transaction by BGC U.S. OpCo or BGC Global OpCo in the event of any issuance or repurchase by the other OpCo other than in the event of an acquisition so that the number of outstanding BGC U.S. OpCo units at all times equals the number of outstanding BGC Global OpCo units.
At the Companys election, in connection with a repurchase of our ClassA common stock or similar actions, BGC U.S. OpCo and BGC Global OpCo will redeem and repurchase from the Company a number of units in BGC U.S. OpCo and BGC Global OpCo equivalent to the number of shares of ClassA common stock repurchased by the Company in exchange for cash in the amount of the gross proceeds to be paid in connection with such stock repurchase.
### Tax Matters Agreement
On December13, 2017, BGC Partners, BGC Holdings, BGC U.S. OpCo, Newmark, Newmark Holdings and Newmark OpCo entered into a tax matters agreement in connection with the Separation that governs the parties respective rights, responsibilities and obligations after the Separation with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes and tax benefits, the preparation and filing of tax returns, the control of audits and other tax proceedings, tax elections, assistance and cooperation in respect of tax matters, procedures and restrictions relating to the distribution, if any, and certain other tax matters.
In addition, the tax matters agreement imposes certain restrictions on Newmark and its subsidiaries (including restrictions on share issuances, business combinations, sales of assets and similar transactions) that will be designed to preserve the tax-free status of the distribution and certain related transactions. The tax matters agreement provides special rules to allocate tax liabilities in the event the distribution, together with certain related transactions, is not tax-free, as well as any tax liabilities incurred in connection with the Separation. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on BGC Partners or Newmark that arise from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is generally tax-free, for U.S. federal income tax purposes, under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such partys respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement.
### Amended and Restated Tax Receivable Agreement
We are party to a tax receivable agreement with Cantor that was entered into on March31, 2008, in connection with the transactions contemplated by the BGC separation agreement, and was amended and restated on December13, 2017, in connection with the Newmark IPO. Certain interests in BGC Holdings may, in effect, be exchanged in the future for shares of BGC Partners ClassA common stock or BGC Partners Class B common stock on a one-for-one basis (subject to customary anti-dilution adjustments). The exchanges may result in increases to our share of the tax basis of the tangible and intangible assets of each of BGC U.S. OpCo and BGC Global OpCo and, so long as Newmark remains a consolidated subsidiary Newmark OpCo that otherwise would not have been available, although the Internal Revenue Service may challenge all or part of that tax basis increase, and a court could sustain such a challenge by the Internal Revenue Service. These increases in tax basis, if sustained, may reduce the amount of tax that we would otherwise be required to pay in the future.
The tax receivable agreement provides for the payment by us to Cantor of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of these increases in tax basis and of certain other tax benefits related to its entering into the tax receivable agreement, including tax benefits attributable to payments under the tax receivable agreement. It is expected that we will benefit from the remaining 15% of cash savings, if any, in income tax that we realize. Pursuant to the tax receivable agreement, we will determine, after consultation with Cantor, the extent to which we are permitted to claim any such tax benefits, and such tax benefits will be taken into account in computing<|endoftext|>Directors in the form of options for each year for their continued service. We also reimburses our directors reasonable out of pocket expenses incurred in attending board meetings and in carrying out their board duties.
2020 Equity Incentive Plan
As of March 5, 2020, subject to the Acquisition, our Board of Directors adopted the Omnia Wellness Inc. 2020 Equity Incentive Plan, or the 2020 Plan, which was approved by stockholders holding a majority of our common stock on March 5, 2020.
The Board believes that our ability to offer our key employees, non-employee directors and certain consultants and advisers long-term, equity-based compensation will help enable us to attract, motivate and retain experienced and highly qualified employees, directors and other service providers who will contribute to our financial success. It is the judgment of the Board that approval of the 2020 Plan is in the best interests of the Company and its stockholders.
The 2020 Plan permits the issuance of equity-based awards, including incentive stock options, or ISOs, nonqualified stock options, restricted stock and restricted stock units, or RSUs (the Awards).
The 2020 Plan is administered by the Board, or a committee composed of two or more members of the Board (the Committee) which is authorized to grant Awards.
### Purpose and Eligible Individuals
The purpose of the 2020 Plan is to retain the services of valued key employees and consultants of the Company and such other persons as the Committee determines and to encourage such persons to acquire a greater proprietary interest in the Company, thereby strengthening their incentive to achieve the objectives of the stockholders of the Company, to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants and other persons selected by the Committee. Under the 2020 Plan, Awards may be granted to our officers, directors, employees and consultants or the officers, directors, employees and consultants of our subsidiary. Because the grant of Awards under the 2020 Plan will be within the discretion of the Committee, it is not possible to determine the Awards that will be made to executive officers or directors under the 2020 Plan.
Shares Subject to the 2020 Plan
The total number of Awards to acquire shares of Common Stock, shares of restricted stock and RSUs shall be 2,000,000. The maximum number of shares that may be subject to ISOs granted under the 2020 Plan shall be 2,000,000, subject to adjustment as provided in the 2020 Plan. The total amount of Common Stock that may be granted under the 2020 Plan to any single person in any calendar year may not exceed in the aggregate 2,000,000 shares. To the extent that an Award lapses or is forfeited, the shares subject to such Award will again become available for grant under the terms of the 2020 Plan.
### Administration
Although the Board has the authority to administer the 2020 Plan, it has the right to delegate this authority to the Committee. Each member of the Committee, if any, will be a non-employee director within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and an outside director within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.
Subject to the terms of the 2020 Plan, the Committees authority includes the authority to: (1) select or approve Award recipients; (2) determine the terms and conditions of Awards, including the price to be paid by a participant for any Common Stock; and (3) interpret the 2020 Plan and prescribe rules and regulations for its administration.
### Stock Options
The Committee may grant ISOs or nonqualified stock options, or Options. The Committee determines the number of shares of Common Stock subject to each Option, provided that in no event shall the aggregate fair market value of the shares of Common Stock with respect to which ISOs are exercisable for the first time by a participant during any calendar year shall not exceed $100,000. The Committee determines the exercise price of an Option, its duration and the manner and time of exercise. However, in no event shall an Option be exercisable more than ten years following the grant date thereof. ISOs may be issued only to employees of the Company or of a corporate subsidiary of ours, and the exercise price must be at least equal to the fair market value of the Common Stock as of the date the Option is granted. Further, an ISO must be exercised within ten years of grant. The Committee, in its discretion, may provide the vesting terms of any Option, provided that if no schedule is specified at the time of grant, the Option shall vest as follows: (i) on the six month anniversary of the date of the grant, the Option shall vest and shall become exercisable with respect to 25% of the Common Stock to which it pertains; and (ii) on the seven month and each successive month anniversary to and including the twenty four month anniversary, the Award shall vest and become exercisable with respect to an additional 1/24 th of shares of Common Stock to which it pertains. The vesting of one or more outstanding Options may be accelerated by the Committee at such times and in such amounts as it shall determine in its sole discretion. Options may be exercisable for one year following the termination of employment or other service relationship, unless the Committee specifies otherwise, in the event the Option is an ISO, in the event of a termination for cause or the expiration date of the Option.
The exercise price of an Option may be paid in cash or by certified or cashiers check, or, at the discretion of the Committee, in shares of Common Stock owned by the participant, or by means of a cashless exercise procedure in which a broker transmits to us the exercise price in cash, either as a margin loan or against the participants notice of exercise and confirmation by us that we will issue and deliver to the broker stock certificates for that number of shares of Common Stock having an aggregate fair market value equal to the exercise price.
Options granted under the 2020 Plan and the rights and privileges conferred by the 2020 Plan may not be transferred, assigned, pledged or hypothecated in any manner (whether by operation of law or otherwise) other than by will or by applicable laws of descent and distribution.
### Stock Grants
The Committee may issue shares of Common Stock to participants with restrictions, as determined by it in its discretion, as well as restricted stock units, which are contractual commitments to deliver shares of Common Stock pursuant to a vesting schedule. Restrictions may include conditions that require the participant to forfeit the shares in the event that the holder ceases to provide services to us and/or if certain performance goals are not met (see discussion below). The recipient of a stock grant, including a stock grant subject to restrictions, unless otherwise provided for in a restricted stock agreement, has the rights of a stockholder of ours to vote and to receive payment of dividends on our Common Stock. Holders of restricted stock units and Options do not enjoy voting and dividend rights until the Award is settled in actual shares of Common Stock or the option is exercised, as the case may be.
Effect of Certain Corporate Transactions
If a recapitalization or similar transaction occurs that does not alter the existing proportionate ownership of the Common Stock, appropriate adjustments shall be made in the exercise price and number of outstanding Options and in the terms of restricted stock and RSUs. In the case of a merger, acquisitive transaction, reorganization, liquidation or other transaction, or Major Transaction, that does alter such proportionate ownership, vested Options generally may be exercised before such transaction and persons owning Common Stock as a result of Awards made under the 2020 Plan will participate on the same basis as other owners of Common Stock. Alternatively, the Board may determine in the case of a Major Transaction that Options, restricted stock and RSUs will continue in effect on a basis similar to that in effect prior to such Major Transaction, including with respect to vesting, except that such rights shall apply with respect to the surviving entity. The Board may, in its discretion, accelerate vesting in whole or in part in connection with a Major Transaction.
### Performance Goals
If the Committee desires to tie an Award to performance goals, the performance goals selected by the Committee must be based on the achievement of specified levels of one, or any combination, of the following business criteria: return on equity, return on assets, share price, market share, sales, earnings per share, costs, net earnings, net worth, inventories, cash and cash equivalents, gross margin or the Companys performance relative to its internal business plan. Performance objectives may be in respect of the performance of the Company as a whole (whether on a consolidated or unconsolidated basis), a related corporation, or a subdivision, operating unit, product or product line of either of the foregoing. Performance objectives may be absolute or relative and may be expressed in terms of a progression or a range. An Award that is exercisable (in full or in part) upon the achievement of one or more performance objectives may be exercised only following written notice to the participant and the Company by the Committee that the performance objective has been achieved. After the close of the applicable performance period, which may consist of more than one year, and generally before the close of the next years first quarter, the Committee will determine the extent to which the performance goals were satisfied and make a final determination with respect to an Award.
Further Amendments to the 2020 Plan
The Board or the Committee may, at any time, modify, amend or terminate the 2020 Plan or modify or amend Awards granted under the 2020 Plan, including, without limitation, such modifications or amendments as are necessary to maintain compliance with applicable laws. However, the Board or the Committee may not, without approval of the Companys stockholders: (1) increase the total number of shares covered by the 2020 Plan, except by adjustments upon certain changes in capitalization; (2) change the aggregate number of shares of Common Stock that may be issued to any single person; (3) change the class of persons eligible to receive Awards under the 2020 Plan; or (4) make other changes in the 2020 Plan that require stockholder approval under applicable law (including any rules of any applicable stock exchange or stock quotation system of which the Companys shares of Common Stock are is traded). Except as otherwise provided in the 2020 Plan or an award agreement, no amendment will adversely affect outstanding Awards without the consent of the participant. Any termination of the 2020 Plan will not terminate Awards then outstanding, without the consent of the participant.
### Term of the 2020 Plan
Unless sooner terminated by the Board, the 2020 Plan will terminate on the day prior to the 10 th anniversary of its adoption by the Board. No Award may be granted after such termination or during any suspension of the 2020 Plan.
### U.S. Tax Treatment
The following description of the federal income tax consequences of Awards is general and does not purport to be complete.
Incentive Stock Options
Generally, a participant incurs no federal income tax liability on either the grant or the exercise of an ISO, although a participant will generally have taxable income for alternative minimum tax purposes at the time of exercise equal to the excess of the fair market value of the shares subject to the Option over the exercise price. Provided that the shares are held for at least one year after the date of exercise of the Option and at least two years after its date of | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Quarterly payment, with a ten-day grace period. As a result, the convertible became due immediately, and the warrants increased from 5,000,000 to 10,000,000.
aa)
On September 22, 2020, the Company entered into a convertible promissory note with a non-related party for $53,500, of which $3,500 was an original issue discount resulting in cash proceeds to the Company of $50,000. The note is due on March 21, 2022 and bears interest on the unpaid principal balance at a rate of 12% per annum. As the note is not convertible until 180 days following issuance, no derivative liability was recognized as of December 31, 2020.
cc)
On October 7, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 6, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum.
dd)
On October 16, 2020, the Company entered into a convertible promissory note with a non-related party for $200,000. The note is due on October 15, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum.
ee)
On November 11, 2020, the Company entered into a convertible promissory note with a non-related party for $300,000. The note is due on November 10, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 6-months of the date of issuance into shares of Companys common stock at a conversion price of $0.15.
ff)
On November 20, 2020, the Company entered into a settlement agreement to settle a convertible note with a remaining principal amount of $154,330 and accrued interest balance of $166,932. Pursuant to the settlement agreement, the Company agreed to issue 15,000,000 common shares with a fair value of $309,000 to settle the principal and accrued interest and penalties relating to the convertible note. As a result, the Company recorded a gain on settlement of debt of $1,362,268.
gg)
On December 29, 2020, the Company entered into a convertible promissory note with a non-related party for $150,000. The note is due on December 28, 2021 and bears interest on the unpaid principal balance at a rate of 5% per annum. The Note may be converted by the Lender at any time after 6-months of the date of issuance into shares of Companys common stock at a conversion price of $0.10.
### NOTE 7 DERIVATIVE LIABILITIES
The embedded conversion option of (1) the convertible debentures described in Note 6 and (2) warrants, containing conversion features that qualify for embedded derivative classification as described further in Note 10. The fair value of the liabilities will be re-measured at the end of every reporting period and the change in fair value will be reported in the statement of operations as a gain or loss on derivative financial instruments.
Upon the issuance of the convertible notes payable described in Note 6, the Company concluded that it only has sufficient shares to satisfy the conversion of some but not all of the outstanding convertible notes, warrants and options. The Company elected to reclassify contracts from equity with the earliest inception date first. As a result, none of the Companys previously outstanding convertible instruments qualified for derivative reclassification, however, any convertible securities issued after the election, including the warrants described in Note 10, qualified for derivative classification. The Company reassesses the classification of the instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
The table below sets forth a summary of changes in the fair value of the Companys Level 3 financial liabilities.
The Company uses Level 3 inputs for its valuation methodology for the embedded conversion features and warrant liabilities as their fair values were determined by using the Binomial Model based on various assumptions.
As required, these are classified based on the lowest level of input that is significant to the fair value measurement.
Preferred Stock
Effective March 23, 2018, the Company amended the articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series, as summarized below.
### Series A Preferred Shares
Effective March 23, 2018, the Company amended the articles of incorporation and authorized 10,000,000 shares of preferred stock with a par value of $0.001 per share, of which 1,000,000 shares were designated as Series A Convertible Preferred Stock as of December 31, 2019. The preferred stock may be issued from time to time by the Board of Directors as shares of one or more classes or series.
On December 1, 2018, the Companys Board of Directors authorized an offering for 1,000,000 Preferred Series A stock at $0.10 per share and with 100% regular or cashless exercise at $0.10 per share of common stock warrant coverage. At December 31, 2018, the Company received $60,000 of subscriptions for the issuance of 600,000 shares of Preferred Series A stock to three accredited investors who are related parties. The Company was unable to issue the subscriber the preferred shares until the Company filed a Certificate of Designation and the Preferred Series A stock has been duly validly authorized. Resulting in a preferred stock liability related to the Companys commitment to issue shares of Series A stock upon the designation.
On April 12, 2019, the Company filed a Certificate of Designation with the Nevada Secretary of State designating 1,000,000 shares of its authorized preferred stock as Series A Convertible Preferred Stock. The principal terms of the Series A Preferred Shares are as follows:
### Issue Price
The stated price for the Series A Preferred shall be $0.10 per share.
Redemption
This Company may at any time following the first anniversary date of issuance (the Redemption Date), at the option of the Board of Directors, redeem in whole or in part the Shares by paying in cash in exchange for the Shares to be redeemed a price equal to the Original Series A Issue Price ($0.10) (the Redemption Price). Any redemption affected pursuant to this provision shall be made on a pro rata basis among the holders of the Shares in proportion to the number of the shares then held by them.
### Dividends
None.
Preference of Liquidation
In the event of any liquidation, dissolution or winding up of the Company, the holders of Shares shall be entitled to receive, prior and in preference to any distribution of any of the assets of this Company, to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the sum of (i) $0.10 for each outstanding Share (the Original Series A Issue Price) and (ii) an amount equal to 6% of the Original Series A Issue Price for each 12 months that has passed since the date of issuance of any Shares (such amount being referred to herein as the Premium).
For purposes of this provision, a liquidation, dissolution or winding up of this Company shall be deemed to be occasioned by, or to include, (A) the acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger or consolidation but, excluding any merger effected exclusively for the purpose of changing the domicile of the Company); or (B) a sale of all or substantially all of the assets of the Company; unless the Companys stockholders of record as constituted immediately prior to such acquisition or sale will, immediately after such acquisition or sale (by virtue of securities issued as consideration for the Companys acquisition or sale or otherwise), hold at least 50% of the voting power of the surviving or acquiring entity.
If upon the occurrence of such liquidation, dissolution or winding up event, the assets and funds thus distributed among the holders of the Shares shall be insufficient to permit the payment to such holders of the full aforesaid preferential amounts, then, subject to the rights of series of preferred stock that may from time to time come into existence, the entire assets and funds of the Company legally available for distribution shall be distributed ratably among the holders of the Shares in proportion to the preferential amount each such holder is otherwise entitled to receive.
In any of such liquidation, dissolution or winding up event, if the consideration received by the Company is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows:
Securities not subject to investment letter or other similar restrictions on free marketability (covered by (B) below):
1)
If traded on a securities exchange (NASDAQ, AMEX, NYSE, etc.), the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty-day period ending three (3) days prior to the closing;
2)
If traded on a quotation system, such as the OTC:QX, OTC:QB or OTC Pink Sheets, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty-day period ending three (3) days prior to the closing; and
3)
If there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock.
The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholders status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by the Company and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock.
### Voting
Conversion
Each Share shall be convertible into shares of the Companys Common Stock at a price per share of $0.10 (1 Share converts into 1 share of Common Stock), at the option of the holder thereof, at any time following the date of issuance of such Share and on or prior to the fifth day prior to the Redemption Date, if any, as may have been fixed in any Redemption Notice with respect to the Shares, at the office of this Company or any transfer agent for such stock. Each Share shall automatically be converted into shares of Common Stock on the first day of the thirty-sixth (36th) month following the original issue date of the shares at the Conversion Price per share.
The Company was unable to issue the subscribers the preferred shares until the Company filed a Certificate of Designation and the Preferred Series A stock had been duly validly authorized. As the Company had not filed the Certificate of Designation and as the Company could not issue the preferred shares to settle the proceeds received, it was determined the subscriptions were settleable in cash. As a result, the Company classified the subscriptions received as a liability in accordance with ASC 480 Distinguishing Liabilities from Equity. The filing of the Certificate of Designation and issuance of the preferred shares resulted in the reclassification of the Series A Preferred Shares from a liability to temporary equity or mezzanine because the preferred shares include the liquidation preferences described above. The fair value of the preferred series A stock on April 12, 2019 was $60,398 and was valued by using the Binomial Model based on various assumptions and was reclassified from a liability to mezzanine equity.
As of December 31, 2020 and 2019, there were 500,000 shares of Series A Convertible Preferred Stock issued<|endoftext|>The Company acquired a 100% interest in TMC Capital LLC, which holds the rights to mine ore from the Asphalt Ridge deposit. The mining and crushing of the bituminous sands has been contracted to an independent third party.
During the year ended August 31, 2019, the cost of mining, hauling and crushing the ore, amounting to $176,792 (2018 - $122,242), was recorded as the cost of the crushed ore inventory.
7.
### ADVANCED ROYALTY PAYMENTS
(a)
Advance royalty payments to Asphalt Ridge, Inc.
During the year ended August 31, 2015, the Company acquired TMC Capital, LLC, which has a mining and mineral lease with Asphalt Ridge, Inc. (the TMC Mineral Lease) (Note 8(a)). The mining and mineral lease with Asphalt Ridge, Inc. required the Company to make minimum advance royalty payments which can be used to offset future production royalties for a maximum of two years following the year the advance royalty payment was made.
On October 1, 2015, the Company and Asphalt Ridge, Inc. amended the advance royalty payments in the TMC Mineral Lease. All previous advance royalty payments required under the original agreement were deemed to be paid in full. The amended advance royalty payments required were: $60,000 per quarter from October 1, 2015 to September 30, 2017, $100,000 per quarter from October 1, 2017 to June 30, 2020 and $150,000 per quarter thereafter.
On March 12, 2016, a second amendment was made to the TMC Mineral Lease. The amended advanced royalty payments required are $60,000 per quarter from October 1, 2015 to February 28, 2018, $100,000 per quarter from March 1, 2018 to December 31, 2020 and $150,000 per quarter thereafter.
Effective February 21, 2018, a third amendment was made to the TMC Mineral Lease. The amended advanced royalty payments required are $100,000 per quarter from July 1, 2018 to June 30, 2020 and $150,000 per quarter thereafter.
As at August 31, 2019, the Company has paid advance royalties of $2,250,336 (2018 - $1,890,336) to the lease holder, of which a total of $1,382,307 have been used to pay royalties as they have come due under the terms of the TMC Mineral Lease. During the year ended August 31, 2019, $360,000 in advance royalties were paid and $291,057 have been used to pay royalties which have come due. The royalties expensed have been recognized in cost of goods sold on the consolidated statements of loss and comprehensive loss.
As at August 31, 2019, the Company expects to record minimum royalties paid of $446,362 from these advance royalties either against production royalties or for the royalties due within a two year period.
(b)
Unearned advance royalty payments from Blackrock Petroleum, Inc.
During the year ended August 31, 2015, the Company entered into a sublease agreement with Blackrock Petroleum, Inc. (Blackrock), pursuant to which it received $170,000 of unearned advance royalties. The sublease was for a portion of the mining and mineral lease with Asphalt Ridge, Inc. (Note 8(b)). Blackrock is a company associated with Accord and the sublease was effectively terminated in the acquisition by the Company of control of Accord on July 4, 2016. The advanced royalty payment has been offset against the investment in Accord and receivables due from Accord, which have been fully provided for (Note 2(b)).
PETROTEQ ENERGY INC.
Expressed in US dollars
8.
### MINERAL LEASES
(a)
TMC Mineral Lease
On June 1, 2015, the Company acquired TMC Capital, LLC (TMC). TMC holds a mining and mineral lease, subleased from Asphalt Ridge, Inc., on the Asphalt Ridge property located in Uintah County, Utah (the TMC Mineral Lease).
The primary term of the TMC Mineral Lease is from July 1, 2013 to July 1, 2018. During the primary term, the Company must meet certain requirements for oil production. After July 1, 2018, the TMC Mineral Lease will remain in effect as long as certain requirements for oil production continue to be met by the Company. If the Company fails to meet these requirements, the lease will automatically terminate 90 days after the calendar year in which the requirements are not met. In addition, the Company is required to make certain advance royalty payments to the lessor (Note 7(a)). The TMC Mineral Lease was subject to a 10% royalty for the first three years and varying percentages thereafter based on the price of oil. An additional 1.6% royalty is payable to the previous lessees of the TMC Mineral Lease. The TMC Mineral Lease also required the Company to make minimum expenditures on the property of $1,000,000 for the first three years, increasing to $2,000,000 for the next three years.
On October 1, 2015, the Company amended the TMC Mineral Lease to defer the requirements for oil extraction until July 1, 2016 and to include the oil extraction from the MCW Mineral Lease as well. The advance royalty payments required under the TMC Mineral Lease were also amended (Note 7(a)). Production royalties were amended to 7% until June 30, 2020 and a varying percentage thereafter, based on the price of oil. Minimum expenditures were amended to $1,000,000 per year until June 30, 2020 and $2,000,000 thereafter if certain operational requirements for oil extraction are not met.
PETROTEQ ENERGY INC.
Expressed in US dollars
8.
(a)
On March 1, 2016, a second amendment to the TMC Mineral Lease amended the termination clause in the lease to:
(i)
Termination will be automatic if there is a lack of a written financial commitment to fund the proposed 3,000 barrel per day production facility prior to March 1, 2018.
(ii)
(iii)
The proposed 3,000 barrel per day plant fails to produce a minimum of 80% of its rated capacity for at least 180 calendar days during the lease year commencing July 1, 2020 plus any extension periods.
(iv)
(v)
Production royalties payable are amended to 7% of the gross sales revenue, subject to certain adjustments up until June 30, 2020. After that date, royalties will be calculated on a sliding scale based on crude oil prices ranging from 7% to 15% of gross sales revenues, subject to certain adjustments.
Minimum expenditures to be incurred on the properties are $1,000,000 per year up to June 30, 2020 and $2,000,000 per year after that if a minimum daily production of 3,000 barrels per day during a 180 day period is not achieved.
On February 1, 2018, a third amendment to the TMC Mineral Lease amended the termination clause in the lease to:
(i)
Termination will be automatic if there is a lack of a written financial commitment to fund the proposed 1,000 barrel per day production facility prior to March 1, 2019 and another 1,000 barrel per day production facility prior to March 1, 2020.
(ii)
(iii)
The proposed 5,000 barrel per day plant fails to produce a minimum of 80% of its rated capacity for at least 180 calendar days during the lease year commencing July 1, 2020 plus any extension periods.
(iv)
(v)
PETROTEQ ENERGY INC.
Expressed in US dollars
8.
(a)
The term of the lease was extended by the extension of the termination clause, providing a written commitment is obtained to fund the 3,000 barrel per day proposed plant.
Production royalties payable are amended to 8% of the gross sales revenue, subject to certain adjustments up until June 30, 2020.
Minimum expenditures to be incurred on the properties are $2,000,000 beginning July 1, 2020 if a minimum daily production of 3,000 barrels per day during a 180 day period is not achieved.
On November 21, 2018, a fourth amendment was made to the mining and mineral lease agreement whereby certain properties previously excluded from the third amendment were included in the lease agreement.
### The termination clause was amended to:
(i)
Termination will be automatic if there is a lack of a written financial commitment to fund the proposed 1,000 barrel per day production facility prior to July 1, 2019 and another 1,000 barrel per day production facility prior to July 1, 2020.
(ii)
(iii)
The proposed 3,000 barrel per day plant fails to produce a minimum of 80% of its rated capacity for at least 180 calendar days during the lease year commencing July 1, 2021 plus any extension periods.
(iv)
(v)
Minimum expenditures to be incurred on the properties are $2,000,000 beginning July 1, 2021 if a minimum daily production of 3,000 barrels per day during a 180 day period is not achieved.
PETROTEQ ENERGY INC.
Expressed in US dollars
8.
(b)
SITLA Mineral Lease (Petroteq Oil Sands Recovery, LLC mineral lease)
On June 1, 2018, the Company acquired mineral rights under two mineral leases entered into between the State of Utahs School and Institutional Trust Land Administration (SITLA), as lessor, and PQE Oil, as lessee, covering lands in Asphalt Ridge that largely adjoin the lands held under the TMC Mineral Lease (collectively, the SITLA Mineral Leases). The SITLA Mineral Leases are valid until May 30, 2028 and have rights for extensions based on reasonable production. The leases remain in effect beyond the original lease term so long as mining and sale of the tar sands are continued and sufficient to cover operating costs of the Company.
Advanced royalty of $10 per acre are due annually each year the lease remains in effect and can be applied against actual production royalties. The advanced royalty is subject to price adjustment by the lessor after the tenth year of the lease and then at the end of each period of five years thereafter.
Production royalties payable are 8% of the market price of marketable product or products produced from the tar sands and sold under arms length contract of sale. Production royalties have a minimum of $3 per barrel of produced substance and may be increased by the lessor after the first ten years of production at a maximum rate of 1% per year and up to 12.5%.
(c)
### BLM Mineral Lease
On January 18, 2019, the Company paid a cash deposit of $1,800,000 for the acquisition of 50% of the operating rights under U.S. The total consideration of $10,800,000 was settled by the $1,800,000 cash deposit and by the issuance of 15,000,000 shares at an issue price of $0.60 per share, amounting to $9,000,000.
The total consideration of $13,000,000 was settled by the issuance of 30,000,000 shares at an issue price of $0.40 per share, amounting to $12,000,000 and a cash consideration of $1,000,000, which has not been paid as yet.
PETROTEQ ENERGY INC.
Expressed in US dollars
9.
(a)
Oil Extraction Plant
In June 2011, the Company commenced the development of an oil extraction facility on its mineral lease in Maeser, Utah and entered into construction and equipment fabrication contracts for this purpose. On September 1, 2015, the first phase of the plant was completed and was ready for production of hydrocarbon products for resale to third parties. During the year ended August 31, 2017 the Company began the dismantling and relocating the oil extraction facility to its TMC Mineral Lease facility to improve production and logistical efficiencies while continuing its project to increase production capacity to a minimum capacity of 1,000 barrels per day. The plant has been substantially relocated to the TMC mining site and expansion of the plant to production of 1,000 barrels per day has been substantially completed.
The cost of construction includes capitalized borrowing costs for the year ended August 31, 2019 of $2,190,309 (2018 - $18,666) and total capitalized borrowing costs as at August 31, 2019 of $4,421,055 (2018 - $2,230,746).
As a result of the relocation of the plant and the expansion that has taken place to date, the Company reassessed the reclamation and restoration provision and raised an additional liability of $2,375,159 which is capitalized to the cost of the plant and will be depreciated according to our depreciation policy.
As a result of the relocation of the plant and the planned expansion of the plants production capacity to 1,000 barrels per day, and subsequently to an additional 3,000 barrels per day, the Company reevaluated the depreciation | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The maximum number of shares that can be owned by the note holder as a result of the conversions to common stock to 4.99% of the Companys issued and outstanding shares.
ONE WORLD PHARMA, INC.
### NOTES TO
The Company recorded interest expense pursuant to the stated interest rates on the convertible notes in the amount of $21,516 and $24,751 for the years ended December 31, 2020 and 2019, respectively. In addition, the Company recognized $332,332 of interest expense related to the debt discount for the year ended December 31, 2019.
Note 13 Advances from Shareholders
Advances from shareholders consist of the following at December 31, 2020 and 2019, respectively:
The Company recorded interest expense in the amount of $-0- and $16,053 for the years ended December 31, 2020 and 2019, respectively.
ONE WORLD PHARMA, INC.
### NOTES TO
Note 14 Notes Payable
Notes payable consists of the following at December 31, 2020 and 2019, respectively:
ONE WORLD PHARMA, INC.
### NOTES TO
The Company recorded interest expense in the amount of $9,734 and $7,679 for the years ended December 31, 2020 and 2019, respectively, including $1,296 of interest payable to officers and directors.
The Company recognized interest expense for the year ended December 31, 2020 and 2019, respectively, as follows:
Reverse Stock Split
On January 10, 2019, the Company effected a 1-for-4 reverse stock split (the Reverse Stock Split). No fractional shares were issued, and no cash or other consideration was paid in connection with the Reverse Stock Split. Instead, the Company issued one whole share of the post-Reverse Stock Split common stock to any stockholder who otherwise would have received a fractional share as a result of the Reverse Stock Split. The Companys authorized shares of common stock prior to the Reverse Stock Split were unaffected. The Reverse Stock Split also did not have any effect on the stated par value of the common stock. Unless otherwise stated, all share and per share information in this Annual Report on Form 10-K has been retroactively adjusted to reflect the Reverse Stock Split.
ONE WORLD PHARMA, INC.
### NOTES TO
Preferred Stock
The Company has 10,000,000 authorized shares of $0.001 par value blank check preferred stock, of which 500,000 shares have been designated Series A Preferred Stock and 300,000 shares have been designated Series B Preferred Stock, subject to anti-dilution provisions. Each share of Series A Preferred Stock is currently convertible into one hundred (100) shares of the Companys common stock. As of December 31, 2020, there were 150,233 shares of Series A Preferred Stock issued and outstanding. No Series B Preferred Stock were outstanding as of December 31, 2020. The Series A Preferred Stock is presented as mezzanine equity on the balance sheet due to it carrying a stated value of $10 per share and a deemed liquidation clause, which entitles the holder to receive, before and in preference to any distribution or payment of assets of the Corporation or the proceeds thereof may be made or set apart for the holders of junior securities an amount in cash equal to the stated value per share, plus an amount equal to any accrued and unpaid dividends. Each share of Preferred Stock carries a number of votes equal to the number of shares of common stock into which such Preferred Stock may then be converted. The Preferred Stock generally will vote together with the common stock and not as a separate class.
The Series A Convertible Preferred Stock has been classified outside of permanent equity and liabilities since it embodies a conditional obligation that the Company may settle by issuing a variable number of equity shares and the monetary value of the obligation is based on a fixed monetary amount known at inception.
### Series A Preferred Stock Sales
Series A Preferred Stock Dividends
A total of $37,236 of dividends were payable as of December 31, 2020.
### Common Stock
The Company is authorized to issue an aggregate of 300,000,000 shares of common stock with a par value of $0.001. As of December 31, 2020, there were 53,085,305 shares of common stock issued and outstanding.
Common Stock Sales, 2020
On November 27, 2020, the Company sold an aggregate of 750,000 shares of common stock at a price of $0.10 per share for total cash proceeds of $75,000. The shares were subsequently issued on March 1, 2021. Prior to the issuance, the fair value of the shares was reflected on the Companys balance sheet as subscriptions payable.
Common Stock Issued on Subscriptions Payable, 2020
On January 6, 2020, the Company issued 500,000 shares of common stock that were purchased on December 31, 2019 at $0.50 per share for proceeds of $25,000. Prior to the issuance, the purchase price was reflected on the Companys balance sheet as subscriptions payable.
Common Stock Issued for Services, Employees and Consultants, 2020
On December 31, 2020, the Company awarded 100,000 shares of common stock to a consultant for services performed. The aggregate fair value of the common stock was $12,000 based on the closing price of the Companys common stock on the date of grant.
On September 21, 2020, the Company awarded 250,000 shares of common stock to a consultant for services performed. The aggregate fair value of the common stock was $45,000 based on the closing price of the Companys common stock on the date of grant.
On July 1, 2020, the Company awarded an aggregate of 875,000 shares of common stock to four employees and consultants for services provided. The aggregate fair value of the common stock was $332,500 based on the closing price of the Companys common stock on the date of grant.
On June 3, 2020, the Company awarded 200,000 shares of common stock to a consultant for services performed. The aggregate fair value of the common stock was $120,000 based on the closing price of the Companys common stock on the date of grant.
On various dates between January 4, 2020 and May 31, 2020, the Company awarded an aggregate of 2,006,000 shares of common stock to ten employees and consultants for services provided. The aggregate fair value of the common stock was $1,318,000 based on the closing price of the Companys common stock on the date of grant.
ONE WORLD PHARMA, INC.
### NOTES TO
Common Stock Issued for Services, Officers and Directors, 2020
### Common Stock Issued for Share Exchange, 2019
On February 21, 2019, One World Pharma acquired OWP Ventures in the Merger. (b) the options described above to purchase 825,000 shares of common stock of OWP Ventures at an exercise price of $0.50 automatically converted into options to purchase 825,000 shares of our common stock at an exercise price of $0.50; and (d) 875,000 shares of our common stock owned by OWP Ventures prior to the Merger were cancelled.
Common Stock Sales, 2019
On various dates between July 18, 2019 and December 18, 2019, the Company sold an aggregate of 4,360,700 shares of common stock at a price of $0.50 per share for total cash proceeds of $2,430,350, and 400,000 shares purchased by the Companys CEO in which the consideration for such shares was paid by the cancelation of $200,000 of outstanding indebtedness owed to the CEO under a promissory note, in lieu of cash payment.
On various dates between January 3, 2019 and February 19, 2019, the Company sold an aggregate 3,900,000 shares of common stock of OWP Ventures at $0.50 per share for total proceeds of $1,950,000.
Common Stock Issued on Subscriptions Payable, 2019
On December 31, 2019 we sold 500,000 shares of common stock at a price of $0.50 per share for total cash proceeds of $250,000. The shares were subsequently issued on January 6, 2020, and the Company recognized a subscriptions payable of $250,000 at December 31, 2019.
### Common Stock Issued for Debt Conversion, 2019
On February 4, 2019, a total of 1,253,493 shares of common stock of OWP Ventures were issued pursuant to the conversion of $501,397 of convertible debt owed to The Sanguine Group LLC, consisting of $500,000 of principal and $1,397 of interest.
Common Stock Options Exercised, 2019
Common Stock Issued for Services, Consultants, 2019
On February 18, 2019, the Company issued 30,000 shares of common stock of OWP Ventures to a consultant for services. The total fair value of the common stock was $15,000 based recent independent third-party sales at $0.50 per share.
ONE WORLD PHARMA, INC.
### NOTES TO
On various dates between September 4, 2019 and December 4, 2019, the Company awarded an investor relations firm an aggregate 69,666 shares of common stock for services provided. The aggregate fair value of the common stock was $221,560 based on the closing price of the Companys common stock on the date of grant, and was expensed during the current period.
Adjustments to Additional Paid-In Capital, 2019
Pursuant to the purchase of 66.2% of the outstanding common stock of One World Pharma, Inc for $350,000 on November 30, 2018, the Company realized goodwill of $349,420 on the consideration paid in excess of the net fair value of assets and liabilities assumed, which has been recognized as contributed capital due to the subsequent reverse merger between the two entities on February 21, 2019.
### Note 16 Common Stock Options
Stock Incentive Plan
### Common Stock Options Issued for Services, 2020
On December 31, 2020, the Company awarded options to purchase 250,000 shares of the Companys Common Stock at an exercise price equal to $0.13 per share to a consultant. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170, was $29,245. As of December 31, 2020, a total of $29,245 of unamortized expenses are expected to be expensed over the vesting period.
On December 31, 2020, the Company awarded options to purchase 125,000 shares of the Companys Common Stock at an exercise price equal to $0.13 per share to a consultant. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170, was $14,622. As of December 31, 2020, a total of $14,622 of unamortized expenses are expected to be expensed over the vesting period.
On December 31, 2020, the Company awarded options to purchase 50,000 shares of the Companys Common Stock at an exercise price equal to $0.13 per share to a consultant. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 192% and a call option value of $0.1170, was $5,849. As of December 31, 2020, a total of $5,849 of unamortized expenses are expected to be expensed over the vesting period.
On July 1, 2020, the Company awarded options to purchase 125,000 shares of the Companys Common Stock at an exercise price equal to $0.38 per share to a consultant. The options vested quarterly over six months. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.3798, was $47,476. The options were expensed over the vesting period, resulting in $47,476 of stock-based compensation expense during the year ended December 31, 2020.
On July 1, 2020, the Company awarded options to purchase 1,000,000 shares of the Companys Common Stock at an exercise price equal to $0.38 per share to a consultant. The options were exercisable over a ten year period. The options will vest quarterly over three years. The estimated value using the Black-Scholes Pricing Model, based on a volatility rate of 303% and a call option value of $0.38, was $379,958. The options were being expensed over the vesting period, resulting in $63,326 of stock-based compensation expense during the year ended December 31, 2020.
On July 1, 2020, the Company awarded options to purchase 125,000 shares of the Companys Common Stock at an exercise price equal to $0.38 per share to a consultant for Advisory Board services. The options will vest quarterly over one year. The estimated value using the Black-Scholes Pricing Model, based on a volatility<|endoftext|>Activity for the year ended June30, 2021.
Following is a summary of the status of stock options outstanding as of June30, 2021.
The following table summarizes the nonvested stock option activity for the year ended June30, 2021.
### Restricted Stock Units
RSUs granted by the Company are not transferable and automatically convert to shares of common stock on a one-for-one basis as the awards vest.
During the years ended June30, 2021 and 2020, the Company incurred $120,100 and $114,520 of compensation expense related to RSUs, respectively. As of June30, 2021, there is $359,736 remaining compensation expense related to RSUs.
The following table summarizes the RSU activity for the year ended June30, 2021:
No tax benefit was recognized in the consolidated statements of income related to share-based compensation for the years ended June30, 2021 and 2020.No share-based compensation was capitalized for the years ended June30, 2021 and 2020.
### Certain Anti-Takeover Provisions
The Companys certificate of incorporation and by-laws contain certain anti-takeover provisions that could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company without negotiating with its Board. Certain of such provisions allow the Company to issue preferred stock with rights senior to those of the common stock or impose various procedural and other requirements which could make it more difficult for stockholders to effect certain corporate actions.
17. CUSTOMER AND SUPPLIER CONCENTRATIONS
### Customer Concentration
Customers providing 10percent or more of the Company's revenues for the year ended June30, 2021 are presented on a comparative basis, with their corresponding balances for the year ended June30, 2020 in the table below:
(2)
Includes sales made to JMB from the beginning of the period through the Acquisition Date.
Customers providing 10 percent or more of the Company's accounts receivable as of June30, 2021 and June 30, 2020 are presented on a comparative basis in the table below.
No single customer provided 10 percent or more of the Company's secured loan receivable balances as of as of June30, 2021.
### Supplier Concentration
The Company buys precious metals from a variety of sources, including through brokers and dealers, from sovereign and private mints, from refiners and directly from customers. The Company believes that no one or small group of suppliers is critical to its business, since other sources of supply are available that provide similar products on comparable terms.
18. SEGMENTS AND GEOGRAPHIC INFORMATION
The Company evaluates segment reporting in accordance with FASB ASC 280,
### Segment Reporting
, each reporting period, including evaluating the organizational structure and the reporting package that is reviewed by the chief operating decision makers. The Company's operations are organized under three business segments (i) Wholesale Sales & Ancillary Services (formerly known as Wholesale Trading & Ancillary Services), (ii) Secured Lending and (iii) Direct-to-Consumer (formerly known as Direct Sales). The Wholesale Sales & Ancillary Services segment includes the consolidating eliminations of inter-segment transactions and unallocated segment adjustments. (See
Note 1 for a description of the types of products and services from which each reportable segment derives its revenues.)
Revenue
(1)
Inter-segment purchases from and sales to the Direct-to-Consumer segment are transacted at Wholesale Sales & Ancillary Services segment's prices, which is consistent with arms-length transactions with third-parties.
(2)
The Secured Lending segment earns interest income from its lending activity and earns no revenue from the sales of precious metals.
(3)
The eliminations of inter-segment sales are reflected in the Wholesale Sales & Ancillary Services segment.
(a
)
(b
)
(1)
Presentation of amounts realigned based on current accounting policy that defines geographic area based on the delivery or settlement location. The presentation change had no impact on the segments' operations or the Company's consolidated results.
Gross Profit and Gross Margin Percentage
NM
Not meaningful.
(
)
The Secured Lending segment earns interest income from its lending activity and earns no gross profit from the sales of precious metals.
### Operating income and (expenses)
Net income (loss) before provision for income taxes
Depreciation and Amortization
### Advertising expense
Inventories
### Total Assets
Long-term Assets
Capital Expenditures for Property, Plant, and Equipment
(1)
Direct-to-Consumer segments goodwill balance is net of $1.4 million accumulated impairment losses.
Intangible assets
(1)
Direct-to-Consumer segments intangibles balance is net of $1.3 million accumulated impairment losses
19. SUBSEQUENT EVENTS
### Trading Credit Facility
On July 16, 2021, the Company entered into an Eighth Amendment (the Eighth Amendment) to Amended and Restated Uncommitted Credit Agreement with Cooperative Rabobank U.A., New York Branch as Administrative Agent, and various other lenders (the Credit Agreement.) As so amended, the Credit Agreement now provides for a $330.0 million credit facility, consisting of a $280.0 million base and a $50.0 million accordion feature.
Increased Investment in Pinehurst Coin Exchange, Inc.
On August 27, 2021, the Company increased its ownership interest in Pinehurst Coin Exchange, Inc., a North Carolina corporation (Pinehurst), from 10% to 49%, for a purchase price of $9.75 million, consisting of $6.75 million in cash and 61,590 shares of the Companys common stock.The Company had acquired its initial minority investment in January 2019. As part of the recent transaction, A-Mark also extended its existing exclusive supplier agreement with Pinehurst for an additional five years, to January 2029. Pinehurst is a leading precious metals broker, servicing the wholesale and retail marketplace, and one of the nations largest e-commerce retailers of modern and numismatic certified coins on eBay.
### Special Dividend Declared
On August 30, 2021, the Company's Board of Directors declared a special dividend of $2.00 per share to common stock shareholders of record at the close of business on September 20, 2021, payable on or about September 24, 2021. The estimated dividends to be paid total $22.6 million.
ITEM 9.
None.
### ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act).Based on the foregoing, our Certifying Officers concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report.
Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms.Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.
The financial statements were prepared by management, which is responsible for their integrity and objectivity and for establishing and maintaining adequate internal controls over financial reporting.
The Companys internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over financial reporting includes those policies and procedures that: i. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; ii. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and iii. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.
There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal controls may vary over time.
Management assessed the design and effectiveness of the Companys internal control over financial reporting as of June30, 2021.
### Internal ControlIntegrated Framework
("2013 framework"). Based on this evaluation, management concluded that our internal control over financial reporting was effective as of June30, 2021 based on criteria in
Internal Control Integrated Framework issued by the COSO.
Management's evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021 did not include internal controls over financial reporting for JM Bullion, Inc. (JMB), which we acquired in March 2021.JMB comprised approximately 25% of our total assets as of June 30, 2021, and approximately 9% of our total revenues and 16% of our pre-tax income for the year ended June 30, 2021.
Grant Thornton LLP, an independent registered public accounting firm, has audited the financial statements of the Company as of June30, 2021 and June30, 2020, and for the fiscal years then ended. Under Rule 12b-2 and Section 404 of the Sarbanes-Oxley Act, the Company is required to provide an attestation report from a registered public accounting firm of its internal control over financial reporting as of June30, 2021.
We have not experienced any material impact to our internal control over financial reporting during the COVID-19 pandemic.Many of our employees worked remotelyduring the period in which we prepared these financial statements and, accordingly, we ensured on-going related oversight and monitoring procedures continued during the financial close and reporting process. We did not compromise our disclosure controls and procedures. We are continually monitoring and assessing our disclosure controls to ensure disclosure controls and procedures continue to be effective.
There was no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
### ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
### ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS
ITEM 13.
### INDEPENDENCE
ITEM 14.
PART IV
ITEM 15.
(a)
The following documents are filed as part of this report:
1.
Financial Statements
2.
### Financial Statements Schedules:
None.
3.
Exhibits required to be filed by Item 601 of Regulation S-K:
*
Filed herewith
**
Previously filed | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
EVC Plan, payable in the first quarter of fiscal year 2021; stock options granted on December 4, 2019 under the 2017 Plan; RSUs granted on December 4, 2019 under the 2017 Plan; and PRSUs granted on December 4, 2019 under the 2017 Plan. In addition, Mr. Harrison received stock options granted on March 15, 2020 under the 2017 Plan; RSUs granted on March 15, 2020 under the 2017 Plan; and PRSUs granted on March 15, 2020 under the 2017 Plan. Mr. Martinez also received grants of RSUs on June 15 and September 15, 2020, in connection with his service as Interim CEO.
EVC Awards
Under our EVC Plan, the NEOs may receive cash payouts after the completion of each fiscal year if specified performance goals established at the beginning of the fiscal year are attained. For each NEO, a cash incentive amount, expressed as a percentage of base salary, is established for performance at each of the target and maximum levels. The EVC Plan awards for fiscal year 2020 were structured so that the cash incentive paid to each NEO would be 0% to 200% of the payout level established for performance at the target level for each goal.
Information about the potential payout levels established for each NEO and the nature and weighting of the goals selected for fiscal year 2020 can be found under Compensation Discussion and Analysis. , so no amounts were paid pursuant to the EVC Plan for fiscal year 2020 performance.
### Stock Options
Unless an option holder is terminated for cause, vested stock options are exercisable for 90 days after the termination of the option holders employment, or 180 days upon death, disability or retirement. If an option holders employment is terminated for Cause, as such term is defined in our 2011 Plan or 2017 Plan, as applicable, all unexercised options will immediately terminate. The Committee may, at any time after the award is granted, accelerate the vesting of some or all the unvested options as it deems appropriate.
Stock options become fully exercisable upon the occurrence of a Change in Control, as such term is defined in our 2011 Plan or 2017 Plan, as applicable, unless the acquiring entity assumes or provides a substitute for the award. The Committee may require options be exercised prior to the Change in Control and may pay cash or other securities to cancel awards in connection with the Change in Control.
### Restricted Stock Units
All unvested RSUs will fully vest upon the occurrence of a Change in Control, as such term is defined in our 2017 Plan unless the acquiring entity assumes or provides a substitute for the award. Please see the Overview and Impact of Merger Agreement section in the for further information regarding the impact of the merger on outstanding RSUs.
Performance Restricted Stock Units
Under our 2017 Plan, unless the Committee determines otherwise at or prior to the Change in Control, as such term is defined in our 2017 Plan, any unvested PRSUs will vest based upon actual results at or immediately prior to the Change in Control and/or based upon pro-rated performance goals based on the time elapsed in the performance period as of the date of the Change in Control, unless the acquiring entity assumes or provides a substitute for the award. Please see the Overview and Impact of Merger Agreement section in the for further information regarding the impact of the merger on outstanding PRSUs.
Grants to NEOs of plan-based awards in fiscal year 2020 are set forth in the table below.
(1)
The cash awards are made pursuant to the EVC Plan. The grants of stock options, RSUs and PRSUs were made pursuant to the 2017 Plan. Stock options are exercisable in three equal installments each year beginning on the first anniversary of the grant date and have a seven-year term. The RSUs granted to Mr. The remaining RSUs held by Mr. The PRSUs vest in December 2022 (for those granted in December 2019 and March 2020).
(2)
The EVC Plan performance goals for fiscal year 2020 are described under 2020 Short-Term Incentives. Mr. Martinez was not a participant in the EVC Plan. As a part of our response to the COVID-19 pandemic for fiscal year 2020, the Compensation and Leadership Development Committee cancelled all opportunities for a payout under the EVC Plan, so no amounts were paid pursuant to the EVC Plan for fiscal year 2020 performance.
(3)
Threshold amounts can be calculated for each individual performance measure, and in each case are equal to 50% of the target amount payable with respect to that measure. The amounts reported as threshold amounts in the table represent the payout that would have been made if threshold performance were achieved for the performance measure assigned the lowest weight for the respective NEO, assuming that threshold performance was not achieved for any other performance measure.
(4)
Threshold amounts represent minimum number of PRSUs, equal to 50% of the target number of PRSUs available if threshold performance is achieved.
(5)
Equal to the closing market value of shares of our common stock on the Nasdaq Stock Market (Nasdaq) on the grant date.
(6)
The grant date fair value of options is calculated using a multiple option form of the Black-Scholes option valuation model with assumptions for interest rate, expected life, share price volatility and dividend yield. The grant date fair value of RSUs is calculated with reference to the fair market value of the underlying shares (the closing market value of shares of our common stock on Nasdaq on the grant date). The grant date fair value of PRSUs is calculated at the target level of performance with reference to the fair market value of the underlying shares (the closing market value of shares of our common stock on Nasdaq on the grant date). See Note 10 to our Notes to Consolidated Financial Statements for the fiscal year ended October 3, 2020 included in Item 8 of Part II of our Annual Report on Form 10-K for fiscal year 2020.
(7)
Dr. Upon his resignation, Dr.
(1)
Stock options granted are exercisable in three equal installments each year beginning on the first anniversary of the grant date and have a seven-year term.
(2)
The market value of unvested RSUs equals the closing price of our common stock on Nasdaq at the end of fiscal year 2020 ($19.99) multiplied by the number of shares or units. The RSUs granted to Mr. The remaining RSUs held by Mr.
(3)
The number of PRSUs reported in this column is based on achieving target payouts for future equity performance. The market value of unvested PRSUs equals the closing price of our common stock on Nasdaq at the end of fiscal year 2020 ($19.99) multiplied by the target number of shares or units. The PRSUs vest in December 2020 (for those granted in April 2018), December 2021 (for those granted in December 2018), and December 2022 (for those granted in December 2019 and March 2020).
(4)
Dr. Upon his resignation, Dr. All vested options expired three months following his resignation.
Option Exercises and Stock Vested in Fiscal Year 2020
(1)
The number of shares delivered to each NEO following any withholding was: Mr. Martinez 2,307; Dr. Graves 7,590; Mr. Ross 2,105; Mr. Harrison 4,647; Mr. Hore 2,395, and Mr. Klemmensen 1,160.
(2)
The value realized on the vesting of the RSUs and PRSUs is the fair market value of our common stock at the time of vesting.
Our Executive Deferred Compensation Plan is a non-qualified plan that provides a select group of employees, including all the NEOs, except Mr. Martinez and Mr. Hore, with the option to defer up to 90% of base salary or short-term cash incentive. Independent directors are also eligible to participate in the Executive Deferred Compensation Plan and may elect to defer up to 100% of the directors fees we pay.
Participants deferred compensation accounts earn a monthly rate of return based on an established interest rate. The interest rate is approved by the Committee in November of each year for the following calendar year. As such, the interest rate for calendar year 2020 was 1.88%.
At the time of the deferral election, participants must also select a distribution date and form of distribution. Participants may elect to receive distribution in a single payment, installments, or combination thereof. Distribution elections cannot change unless the election is to postpone payment until the fifth anniversary of separation from service or, if later, age 60 and the election must be made at least 12 months before separation from service. In no case can an earlier distribution election be allowed.
None of our NEOs elected to participate in the Executive Deferred Compensation Plan during fiscal year 2020 and none of our NEOs have prior balances in the Executive Deferred Compensation Plan.
Payments and benefits receivable by the NEOs upon termination of employment or a change in control of our Company are governed by the arrangements described below. As Interim CEO, Mr. Martinez did not participate in the Executive Change in Control Severance Plan or the Executive Severance Plan. Additionally, this section does not address the compensation that may be paid or become payable to the NEOs and that is based on, or otherwise relates to, the merger. Only those plans that were in place as of October 3, 2020 are discussed below.
### Executive Change in Control Severance Plan
We maintain the Executive Change in Control Severance Plan (the Change in Control Severance Plan), which provides severance benefits, subject to executing and not rescinding a release, to each of our executive officers other than Mr. Martinez upon a termination by the Company (other than for cause or due to death or disability) or resignation by the executive officer for good reason within two years following a change in control, each as defined in the Change in Control Severance Plan (each, a qualifying termination of employment). The contemplated merger will be a change in control as defined under the Change in Control Severance Plan. Under the Change in Control Severance Plan, upon a qualifying termination of employment, the Company will pay the executive officer a cash severance benefit equal to 200% times the executive officers annual compensation. Under the Change in Control Severance Plan, annual compensation is defined as the sum of the following: (i) annual base salary; (ii) average annual amounts paid under the EVC Plan for the preceding three years (or the actual number of years of receipt of such incentive compensation if less than three years); and (iii) any other form of compensation paid to the participant and included in such individuals gross income during the 12-month period immediately prior to the date of termination (but excluding (a) any amount actually paid to the participant as a target bonus (regardless of whether all or any portion of such Company bonus was contributed to a deferred compensation plan); (b) compensation income recognized as a result of the exercise of stock options or sale of the stock so acquired, the vesting of restricted stock or distribution of restricted stock units; and (c) any payments actually or constructively received from a plan or arrangement of deferred compensation). The cash severance benefit will be paid in a lump sum within 60 days following the executive officers qualifying termination of employment. In addition, under the terms of the Change in Control Severance Plan, for the 18-month period following the qualifying termination of employment, the Company will provide life, disability, accident and health insurance benefits substantially similar to those that the executive officer received or was entitled to receive immediately prior to the notice of termination with respect to such qualifying termination of employment; provided, however, that if the Companys pre-tax subsidy of providing such benefits would result in discrimination under applicable tax laws, then the Company will pay an amount equal to 200% of such monthly premiums as additional compensation to the executive officer in lieu of such continued coverage.<|endoftext|>Development Companies (some of which are listed publicly) as well as private funds and accounts.
Our sponsor subscribed for founder shares prior to the date of this Report and will purchase private placement warrants in a transaction that will close simultaneously with the closing of the Initial Public Offering.
In addition, our Founders, sponsor, officers and directors may sponsor, form or participate in other blank check companies similar to ours during the period in which we are seeking an initial business combination.
Further, commencing on the date our securities are first listed on the NYSE, we will also reimburse an affiliate of our sponsor for office space, secretarial and administrative services provided to us in the amount of $10,000 per month.
### Item11. Executive Compensation
The following disclosure concerns the compensation of our executive officers and directors for the fiscal year ended December31, 2020 (i.e., pre-business combination).
None of our executive officers or directors has received any cash compensation for services rendered to us. Commencing on the date that our securities were first listed on the NYSE through the earlier of consummation of our initial business combination and our liquidation, we have paid and will pay $10,000 per month to an affiliate of our sponsor for office space, secretarial and administrative services provided to us. In addition, our sponsor, executive officers and directors, or any of their respective affiliates have been and will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee reviews on a quarterly basis all payments that are made to our sponsor, executive officers or directors, or our or their affiliates.
Any compensation to be paid to our executive officers will be determined, or recommended to the Jaws Board for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on the Jaws Board.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our executive officers and directors may remain directors or negotiate employment or consulting arrangements to remain with us after our initial business combination.
Item12.
The following table sets forth information regarding the beneficial ownership of our ordinary shares as of March 26, 2021 based on information obtained from the persons named below, with respect to the beneficial ownership of our ordinary shares, by: each person known by us to be the beneficial owner of more than 5% of our ordinary shares each of our executive officers and directors that beneficially owns ordinary shares;
In the table below, the percentage ownership is based on 86,250,000 ordinary shares issued and outstanding as of December31, 2020.
Unless otherwise noted, the business address of each of the following entities or individuals is Jaws Acquisition Corp., 1601 Washington Avenue, Suite 800, Miami Beach, FL 33139.
*
Less than one percent.
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is 1601 Washington Avenue, Suite 800, Miami Beach, Florida 33139.
(2)
Assuming the automatic conversion of the ClassB ordinary shares into the shares of ClassA ordinary shares on the effective date of the Domestication and prior to the consummation of the Business Combination.
(3)
The Sponsor is the record holder of the securities reported herein. Barry S. Sternlicht controls the Sponsor, and as such has voting and investment discretion with respect to the securities held by the Sponsor and may be deemed to have beneficial ownership of the securities held directly by the Sponsor.
(4)
Represents the Class A ordinary shares beneficially owned by ArrowMark Colorado Holdings LLC (ArrowMark) according to the Schedule 13G/A filed by ArrowMark with the SEC on February16, 2021, indicating that ArrowMark has the sole voting and dispositive power with respect to 10,555,378 Class A ordinary shares. The business address of ArrowMark Colorado Holdings LLC is 100 Fillmore Street, Suite 325, Denver, Colorado 80206.
(5)
Represents the Class A ordinary shares beneficially held by Diameter Capital Partners LP, a Delaware limited partnership (Diameter) based solely on the Schedule 13G filed by Diameter with the SEC on February 16, 2021 (the Diameter 13G). According to the Diameter 13G, Diameter has the sole voting and dispositive power with respect to 3,620,167 Class A ordinary shares. Diameter Capital GP LLC, a Delaware limited liability company, is the general partner of Diameter (Diameter Capital) and therefore has beneficial ownership of Class A ordinary shares directly owned by Diameter. Scott K. Goodwin is a managing member of Diameter Capital and therefore Mr. Goodwin has beneficial ownership of Class A ordinary shares directly owned by Diameter. Jonathan Lewinsohn is a managing member of Diameter Capital and therefore Mr. Lewinsohn has beneficial ownership Class A ordinary shares directly owned by Diameter. The business address of each of Diameter Capital Partners LP, Scott K. Goodwin, and Jonathan Lewinsohn is 24 West 40th Street, 5th Floor, New York, NY 10018.
(6)
Represents the Class A ordinary shares held by Suvretta Capital Management LLC (Suvretta) based solely on the Schedule 13G/A filed by Suvretta with the SEC on February16, 2021 (the Suvretta 13G). The Suvretta 13G indicates that (i)Suvretta and Aaron Cowen, a United States citizen, beneficially own and have shared voting and dispositive power with respect to 4,000,000 Class A ordinary shares and sole voting and dispositive power with respect to no Class A ordinary shares and (ii)Suvretta Master Fund, Ltd., a Cayman Island corporation, beneficially owns and has shared voting and dispositive power with respect to 3,953,310 Class A ordinary shares and sole voting and dispositive power with respect to no Class A ordinary shares. The Business address of Suvretta and Aaron Cowen is 540 Madison Avenue, 7th Floor, New York, New York 10022 and the business address of Suvretta Master Fund, Ltd., is c/o Maples Corporate Services Limited, P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands.
(7)
Represents the Class A ordinary shares held by Fidelity Management & Research Company LLC (FMR) based solely on the Schedule 13G/A filed by FMR with the SEC on February 9, 2021 (the FMR 13G). The FMR 13G indicates that FMR is the beneficial owner of 8,624,940 shares of Class A ordinary Shares with the sole power to vote or to direct the vote of 1,333,893 shares of Class A ordinary shares and with the sole power to dispose or to direct the disposition of 8,624,940 shares of Class A ordinary shares. Abigail P. Johnson is the Director, of FMR and therefore may be a beneficial owner of the shares of Class A ordinary shares directly owned by FMR. Ms. Johnson and other members of the Johnson family are the predominant owners, directly or through trusts, of the voting power of FMR. Accordingly, members of the Johnson family, including Ms. Johnson, may be deemed to form a controlling group. The business address of FMR and Abigail P. Johnson is 245 Summer Street, Boston, Massachusetts 02210.
(8)
Represents the Class A ordinary shares held by Citadel Advisors LLC (Citadel Advisors) based solely on the Schedule 13G filed by Citadel Advisors with the SEC on February 1, 2021 (the Citadel 13G). The Citadel 13G indicates that Citadel Advisors is the beneficial owner of 5,167,446 shares of Class A ordinary shares. Citadel Advisors Holdings LP, a Delaware partnership (CAH), is the sole member of Citadel Advisors and therefore has beneficial ownership of the shares of Class A ordinary shares directly owned by Citadel Advisors. Citadel GP LLC, a Delaware limited liability company (CGP), is the general partner of CAH and therefore has beneficial ownership of the shares of Class A ordinary shares directly owned by Citadel Advisors. Citadel Securities LLC, a Delaware limited liability company (Citadel Securities) is the beneficial owner of 32,299 shares of Class A ordinary shares. CALC IV LP, a Delaware partnership (CALC4), is the non-member manager of Citadel Securities and therefore has beneficial ownership of the shares of Class A ordinary shares directly owned by Citadel Securities. Citadel Securities GP LLC, a Delaware limited liability company (CSGP), is the general partner of CALC4 and therefore has beneficial ownership of the shares of Class A ordinary shares directly owned by Citadel Securities. Mr. Kenneth Griffin is the President and Chief Executive Officer of CGP and owns a controlling interest in CGP and CSGP, and therefore may be a beneficial ownership of 5,199,745 shares of Class A ordinary shares. The business address of Citadel Advisors, CAH, CGP, Citadel Securities, CALC4, CSGP and Mr. Griffin is 131 S.
### Changes in Control
There are no arrangements, known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control.
Item13.
### ClassB Ordinary Shares
Notwithstanding the foregoing, if the closing price of the ClassA ordinary shares equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any30-tradingday period commencing at least 150 days after the initial business combination, the ClassB ordinary shares will be released from thelock-uprestrictions.
### Private Placement
Simultaneously with the closing of the IPO, Jaws consummated the private placement of 10,533,333 private placement warrants at a price of $1.50 per warrant to the sponsor, generating gross proceeds of $15.8million.
A portion of the proceeds from the sale of the private placement warrants were added to the proceeds from the IPO to be held in the trust account. If we do not complete a business combination within 24 months from the closing of the IPO, the private placement warrants will expire worthless. The private placement warrants arenon-redeemableand exercisable on a cashless basis so long as they are held by the sponsor or its permitted transferees.
### Related Parties Loans
The sponsor had agreed to loan us up to $300,000 (the Note) to be used for the payment of costs related to the IPO. The Note wasnon-interestbearing, unsecured and was due on the earlier of December31, 2020 or the closing of the IPO. Jaws had borrowed $274,059 under the Note, which was fully repaid upon the closing of the IPO on May18, 2020.
We agreed, commencing on the effective date of the IPO through the earlier of our consummation of a business combination or our liquidation, to pay an affiliate of the sponsor a monthly fee of $10,000 for office space, and secretarial and administrative services.
Registration Rights
However, the registration and shareholder rights agreement provides that we will not permit any registration statement filed under the Securities Act to become effective until termination of the applicablelock-upperiod.
### Director Independence
Item14.
### Audit Fees
The aggregate fees billed by WithumSmith+Brown, PC for audit fees, inclusive of required filings with the SEC for the year ended December31, 2020 and of services rendered in connection with our Initial Public Offering, totaled $136,475. We did not incur any audit fees for the year ended December 31, 2019.
### Audit-Related Fees
During theyears ended December31, 2020 and 2019, we did not pay WithumSmith+Brown, PC any audit-related fees.
### All Other Fees
During theyears ended December31, 2020 and 2019, we did not pay WithumSmith+Brown, PC any other fees.
Pre-Approval
### Policy
### PART IV
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Competitors may have a stronger network of contacts and better connections for deal flows or have access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objective.
REGULATIONS GOVERNING OUR OPERATION AS A BUSINESS DEVELOPMENT COMPANY WILL AFFECT OUR ABILITY TO, AND THE WAY IN WHICH WE, RAISE ADDITIONAL CAPITAL.
We are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common stock at a price below the current net asset value of the common stock, or sell warrants, options, or rights to acquire such common stock, at a price below the current net asset value of the common stock if our Board of Directors determines that such sale is in the best interests SVVC, and our stockholders approve SVVCs policy and practice of making such sales. Our stockholders have not approved a policy or practice of selling our common stock below our net asset value per share. However, our Board of Directors may ask our stockholders to vote on such a policy and practice at upcoming stockholders meetings. In any such case, the price at which our securities are to be issued and sold may not be less than a price which, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).
ANY FAILURE ON OUR PART TO MAINTAIN OUR STATUS AS A BUSINESS DEVELOPMENT COMPANY WOULD REDUCE OUR OPERATING FLEXIBILITY.
If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility and increase our cost of doing business. Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us or expose us to claims of private litigants.
IF WE DO NOT INVEST A SUFFICIENT PORTION OF OUR ASSETS IN QUALIFYING ASSETS, WE COULD FAIL TO QUALIFY AS A BUSINESS DEVELOPMENT COMPANY OR BE PRECLUDED FROM INVESTING ACCORDING TO OUR CURRENT BUSINESS STRATEGY.
As a BDC, we may not acquire any assets other than qualifying assets unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. See Regulation above.
We may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could lose our status as a BDC, which would have a material adverse effect on our business, financial condition, and results of operations. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
WE ARE A NON-DIVERSIFIED INVESTMENT COMPANY WITHIN THE MEANING OF THE 1940 ACT, AND THEREFORE WE ARE NOT LIMITED WITH RESPECT TO THE PROPORTION OF OUR ASSETS THAT MAY BE INVESTED IN SECURITIES OF A SINGLE ISSUER.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer. To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the markets assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond our income tax diversification requirements, we do not have fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies.
### WE WILL NEED TO RAISE ADDITIONAL CAPITAL TO GROW.
We will need additional capital to fund growth in our investments once we have fully invested the cash (and other liquid assets, if any) received, we may issue equity securities in order to obtain this additional capital. A reduction in the availability of new capital could limit our ability to grow or pursue business opportunities. During the years that we have elected and maintained our status as a RIC, we will be required to distribute at least 90% of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to our stockholders to maintain our RIC status. As a result, if stockholders opt out of reinvesting those distributions back into SVVC, these earnings will not be available to fund new investments. If we fail to obtain additional capital to fund our investments, this could limit our ability to grow, which may have an adverse effect on the value of our securities.
MANY OF OUR PORTFOLIO INVESTMENTS WILL BE RECORDED AT FAIR VALUE AS DETERMINED IN GOOD FAITH BY OUR BOARD OF DIRECTORS. AS A RESULT, THERE WILL BE UNCERTAINTY AS TO THE VALUE OF OUR PORTFOLIO INVESTMENTS.
A large percentage of our portfolio investments will be in the form of securities that are not publicly traded. We will value these securities quarterly at fair value according to our written valuation procedures and as determined in good faith by our Board of Directors. Our Board of Directors may use the services of a nationally recognized independent valuation firm to aid it in determining the fair value of these securities.
THE LACK OF LIQUIDITY IN OUR INVESTMENTS MAY ADVERSELY AFFECT OUR BUSINESS.
We primarily make investments in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.
WE MAY EXPERIENCE FLUCTUATIONS IN OUR QUARTERLY RESULTS.
We could experience fluctuations in our quarterly operating results due to a number of factors, including the performance of the portfolio securities we hold; the level of our expenses; variations in, and the timing of the recognition of, realized and unrealized gains or losses; the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.
THERE ARE SIGNIFICANT POTENTIAL CONFLICTS OF INTEREST THAT COULD IMPACT OUR INVESTMENT RETURNS.
Our executive officers and directors may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by affiliates of FCM that may be formed in the future. Accordingly, if this occurs, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders.
In the course of our investing activities, we will pay investment management and incentive fees to FCM, and will reimburse FCM for certain expenses it incurs. As a result, investors in our common stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of FCM has interests that differ from those of our stockholders, giving rise to a conflict.
Several members of our Board of Directors are also trustees of the Board of Trustees of Firsthand Funds. Of the five directors of the Company, Messrs. Landis, Burglin, and Lee all serve as both directors for the Company and trustees for Firsthand Funds. Messrs. Petredis and Yee are the only directors of the Company who are not also trustees of Firsthand Funds. We believe such a commonality of the board brings continuity of oversight and allows our Board to maintain the institutional knowledge and experience of overseeing illiquid securities and their pricing methods.
OUR INCENTIVE FEE MAY INDUCE FCM TO MAKE SPECULATIVE INVESTMENTS AND THESE FEES WILL, IN EFFECT, BE BORNE BY OUR COMMON STOCKHOLDERS.
The incentive fee payable by us to FCM may create an incentive for FCM to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to the Investment Adviser is calculated based on a percentage of our return on invested capital. This may encourage the Investment Adviser to invest in higher risk investments in the hope of securing higher returns.
We may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, as well as other special purpose vehicles set up by third parties for investment in a particular private company. To the extent we so invest, we will bear our ratable share of any such investment companys expenses, including management and incentive fees. We will also remain obligated to pay investment advisory fees, consisting of a base management fee and incentive fees, to FCM with respect to the assets invested in the securities and instruments of other investment companies under the Investment Management Agreement. With respect to any such investments, each of our stockholders will bear his or her share of the investment advisory fees of FCM as well as indirectly bearing the investment advisory fees and other expenses of any investment companies in which we invest.
CHANGES IN LAWS OR REGULATIONS GOVERNING OUR OPERATIONS MAY ADVERSELY AFFECT OUR BUSINESS.
We and our portfolio companies will be subject to regulation by laws at the local, state, and federal levels. These laws and regulations, as well as their interpretation, may be changed from time to time. Accordingly, any change in these laws or regulations could materially and adversely affect our business.
PROVISIONS OF THE MARYLAND GENERAL CORPORATION LAW AND OF OUR CHARTER AND BYLAWS COULD DETER TAKEOVER ATTEMPTS AND HAVE AN ADVERSE IMPACT ON THE PRICE OF OUR COMMON STOCK.
The Maryland General Corporation Law, our charter, and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of the Company or the removal of the Companys directors. We are subject to the Maryland Business Combination Act, the application of which is subject to any requirements of the 1940 Act. We are also subject to the Maryland Control Share Acquisition Act. With<|endoftext|>Rescind rules and regulations relating to the Plan.
### Eligible Recipients:
Persons eligible to receive awards under the Plan will be those officers, employees, consultants, and directors of our company and its subsidiaries who are selected by the administrator.
Shares Available Under the Plan:
The maximum number of shares of our common stock that may be delivered to participants under the Plan is 1,000,000 (subject to stockholder approval of such increase), subject to adjustment for certain corporate changes affecting the shares, such as stock splits. Shares subject to an award under the Plan for which the award is canceled, forfeited or expires again become available for grants under the Plan. Shares subject to an award that is settled in cash will not again be made available for grants under the Plan.
### Stock Options:
General.
Subject to the provisions of the Plan, the administrator has the authority to determine all grants of stock options. That determination will include: (i) the number of shares subject to any option; (ii) the exercise price per share; (iii) the expiration date of the option; (iv) the manner, time and date of permitted exercise; (v) other restrictions, if any, on the option or the shares underlying the option; and (vi) any other terms and conditions as the administrator may determine.
### Option Price
The exercise price for stock options will be determined at the time of grant. Normally, the exercise price will not be less than the fair market value on the date of grant. As a matter of tax law, the exercise price for any incentive stock option awarded may not be less than the fair market value of the shares on the date of grant. However, incentive stock option grants to any person owning more than 10% of our voting stock must have an exercise price of not less than 110% of the fair market value on the grant date.
Exercise of Options.
An option may be exercised only in accordance with the terms and conditions for the option agreement as established by the administrator at the time of the grant. The option must be exercised by notice to us, accompanied by payment of the exercise price. Payments may be made in cash or, at the option of the administrator, by actual or constructive delivery of shares of common stock to the holder of the option based upon the fair market value of the shares on the date of exercise.
### Expiration or Termination.
Options, if not previously exercised, will expire on the expiration date established by the administrator at the time of grant. In the case of incentive stock options, such term cannot exceed ten years provided that in the case of holders of more than 10% of our voting stock, such term cannot exceed five years. Options will terminate before their expiration date if the holders service with our company or a subsidiary terminates before the expiration date. The option may remain exercisable for specified periods after certain terminations of employment, including terminations as a result of death, disability or retirement, with the precise period during which the option may be exercised to be established by the administrator and reflected in the grant evidencing the award.
Incentive and Non-Qualified Options.
As described elsewhere in this summary, an incentive stock option is an option that is intended to qualify under certain provisions of the Code, for more favorable tax treatment than applies to non-qualified stock options. Any option that does not qualify as an incentive stock option will be a non-qualified stock option. Under the Code, certain restrictions apply to incentive stock options. For example, the exercise price for incentive stock options may not be less than the fair market value of the shares on the grant date and the term of the option may not exceed ten years. In addition, an incentive stock option may not be transferred, other than by will or the laws of descent and distribution, and is exercisable during the holders lifetime only by the holder. In addition, no incentive stock options may be granted to a holder that is first exercisable in a single year if that option, together with all incentive stock options previously granted to the holder that also first become exercisable in that year, relate to shares having an aggregate fair market value in excess of $100,000, measured at the grant date.
### Stock Appreciation Rights:
Awards of SARs may be granted alone or in tandem with stock options. SARs provide the holder with the right, upon exercise, to receive a payment, in cash or shares of stock, having a value equal to the excess of the fair market value on the exercise date of the shares covered by the award over the exercise price of those shares. Essentially, a holder of a SAR benefits when the market price of the common stock increases, to the same extent that the holder of an option does, but, unlike an option holder, the SAR holder need not pay an exercise price upon exercise of the award.
Stock Awards:
Stock awards can also be granted under the Plan. A stock award is a grant of shares of common stock or of a right to receive shares in the future. These awards will be subject to such conditions, restrictions and contingencies as the administrator shall determine at the date of grant. Those may include requirements for continuous service and/or the achievement of specified performance goals.
### Cash Awards:
A cash award is an award that may be in the form of cash or shares of common stock or a combination, based on the attainment of pre-established performance goals and other conditions, restrictions and contingencies identified by the administrator.
Section 162(m) of the Code:
Section 162(m) of the Code limits publicly-held companies to an annual deduction for U.S. federal income tax purposes of $1.0 million for compensation paid to each of their chief executive officer and their three highest compensated executive officers (other than the chief executive officer) determined at the end of each year, referred to as covered employees.
Performance Criteria
:
Under the Plan, one or more performance criteria will be used by the administrator in establishing performance goals. Any one or more of the performance criteria may be used on an absolute or relative basis to measure the performance of our company, as the administrator may deem appropriate, or as compared to the performance of a group of comparable companies, or published or special index that the administrator deems appropriate. In determining the actual size of an individual performance compensation award, the administrator may reduce or eliminate the amount of the award through the use of negative discretion if, in its sole judgment, such reduction or elimination is appropriate. The administrator shall not have the discretion to (i) grant or provide payment in respect of performance compensation awards if the performance goals have not been attained or (ii) increase a performance compensation award above the maximum amount payable under the Plan.
### Other Material Provisions:
Awards will be evidenced by a written agreement, in such form as may be approved by the administrator. In the event of various changes to the capitalization of our company, such as stock splits, stock dividends and similar re-capitalizations, an appropriate adjustment will be made by the administrator to the number of shares covered by outstanding awards or to the exercise price of such awards. The administrator is also permitted to include in the written agreement provisions that provide for certain changes in the award in the event of a change of control of our company, including acceleration of vesting. Except as otherwise determined by the administrator at the date of grant, awards will not be transferable, other than by will or the laws of descent and distribution. Prior to any award distribution, we are permitted to deduct or withhold amounts sufficient to satisfy any employee withholding tax requirements. Our board also has the authority, at any time, to discontinue the granting of awards. The board also has the authority to alter or amend the Plan or any outstanding award or may terminate the Plan as to further grants, provided that no amendment will, without the approval of our stockholders, to the extent that such approval is required by law or the rules of an applicable exchange, increase the number of shares available under the Plan, change the persons eligible for awards under the Plan, extend the time within which awards may be made, or amend the provisions of the Plan related to amendments. No amendment that would adversely affect any outstanding award made under the Plan can be made without the consent of the holder of such award.
ITEM12.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of March 26, 2021 by (i) each of our named executive officers and directors; (ii) all of our named executive officers and directors as a group; and (iii) each person who is known by us to beneficially own more than 5% of our common stock. Unless otherwise specified, the address of each of the persons set forth below is c/o our company, 13850 Manchester Rd., Ballwin, MO 63011.
* Less than 1%
(1)
Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as otherwise indicated, each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to our common stock.
(2)
A total of 6,111,200 shares of common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of March 26, 2021. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.
(3)
Consists of 65,790 shares of common stock which Mr. Moore has the right to acquire within 60 days through the exercise of vested options.
(4)
Based solely on the information set forth in the Schedule 13G filed by Michael Goedeker with the SEC on February 26, 2021.
(5)
Based solely on the information set forth in the Schedule 13G filed by Stephen Goedeker with the SEC on February 26, 2021.
(6)
Represents shares of common stock held by Leonite Capital LLC, or Leonite. Based on the information set forth in the Schedule 13G filed by Leonite with the SEC on October 26, 2020, Avi Geller is the Chief Investment Officer of Leonite and has voting and investment power over the securities held by it. Mr. Geller disclaims beneficial ownership of the shares held by Leonite except to the extent of his pecuniary interest, if any, in such shares. The address of Leonite is 1 Hillcrest Center Dr, Suite 232, Spring Valley, NY 10977.
### Changes in Control
We do not currently have any arrangements which if consummated may result in a change of control of our company.
The following table sets forth certain information about the securities authorized for issuance under our incentive plans as of December 31, 2020.
On July 30, 2020, we established the Plan. As of December 31, 2020, no shares remained available for issuance under the Plan.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
### Transactions with Related Persons
The following includes a summary of transactions since the beginning of our 2019 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11
Executive Compensation
). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Its liquidation, to pay our Sponsor or an affiliate of our Sponsor a monthly fee of$
10,000 for office space, utilities and secretarial and administrative support. The Company incurred $
110,000 and $
120,000 in expenses in connection with such services during the years ended December 31, 2020 and 2019 as reflected in the accompanying Statements of Operations.
### Board Member Agreement
In September 2017, the Company entered into an agreement with B. Baudouin Prot, one of its board members, pursuant to which the board member is paid a cash fee of $150,000 per annum in exchange for his service.
The agreement was effective as of October 1, 2017 and lasts until the consummation of the Companys business combination. The Company incurred $
150,000 in fees related to this service for the year ended December 31, 2019, in the accompanying Statements of Operations. On February 20, 2020, the Company agreed to amend its arrangement with Mr. Prot, however, if the Company completes its acquisition of a target company prior to June 18, 2020, the Company shall pay Mr. Prot $
12,500 for each month Mr. Prot has continued to provide services to the Company since January 1, 2020. On August 3, 2020, the Company agreed to amend its arrangement with Mr. Prot pursuant to which Mr. Prot will be paid an aggregate of $
75,000 for January through June 2020 so long as Mr. Prot continues to provide services to the Company to substantially the same extent as he previously provided such services and the Company successfully completes its acquisition of a target company prior to December 31, 2020. If the Company does not complete its acquisition of a target company prior to December 31, 2020, then no further fees will be due from the Company to Mr. Prot.
The Sponsor had agreed to loan the Company an aggregate of up to $300,000 to be used for the payment of costs related to the Initial Public Offering. In April 2018, the Sponsor amended the note to increase the principal amount to $
The loan was non-interest bearing, unsecured and due on the earlier of December 31, 2018 or the closing of the Initial Public Offering. The Company fully repaid the loan from the proceeds of the Initial Public Offering not being placed in the Trust Account on June 22, 2018.
On July 16, 2020, the Company issued a promissory note (Promissory Note) to the Sponsor, pursuant to which the Sponsor agreed to provide a working capital loan to the Company of up to $3.0 million. The Promissory Note will be repaid on the earlier of (i) December 31, 2020 and (ii) the effective date of a Business Combination, without interest. On July 16, 2020, the Company received $1.0 million in loan proceeds pursuant to the Promissory Note which increased the outstanding principal balance of the Promissory Note to $1.0 million.
See the Business Combination described in Note 1 above, including the description of the Sponsor Surrender Agreement, pursuant to which the Sponsor agreed to cancel the outstanding principal balance of the Promissory Note of $1.0 million immediately prior to (but conditioned and effective upon) completion of the proposed Merger.
### Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Companys officers and directors agreed to loan the Company funds as may be required (Working Capital Loans). In the event that a Business Combination did not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
On March 4, 2019, the Company issued a convertible note (Convertible Note) to the Sponsor, pursuant to which the Sponsor agreed to provide a Working Capital Loan to the Company of up to $
1.5 million. On June 16, 2020, the Company amended the Convertible Note, pursuant to which the maturity date of the note was extended to the earlier of (i) December 31, 2020 and (ii) the effective date of a Business Combination. The Company was provided $
750,000 and $
750,000 in loan proceeds during the year ended 2020 and 2019, respectively, for an aggregate $
1.5 million outstanding balance pursuant to the amended Convertible Note.
In addition, in connection with the Extension, the Companys officers, directors or any of their affiliates or designees have agreed, if the Company does not have the funds necessary to make the Deposit, to make Contributions to the Company as a loan of $0.03 for each Public Share that is not converted in connection with the shareholder votes to approve the Extension. The Contributions will not bear any interest and will be repayable by the Company to the officers, directors or affiliates upon consummation of an initial Business Combination (Note 1). As of December 31, 2020, no Contributions were outstanding.
See the Business Combination described in Note 1 above, including the description of the Sponsor Surrender Agreement, pursuant to which the Sponsor agreed to waive its right to convert the outstanding principal due under the Convertible Note to warrants of the Company in lieu of cash payment upon the consummation of the Merger (but conditioned and effective upon) completion of the proposed Merger.
Note 6.
### Commitments & Contingencies
Registration Rights
The holders of the founder shares and Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans) were entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement to be signed prior to or on the effective date of the Initial Public Offering.
### Underwriting Agreement
The underwriters were entitled to an underwriting discount of $
0.20 per unit, or $
3.105 million in the aggregate, paid upon the closing of the Initial Public Offering. Additionally, a deferred underwriting discount of$
0.35 per unit, or $
5.434 million in the aggregate will be payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Note 7.
### Stockholders equity
Class A Common stock
100,000,000 shares of Class A common stock with a par value of$
0.0001 per share. At December 31, 2020 and 2019, there were 15,525,000 Class A common stock issued or outstanding, including
0 and
13,413,549 shares of Class A common stock subject to possible redemption, respectively.
Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders, except as required by law. Each share of common stock will have one vote on all such matters.
### Class B Common stock
15,000,000 shares of Class B common stock with a par value of$
0.0001 per share. In August 2017, the Company initially issued
Class B common stock. In February 2018, in connection with the decrease of the size of the Initial Public Offering, the Sponsor forfeited
431,250 shares of Class B common stock, resulting in a decrease in the total number of founder shares from 4,312,500 to 3,881,250. Of the
3,881,250 shares of Class B common stock, an aggregate of up to 506,250 shares were subject to forfeiture to the Company by the Sponsor for no consideration to the extent that the underwriters over-allotment option was not exercised in full. At December 31, 2020 and 2019, there were
### Class B common stock issued or outstanding.
The Class B common stock would automatically convert into Class A common stock on the first business day following the consummation of the initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts sold in the Initial Public Offering and related to the closing of the initial Business Combination, the ratio at which the Class B common stock shall convert into Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future issuance) so that the number of Class A common stock issuable upon conversion of all Class B common stock will equal, in the aggregate, 20% of the sum of the total number of all common stock outstanding upon the completion of the Initial Public Offering plus all Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination.
Preferred Stock
###
1,000,000 preferred shares with a par value of $
0.0001 per share. At December 31, 2020 and 2019, there are no preferred shares issued or outstanding.
### Warrants
At December 31, 2020 and 2019 there are
23,285,000 outstanding warrants, consisting of
15,525,000 public warrants and
Private Placement Warrants, each Warrant exercisable at $
11.50 into one share of Class A common stock.
provided in each case that the Company has an effective registration statement under the Securities Act covering the Class A common stock issuable upon exercise of the public warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their public warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, the Company will use its best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A common stock issuable upon exercise of the public warrants. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective by the sixtieth (60th) day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption.
The Private Placement Warrants are identical to the public warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. If the Private Placement Warrants are held by someone other than the initial stockholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants.
The Company may call the public warrants for redemption (except with respect to the Private Placement Warrants): in whole and not in part; at a price of $0.01 per warrant; upon a minimum of 30 days prior written notice of redemption; and
The exercise price and number of Class A shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A shares at a price below its exercise price.
Note 8.
### Fair Value Measurements<|endoftext|>65% multiplied by lowest average traded price during the ten (10) trading day period ending.
Voting
Series B Preferred Stock shall be non-voting on any matters requiring shareholder vote.
### Dividends
Series B Preferred Stock will carry an annual cumulative dividend, compounded monthly, payable solely upon redemption, liquidation or conversion.
Redemption
The Series B Preferred Stock is mandatorily redeemable by the holder 15 months after issuance, and therefore is classified as temporary equity in the consolidated balance sheet.
2020 and 2019 Transactions
During the year ended December 31, 2020, the Company issued Series B Preferred Stock as follows:
-
On January 16, 2020, an existing Series B stockholder purchased 53,000 Series B Preferred shares for proceeds of $53,000 under the same terms as their prior purchases.
-
The holders of 3,600 shares of Series B Preferred Stock converted these shares for 29,353,846 shares of common stock.
During the year ended December 31, 2019, the Company issued Series B Preferred Stock as follows:
-
The holders of 68,000 shares of Series B Preferred Stock converted these shares for 1,815,742 shares of common stock.
-
In November 2019, the Company issued 68,000 shares of Series B Preferred Stock for $68,000.
-
In December 2019 the company issued 53,000 shares of Series B Preferred Stock for $53,000.
### Series C Preferred Stock
As of December 31, 2020 and 2019, there were two designated shares of Series C Preferred Stock.
The Series C Preferred Shares have no equity value, no preference in liquidation, is not convertible into common shares and does not accrue dividends or have redemption rights. Each issued and outstanding share of Series C Preferred Stock authorizes the holder to vote eight billion (8,000,000,000) votes on any matter that shareholders are entitled to vote for under our Bylaws at a cost of $1.00 per share.
As of December 31, 2020 and 2019, there is one share of S Series C Preferred Stock issued and outstanding.
### Series D Preferred Stock
Series D Preferred Stock are Blank Check Preferred which allows the Board of Directors to subdivide and/or determine the rights, privileges, and other features of this stock.
The total number of shares of Series D Preferred Stock the Company is authorized to issue is ten million (10,000,000) shares.
### Series D-1 Preferred Stock
On July 2, 2018, the Company entered into an Equity Line of Credit agreement with Oasis Capital, LLC (Oasis Agreement) and as a part of that Agreement the Company created a subset Series D-1 Preferred Stock from the authorized Series D Preferred Stock having special rights and privileges as follows:
As of December 31, 2020 and 2019, there were 500,000 shares designated as Series D-1 Preferred Stock with a stated value of $2.00 per share (the Stated Value).
### Liquidation
Holders of Series D-1 Preferred Stock shall have a liquidation preference junior to Series A, B and C holders. Upon any liquidation, dissolution or winding-down of the Company, the holders of the shares of Series D-1 Preferred Stock shall be paid in cash an amount for each share of Series D-1 Preferred Stock held by such holder equal to 140% of the Stated Value plus any dividends accrued but unpaid.
Conversion
Each share of Series D-1 Preferred Stock, together with accrued but unpaid dividends, shall be convertible at the option of the holder at any time into shares of common stock as is determined by dividing the Stated Value per share being converted plus accrued and unpaid dividends by the Series D-1 Conversion Price. The Series D-1 Conversion Price per share of Common Stock shall be the lowest traded price of the Common Stock during the thirty (30) trading day period ending, in Holders sole discretion on each conversion, on either (i) the last complete trading day prior to the Conversion Date or (ii) the Conversion Date.
### Voting
Series D-1 Preferred Stock shall be non-voting except on certain major corporate actions or as required by law. In the event of such a right to vote, each holder of Series D-1 Preferred Stock shall have the right to the number of votes equal to the number of Conversion Shares then issuable upon conversion of the Series D-1 Preferred Stock held by such holder.
Dividends
Before any dividends shall be paid or set aside for payment on any junior security of the Company, each holder of the Series D-1 Preferred Stock shall be entitled to receive dividends, in the manner provided herein, payable on the Stated Value of the Series D-1 Preferred Stock at a rate of 8% per annum, which shall be cumulative and be due and payable in shares of common stock on the Conversion Date. Such dividends shall accrue from the date of issue of each share of Series D-1 Preferred Stock, whether or not declared.
### Redemption
Shares of the Series D-1 Preferred Stock shall be redeemable in cash, at any after the issuance of the respective Series D-1 Preferred Stock at a price per share equal to 125% of the Stated Value plus the amount of accrued but unpaid dividends, provided, however, that 125% shall be replaced with 140% if the Company exercises its option to redeem the Series D-1 Preferred Stock after the initial 60 calendar day period. Therefore, the Series D-1 Preferred Stock is classified as temporary equity in the consolidated balance sheet.
During the year ended December 31, 2019, the Company issued Series D-1 Preferred Stock as follows:
-
During the first quarter of 2019, Oasis Capital converted 28,500 shares for 630,000 shares common stock and reduced the principal outstanding balance by $57,000. As such, the Company recorded a change in derivative liability associated the Series D-1 Preferred Shares of $86,428.
-
On March 14, 2019, the Company executed an agreement with Oasis Capital, whereby the Company agreed to exchange the remaining outstanding 282,750 Series D-1 shares for 282,750 Series D-2 Preferred Shares. In addition, the Company executed an agreement whereby 62,250 outstanding D-1 shares were exchanged for 62,250 Series D-2 preferred shares in exchange of $100,000. In addition, the Company agreed to pay 1,425 shares of D-2 shares as a finance charge for this agreement. The excess fair value of the shares exchanged was recorded as additional interest expense.
As of December 31, 2020 and 2019, there are 0 Preferred Series D-1 shares issued and outstanding, respectively.
### Series D-2 Preferred Stock
The total number of shares of Series D-2 Preferred Stock the Company is authorized to issue 2,500,000 shares, with a stated value of $2.00 per share.
Dividends
Before any dividends shall be paid or set-side for payment on any junior security, each holder of Series D-2 Preferred Stock shall be entitled to receive dividends payable on the stated value of the Series D-2 Preferred Stock at a rate of 8% per annum, or 18% per annum following the occurrence of an event of default, which shall be cumulative and be due and payable in shares of common stock on the conversion date or in cash on the redemption date. Such dividends shall accrue from the date of issue of each share of Series D-2 Preferred Stock.
### Liquidation
Holders of Series D-2 Preferred Stock shall have a liquidation preference junior to Series A, B, C and D-1 holders.
Conversion
Each share of Series D-2 Preferred Stock, together with accrued but unpaid dividends, shall be convertible at the option of the holder at any time into shares of common stock as is determined by dividing the Stated Value per share being converted plus accrued and unpaid dividends by the Series D-2 Conversion Price. The Series D-2 Conversion Price per share of Common Stock shall be the lowest traded price of the Common Stock during the thirty (30) trading day period ending, in Holders sole discretion on each conversion, on either (i) the last complete trading day prior to the Conversion Date or (ii) the Conversion Date.
### Redemption
The Series D-2 Preferred Stock is classified temporary equity due to the fact that the shares are redeemable immediately.
In 2020, the Company converted an aggregate of 23,000 shares of Series D-2 Preferred Stock with a fair value of $46,000 into 355,142,105 shares of common stock.
The Company issued 346,625 Series D-2 shares to Oasis Capital with a value of $692,850. On April 1, 2019, Oasis Capital received $103,500 in exchange for 103,500 Series D-2 shares. On May 9, 2019, the Company received $50,000 in exchange for 45,045 Series D-2 Preferred Shares from Oasis Capital with which the Company had previously executed the PIPE Securities Purchase Agreement in March of 2019. During the year ended December 31, 2019 Oasis Capital redeemed $127,580 or 63,790 shares of its Series D-2 Preferred shares for 3,000,000 common shares. In addition, Oasis purchased an additional 9,009 series D-2 Preferred shares for $10,000. For the year ended December 2019, Oasis redeemed and exchanged $127,580 or 63,790 shares of its D-2 Preferred shares for 10,536,281 commons shares.
On April 3, 2019, the Company entered into a Securities Exchange Agreement with Mr. DAlleva and issued him 332,032 Series D-2 Preferred Shares in exchange for the 6,250,000 common shares that Mr. DAlleva had previously purchased from the Company.
Mr. DAlleva received 318,750 Series D-2 shares in exchange for the 62,500 common shares that he previously purchased for $531,250. He will also receive an additional 13,282 Series D-2 Preferred shares in the form of debt discount in this share exchange.
On April 3, 2019, concurrent with the PIPE Securities Purchase Agreement entered into with Mr. DAlleva, the Company entered into a PIPE Securities Purchase Agreement with Dominic DAlleva to sell to Mr. DAlleva in various $25,000 tranches up to 93,750 Series D-2 Preferred Shares for a commitment of a $150,000 investment into the Company.
Thus far, Mr. DAlleva has purchased 15,625 Series D-2 Preferred Shares for $25,000. He has delivered $12,500 and the Company expects him to deliver the remainder of the purchase price in the current period.
In addition, on April 3, 2019, the Company entered into a PIPE Securities Purchase Agreement with a key technology vendor where the Company exchanged 125,000 Series D-2 Preferred Shares for $200,000 of Company debt held by that vendor. An additional $50,000 was expensed as a result of this transaction. During the fourth quarter Oasis converted 6,040 Series D-2 Preferred shares.
As of December 31, 2020 the Company had 912,368 Series D-2 Preferred Shares with a redemption value of $2,607,162 and 935,368 Series D-2 Preferred Shares with a redemption value of $2,442,542 as of December 31, 2019.
### Series D-3 Preferred Shares
The total number of shares of Series D Preferred Stock the Company is authorized to issue is 500,000 shares.
Conversion
The Holder may convert some, part of all of the Series D-3 shares into common shares of the Company based on the closing market price on the day before notice of conversion is presented to the Company.
### Dividends
The Company will pay dividends on the Series D-3 Preferred Stock at the rate of 10% per annum and shall pre-pay the Holder the first 12 months dividends from proceeds. After 12 months the Company would pay the pro-rata interest on a monthly basis due the first of each month and late after the 10th of each month.
Redemption
At the option of the Holder the Company may be obligated to redeem any non-converted shares of Series D-3 Preferred Stock that are not deemed to be incentive shares and that are not deemed to be settlement shares through the issuance of a PUT to the Company. At the conclusion of the PUT Notice Period, the Holder may at any time request a redemption of some, part, or all of Holders any non-converted shares of Series D-3 Preferred Stock by providing the Company with a PUT DEMAND. The Company would then be obligated to redeem any undisputed Securities within 10 business days of receipt of the PUT DEMAND. The Holder may at any time after issuing a PUT NOTICE rescind the PUT option which | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
We are not registering the shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed, as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, to use our best efforts to file, and within 60 business days following our initial business combination have declared effective, a registration statement under the Securities Act covering the issuance of such shares and maintain a current prospectus relating to the Class A common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available. There may be a circumstance where an exemption from registration exists for holders of our private placement warrants to exercise their warrants while a corresponding exemption does not exist for holders of the warrants included as part of units sold in the initial public offering. In such an instance, our sponsor and its permitted transferees (which may include our directors and executive officers) would be able to exercise their warrants and sell the common stock underlying their warrants while holders of our public warrants would not be able to exercise their warrants and sell the underlying common stock. As a result, we may redeem the warrants even if the holders are otherwise unable to exercise the warrants.
The grant of registration rights to our initial stockholders and their permitted transferees may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A common stock.
Pursuant to an agreement entered into in connection with the initial public offering, our initial stockholders and their permitted transferees can demand that we register the resale of their founder shares after those shares convert to shares of our Class A common stock at the time of our initial business combination. In addition, our sponsor and its permitted transferees can demand that we register the resale of the private placement warrants and the shares of Class A common stock issuable upon exercise of the private placement warrants, and holders of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such warrants or the Class A common stock issuable upon exercise of such warrants. This is because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A common stock that is expected when the common stock owned by our initial stockholders or their permitted transferees, the private placement warrants owned by our sponsor or warrants issued in connection with working capital loans are registered for resale.
Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of 65% of our common stock, which is a lower amendment threshold than that of some other blank check companies.
Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a companys pre-business combination activity, without approval by holders of a certain percentage of the companys stockholders. Our amended and restated certificate of incorporation provides that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of the initial public offering and the private placement warrants into the trust account and not release such amounts except in specified circumstances) may be amended if approved by holders of at least 65% of our common stock who attend and vote in a stockholder meeting, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of 65% of our common stock. Additionally, only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to our initial business combination, and such rights may only be amended by a resolution passed by the holders of a majority of our Class B common stock. In all other instances, our amended and restated certificate of incorporation provides that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders, who beneficially own 20% of our common stock, may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and will have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which will govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete our initial business combination with which you do not agree.
Our sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the initial public offering or (B) with respect to any other provision relating to stockholders rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants. As a result, the exercise price of your warrants could be increased, the warrants could be converted into cash or stock, the exercise period could be shortened and the number of shares of our Class A common stock purchasable upon exercise of a warrant could be decreased, all without your approval.
The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.
Unlike most blank check companies, if we issue additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by our board of directors and, in the case of any such issuance to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance) (the newly issued price), the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the newly issued price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the newly issued price.
Because each unit contains one-half of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank check companies.
Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. This is different from other offerings similar to ours whose units include one share of Class A common stock and one warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for half of the number of shares compared to units that each contain a warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses.
An active trading market for our securities may not develop, which would adversely affect the liquidity and price of our securities.
We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. Redemption of the outstanding warrants could force you to: (1) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so (2) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for<|endoftext|>Company recorded an unrealized loss of $97,500 for the year ended December 31, 2019.
10. Line of Credit - Bank
The Company maintains a $1,000,000 secured revolving line of credit from Metropolitan Commercial Bank in New York, of which $500,000 was drawn as of December 31, 2020, which bears a fixed rate of interest of 3.00% on the outstanding balance with an interest only monthly minimum payment, and no maturity date as long as the security deposit of $1,000,000 remains in place, see Note 4.
11. Convertible Debentures
On February 26, 2018, the Company issued debenture units to certain accredited investors (the February 2018 Private Placement). Each debenture unit was comprised of (i) a debenture in the principal amount of CDN $1,000 bearing interest at a rate of 10% per annum, with a maturity date of two years from the date of issuance, (ii) warrants to purchase up to 31.25 shares of the Companys common stock at an exercise price equal to the lesser of $5.00 or 125% of the proposed initial Canadian public offering price per warrant, expiring on February 25, 2020, and (iii) 20 shares of restricted common stock. The investors in the February 2018 Private Placement purchased an aggregate principal amount of CDN $670,000 ($521,900) debentures and received warrants to purchase up to 20,938 shares of the Companys common stock and 13,875 shares of common stock. As a result of the lower debenture conversion price and the warrant exercise price of the May 31, 2018 Private Placement described below, the whole or any part of the principal amount of the February 2018 Private Placement debentures plus any accrued and unpaid interest may have been converted into shares of the Companys common stock at a price equal to $3.20 per share and the warrants could have been exercised at a price equal to $4.00 per share.
In April 2018, the Company issued debenture units to certain investors (the April 2018 Private Placement). Each debenture unit was comprised of (i) a debenture in the principal amount of CDN $1,000 bearing interest at a rate of 10% per annum, with a maturity date of two years from the date of issuance, (ii) warrants to purchase up to 31.25 shares of the Companys common stock at an exercise price equal to the lesser of $5.00 or 125% of the proposed initial Canadian public offering price per warrant, expiring in April 2020, and (iii) 20 shares of restricted common stock. The investors in the April 2018 Private Placement purchased an aggregate principal amount of CDN $135,000 ($105,200) debentures and received warrants to purchase up to 4,218.75 shares of the Companys common stock and 2,700 shares of restricted common stock. As a result of the lower debenture conversion price and the warrant exercise price of the May 31, 2018 Private Placement described below, the whole or any part of the principal amount of the April 2018 Private Placement debentures plus any accrued and unpaid interest may have been converted into shares of the Companys common stock at a price equal to $3.20 per share and the warrants could have been exercised at a price equal to $4.00 per share.
On April 19, 2018, the Company re-issued debenture units that were first issued to certain investors between January 24, 2017 and January 31, 2018 in order to simplify the various debentures into a single series with the same terms as new convertible debenture units issued on February 26, 2018 (the April 19, 2018 Debentures). Each debenture unit was comprised of (i) a debenture in the principal amount of CDN $1,000 bearing interest at a rate of 10% per annum, with a maturity date of two years from the date of issuance, (ii) warrants to purchase up to 31.25 shares of the Companys common stock at an exercise price equal to the lesser of $5.00 or 125% of the proposed initial Canadian public offering price per warrant, expiring on April 19, 2020, and (iii) 20 shares of restricted common stock. The investors in the April 19, 2018 Private Placement received an aggregate principal amount of CDN $1,436,000 ($1,118,600) debentures, warrants to purchase up to 44,875 shares of the Companys common stock and 28,720 restricted shares of common stock. As a result of the lower debenture conversion price and the warrant exercise price of the May 31, 2018 Private Placement described below, the whole or any part of the principal amount of the April 19, 2018 Debentures plus any accrued and unpaid interest could have been converted into shares of the Companys common stock at a price equal to $3.20 per share and the warrants could have been exercised at a price equal to $4.00 per share.
11.
On May 11, 2018, the Company issued debenture units to certain investors (the May 11, 2018 Private Placement). Each debenture unit was comprised of (i) a debenture in the principal amount of CDN $1,000 bearing interest at a rate of 10% per annum, with a maturity date of two years from the date of issuance, (ii) warrants to purchase up to 31.25 shares of the Companys common stock at an exercise price equal to the lesser of $5.00 or 125% of the proposed initial Canadian public offering price per warrant, expiring on May 11, 2020, and (iii) 20 shares of restricted common stock. The investors in the May 11, 2018 Private Placement purchased an aggregate principal amount of CDN $131,000 ($102,000) debentures and received warrants to purchase up to 4,093.75 shares of the Companys common stock and 2,620 restricted shares of common stock. As a result of the lower debenture conversion price and the warrant exercise price of the May 31, 2018 Private Placement described below, the whole or any part of the principal amount of the May 11, 2018 Private Placement plus any accrued and unpaid interest could have been converted into shares of the Companys common stock at a price equal to $3.20 per share and the warrants could have been exercised at a price equal to $4.00 per share.
On May 31, 2018, the Company closed a private placement offering of up to 7,500 units and entered into Subscription Agreements (the Agreements) with certain accredited investors (the May 31, 2018 Private Placement). The units were offered in both U.S. and Canadian dollar denominations. Each unit sold to U.S. investors was sold at a per unit price of $1,000 and was comprised of (i) a 10% convertible debenture in the principal amount of $1,000 (the U.S. Debentures) maturing on May 31, 2020, (ii) 26 shares of our common stock and (ii) warrants to purchase up to 135.25 shares of the Companys common stock (the U.S. Warrants). Each unit sold to Canadian investors was sold at a per unit price of CND $1,000 and was comprised of (i) a 10% convertible debenture in the principal amount of CND $1,000 (the Canadian Debentures and together with the U.S. Debentures, the May Debentures), (ii) 20 shares of our common stock and (ii) warrants to purchase up to 104.06 shares of our common stock (the Canadian Warrants and together with the U.S. Warrants, the May Warrants).
The proceeds received from the convertible debentures were net of finders fees paid to certain brokers. In addition, the Company also issued: (i) shares of common stock to the convertible debenture holders; (iii) certain two year warrants exercisable for shares of common stock at an exercise price of $4.00 per share; (iii) in conjunction with the finders fees paid, the Company also issued warrants to certain brokers on the same terms and conditions as the warrants issued to the convertible debenture holders.
The convertible debentures were convertible into shares of common stock at a conversion price of $3.20 per share.
The May Warrants and broker warrants were exercisable at an exercise price of $4.00 per share and expired on May 31, 2020.
The accounting treatment of the above is as follows:
(i)
The convertible debentures were recorded at gross value;
(ii)
The cash fee paid to the brokers was $427,314 and the fair value of the warrants issued to the brokers were valued at fair value as described in (iv) below and were recorded as a debt discount against the gross value of the convertible debentures;
(iii)
The shares of common stock issued to the convertible debenture holders were valued at $582,486, the market price of the common stock on the date of issue and were recorded as debt discount against the gross value of the convertible debt;
(iv)
The warrants issued to the convertible debenture holders and brokers were valued at $2,929,712 using a Black-Scholes valuation model. These warrants were equity classified with a beneficial conversion feature.
11.
The total debt discount above amounted to $6,524,567 which was being amortized over the two year life of the debentures on a straight line basis.
Convertible debentures of $10,000 and CDN $65,000 (approximately $48,416) that had matured on May 31, 2020 were extended to August 29, 2020, of which CDN $35,000 was acquired by a related party prior to extension, and a further $600,000 and CDN $242,000 (approximately $180,257) that had matured, had the maturity date extended to September 28, 2020, of which $500,000 and CDN $207,000 were acquired by a related party, prior to extension.
As an incentive for extending the maturity date of the convertible debentures, the debenture holders were granted two year warrants exercisable for 301,644 shares of common stock at an exercise price of $3.75 per share, of which 144,041 were granted to related parties and three year warrants exercisable for 72,729 shares of common stock at an exercise price of $5.00 per share, of which 36,010 were issued to related parties. All of the convertible debentures with extended maturity dates, with the exception of one convertible debenture of CDN $35,000, were repaid during 2020. The remaining convertible debenture of CDN $35,000 was repaid in 2021.
During the year ended December 31, 2020, investors in Canadian Dollar convertible debentures converted the aggregate principal amount of CDN $317,600, including interest thereon of CDN $45,029 and investors in US Dollar convertible debentures converted the aggregate principal amount of $400,000, including interest thereon of $70,492 into 230,134 shares of common stock.
The Aggregate convertible debentures outstanding consists of the following:
12. Deferred Purchase Consideration
In terms of the acquisition of Virtual Generation on January 31, 2019, disclosed in Note 3 above, the Company issued non-interest bearing promissory notes of 3,803,000 owing to both related parties and non-related parties. The value of the promissory notes payable related parties was 1,521,200 and to non-related parties was 2,281,800.
The promissory notes payable to non-related parties are to be settled as follows:
(a) an aggregate of 1,435,200 in cash in 23 equal and consecutive monthly instalments of 62,400 with the first such payment due and payable on the date that was one month after the Closing Date; and
(b) an aggregate of 846,600 in shares of the Companys common stock in 17 equal and consecutive monthly instalments of 49,800 as determined by the average of the closing prices of such shares on the last 10 trading days immediately preceding the determination date of each monthly issuance, which issuances commenced on March 1, 2019.
The amount due to the non-related party VG sellers amounted to 300,000 (approximately $336,810).
The future payments on the promissory notes were discounted to present value using the Companys average cost of funding of 10%. The discount is being amortized over the repayment period of the promissory note using the effective interest rate method.
13. Bank Loan Payable
In September 2016, the Company obtained a loan of 500,000 (approximately $545,000) from Intesa Sanpaolo Bank in Italy, which loan is secured by the Company's assets. The loan has an underlying interest rate of 4.5% above the Euro Inter Bank Offered Rate, subject to quarterly review and is amortized over 57 months ending March 31, 2021. Monthly repayments of 9,760 began in January 2017.
In terms of a directive by the Italian Government, in order to provide | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Became due on demand and became convertible with a 40% discount to market price, but not lower than $1.00 per share.
On the date of the note, the 100,000 shares of common stock and the 400,000 warrants had fair values of $50,000 and $184,926, respectively. The total of $234,926 was recognized as interest expense during the year ended June 30, 2019. See Note 9 for assumptions used in the calculation of fair value of the warrants.
During the year ended June 30, 2020 and 2019, interest expense of $20,000 and $932 was recognized on this note payable related party, respectively. Accrued interest payable, included in accounts payable and accrued liabilities, was $20,932 and $932 at June 30, 2020 and 2019, respectively.
### Note 7 Convertible Notes Payable
Convertible note
On March 17, 2020, the Company entered into a Securities Purchase Agreement with Eagle Equities LLC pursuant to which the Company issued a 10% Convertible Redeemable Note (Convertible Note) for the original principal amount of $150,000. The Convertible Note is due on March 17, 2021 and on the sixth month anniversary of the Note may be converted into shares of Common Stock of the Company at a 40% discount to the lowest Volume Weighted Average Price for the Companys common stock for the 15 days preceding the conversion. The Company will recognize the derivative liability when the Note becomes convertible. The Convertible Note may be prepaid prior to the six-month anniversary at 115% of the face if paid within 30 days, and an additional 5% every 30 days thereafter with a cap of 140%. Interest accrual and debt amortization would have begun in April 2020.
Financing fees associated with the note totaled $16,500 resulting in net proceeds to the Company of $133,500. The financing fees were recognized as a discount on debt is being amortized over the term of the note.
During the year ended June 30, 2020, amortization of $4,125 was recognized as interest expense. As of June 30, 2020, the balance of the note payable is $150,000 less unamortized debt discount of $12,375 or $137,625. Interest expense of $3,750 was recognized on the convertible note during the year ended June 30, 2020.
### Convertible note related party
On April 6, 2020, the Company issued convertible note payable of $250,000 with simple interest at 10% per annum if repaid within 90 days, and simple interest at 20% per annum thereafter. The convertible note is due on April 6, 2021. At the option of holder, this note is convertible at any time which is six months from the date of issuance through that date which is one year from the date of issuance at a conversion price of $0.25 per share. In consideration for the loan of $250,000, the Borrower also granted to the Lender 100,000 stock options exercisable at $0.25 for a two-year term. The fair value of the options was $13,297 and was recognized as debt discount as a part of beneficial conversion feature in the year ended June 30, 2020 (Note 8). The Company recorded a discount on the convertible note due to a beneficial conversion feature of $51,594, which is being amortized over the term of the note.
During the year ended June 30, 2020, amortization of $12,899 was recognized as interest expense. As of June 30, 2020, the balance of the note payable is $250,000 less unamortized debt discount of $38,695 or $211,305. Interest expense of $6,250 was recognized on the convertible notes during the year ended June 30, 2020.
### Note 8 - Stockholders Equity
Common Stock
2020 Stock Issuances
During the year ended June 30, 2020, the Company had the following common stock transactions:
2019 Stock Issuances
During the year ended June 30, 2019, the Company had the following common stock transactions:
Sold 951,600 shares of its common stock for total cash proceeds of $402,942. Included with these issuances were warrants to purchase up to 3,096,600 shares via warrants at exercise prices of $1.00 and $2.00.
Issued 59,100 shares of its common stock valued at $0.50 per share to four consultants as compensation for $29,550 in website, advertising, legal and advisory services.
### Common Stock to be Issued
As of June 30, 2020 and 2019, the Company received payment for unissued capital stock resulting in 425,000 and 150,000 share of common stock to be issued for payments of $139,500 and $170,000, respectively.
Stock Purchase Warrants
Transactions in stock purchase warrants for the years ended June 30, 2020 and 2019 are as follows:
The composition of the Companys warrants outstanding at June 30, 2020 are as follows:
During the year ended June 30, 2020 and 2019, the Company issued warrants to purchase common shares in connection with a note payable to a related party (see Note 7). The fair value of the warrant was determined using the Black-Scholes option pricing model with the following assumptions:
### Stock Options
The fair value of these shares was $474,491 of which $189,797 was recognized in the year ended June 30, 2020.At June 30, 2020, compensation cost for non-vested options of $284,695 will be recognized over the next year.
The fair value of the options was determined using the Black-Scholes option pricing model with the following assumptions:
For options issued in the year ended June 30, 2020, the volatility rate is based on the Companys volatility. For options issued in the year ended June 30, 2019, the volatility rate of the Company three similar publicly traded companies. Treasury yield for a term consistent with the expected life of the awards in effect at the time of grant. The Company has no history or expectation of paying cash dividends on its common stock.
Transactions in stock options for the years ended June 30, 2020 and 2019 is as follows:
At June 30, 2020, the intrinsic value of the outstanding options was $1,986,900.
### Note 9 Income Taxes
The Company did not recognize a provision (benefit) for income taxes for the years ended June 30, 2020 and 2019.
At December 31, 2020 and 2019, the Company had net deferred tax assets principally arising from the net operating loss carryforward for income tax purposes multiplied by an expected federal rate of 21%. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the deferred tax assets, a valuation allowance equal to 100% of the net deferred tax asset exists at June 30, 2020 and 2019.
A reconciliation of the federal statutory income tax to our effective income tax is as follows:
At June 30, 2020, the Company had federal net operating loss carry forwards of approximately $567,000 will never expire but its utilization is limited to 80% of taxable income in any future year.
Net deferred tax assets consist of the following components as of:
The Company is open to examination of our income tax filings in the United States and state jurisdictions for the 2018 through 2020 tax years. Tax attributes from years prior to that can be adjusted as a result of examinations. In the event that the Company is assessed penalties and or interest, penalties will be charged to other operating expense and interest will be charged to interest expense.
### Note 10 - Related Party Transactions
In addition to the notes payable described in Note 7, the Company had the following transactions with related parties:
During the year ended June 30, 2019, the Company issued shares and warrants to an investor with direct control over Insight in exchange for $250,000. Insight was a 50% partner of Optical Flow (see Note 5 and Note 7).
On September 11, 2019, the Company elected M. Richard Cutler, the Companys corporate and securities counselor, as a member of its board of directors. During the year ended June 30, 2020, legal expense associated with Mr. Cutlers services totaled $377,707 of which $165,000 was paid in the form of 330,000 shares of the Companys common stock. At June 30, 2020, the Company has an account payable to Mr. Cutler of $76,817.
Pursuant to the agreement, the related party and third party paid $2,000,000 for a deposit on PPE. The balance of the $2,000,000 is payable from net profits from the venture as follows: 43.5% to the Company, 43.5% to the related party and 13.0% to the third party.
On August 1, 2019, the Company entered into an agreement with Stratcon Advisory and Tysadco Partners. Pursuant to the agreement, the Company will pay $6,000 per month for twelve months for corporate development, investment advisory, and investor relations services, payable $3,000 in restricted common stock and $3,000 in cash. Total expense recognized under this agreement during the year ended June 30, 2020 was $70,855. At June 30, 2020, the Company has a balance of $27,000 payable and $6,000 worth of common stock.
On June 11, 2020, the Company formalized an employment agreement with its chief executive officer which provides for annual salary of $250,000 beginning with the calendar year 2020. The agreement also specified that the CEO would receive $180,000 of salary that was earned during the calendar year 2019. During the year ended June 30, 2020, compensation expense of $284,130 was recognized under this agreement. At June 30, 2020, the Company has a payable due to its CEO of $150,000. The agreement contained provisions for severance, health benefits, and a car allowance.
### Note 12 - Subsequent Events
Effective July 1, 2020, the Company agreed to change the conversion price and issue 800,000 shares of common stock to an accredited investor upon conversion of a $200,000 convertible note at $0.25 per share.
Effective January 15, 2021, the Company appointed Christopher Mulgrew as its Chief Financial Officer. As part of that engagement Mr. Mulgrew was issued an option to acquire 500,000 shares of the Companys Common Stock at $0.45 per share pursuant to the terms of an Option Agreement as well as the terms of the Companys 2019 Directors, Officers, Employees and Consultants Stock Option Plan (the Plan). Mr. Mulgrews right to acquire the Shares pursuant to the Option shall vest 20% immediately upon issuance of this option, and an additional 20% every three months thereafter. In the event Mr.
Item 9. Change in and Disagreement with Accountants on Accounting and Financial Disclosure
At inception the Company engaged BF Borgers Certified Public Accountants (BF Borgers), to audit its financial statements for the period of inception to June 30, 2018, the fiscal year ended June 30, 2019 and the fiscal year ended June 30, 2020. During the period of inception through June 30, 2020 the Company has not had any disagreements with BF Borgers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to BF Borgers satisfaction, would have caused them to make reference thereto in their reports on the Company's financial statements for such periods.
During the period of inception through June 30, 2020 there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
During the period of inception to June 30, 2020, the Company has not consulted with BF Borgers regarding either:
1. the application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report was provided to the Company nor oral advice was provided that BF Borgers concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
2. any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph (a)(1)(v) of Item 304 of Regulation S-K).
The report of BF Borgers regarding the Company's financial statements for the fiscal year ended June 30, 2020 did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified<|endoftext|>Attributable to changes in volume (changes in volume multiplied by prior rate). The total column represents the sum of the prior two columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume.
Exclusive of the impact of PPP loans, the Company expects its first fiscal quarter of 2021 net interest margin to decrease due to the precipitous drop in the Federal Funds, Prime and LIBOR interest rates in the latter half of the third fiscal quarter of 2020, and the continued drop in the LIBOR interest rates in the fourth fiscal quarter of 2020. Expected decreases in average interest earning asset yields are unlikely to be fully offset by expected decreases in the average cost of funds. Although the stated interest rate on PPP loans is fixed at 1.00%, the Companys recognition of the interest income on origination fees, net of deferred origination costs, on PPP loans is uncertain at this time and will likely cause interest earning asset yield volatility as loans are forgiven by the SBA.
Comparison of Financial Condition at June30, 2020 and June30, 2019
### Total Assets.
Total assets increased $58.1 million, or 4.0%, to $1.52 billion at June 30, 2020 from $1.47 billion at June30, 2019. The increase was due primarily to an increase of $110.3 million, or 10.6%, in net loans receivable as well as a $31.8 million, or 121.6%, increase in other assets partially offset by a decrease of $73.2 million, or 31.8%, in cash and cash equivalents and a decrease of $10.9 million, or 11.9%, in securities available for sale. The $31.8 million increase in other assets from $26.2 million at June 30, 2019 to $58.0 million at June 30, 2020 was primarily due to an increase in the estimated fair value of derivative assets related to interest rate swaps.
Cash and Cash Equivalents.
Total cash and cash equivalents decreased $73.2 million, or 31.8%, to $156.9 million at June 30, 2020 from $230.1 million at June30, 2019. This decrease resulted from net decreases in deposits of $61.2 million, which included $38.8 million of deposits returned as a result of unfilled stock subscriptions related to the completion of our mutual holding company reorganization and minority stock issuance in July 2019, as well as, from an increase in net loans receivable of $94.5 million, or 9.0%, for the year ended June 30, 2020. These uses of cash were partially offset by the minority stock issuance which resulted in $109.1 million of net proceeds to the Company.
### Securities Available for Sale.
Total securities available for sale decreased $10.9 million, or 12.6%, to $75.8 million at June30, 2020 from $86.7 million at June30, 2019. The decrease was primarily due to maturities of municipal obligations and U.S. Government obligations, as well as, the sale of U.S. Government obligations during the year ended June 30, 2020. Due to the meaningful decline in fixed income yields during fiscal 2020, along with uncertainties related to COVID-19, management favored maintaining increased levels of cash and cash equivalents to fund loans and/or provide for deposit outflows as opposed to reinvesting proceeds from maturing securities.
Securities Held to Maturity.
Total securities held to maturity increased $2.9 million, or 76.1%, to $6.8 million at June30, 2020 from $3.9 million at June30, 2019 due primarily to the purchase of a $2.0 million corporate debt security.
### Net Loans.
Net loans of $1.15 billion at June 30, 2020 increased $110.3 million, or 10.6%, from $1.04 billion at June 30, 2019. By loan category, commercial real estate loans increased by $36.1 million, or 8.7%, to $450.5 million at June 30, 2020 from $414.4 million at June 30, 2019; commercial and industrial loans increased $69.7 million, or 41.7%, to $237.2 million at June 30, 2020 from $167.5 million at June 30, 2019 and consumer loans increased by $9.4 million, or 43.7%, to $30.9 million at June 30, 2020 from $21.5 million at June 30, 2019. In addition, commercial construction loans increased $6.5 million, or 7.6%, to $91.8 million at June 30, 2020 from $85.3 million at June 30, 2019. These increases were partially offset by a decrease in one- to four-family residential mortgage loans of $1.4 million, or 0.5%, to $280.0 million at June 30, 2020 from $281.4 million at June30, 2019. The increase in commercial real estate loans was related to the funding of multiple relatively large loan commitments during the year ended June 30, 2020 which are secured by seasoned properties inside of our market area, as well as, the conversion of several commercial construction loans to permanent financing during the same year. The increase in commercial and industrial loans was primarily due to the funding of $74.0 million of PPP loans during the year ended June 30, 2020. The increase in consumer loans reflected an increase in personal loans to the owners of certain commercial businesses.
Deposits.
Total deposits decreased $61.2 million, or 4.6%, to $1.27 billion at June30, 2020 from $1.33 billion at June30, 2019. The decrease in deposits reflected a decrease in interest-bearing demand accounts of $109.8 million, or 49.8%, to $110.7 million at June30, 2020 from $220.5 million at June30, 2019, a decrease in money market accounts of $28.0 million, or 7.5%, to $343.8 million at June 30, 2020 from $371.8 million at June30, 2019 and a decrease in certificates of deposit of $11.0, million, or 8.4%, to $119.6 million at June 30, 2020 from $130.6 million at June 30, 2019, partially offset by an increase in non-interest bearing demand accounts of $80.0 million, or 22.4%, to $437.5 million at June 30, 2020 from $357.5 million at June 30, 2019 and an increase in savings accounts of $7.7 million, or 3.1%, to $258.6 million at June 30, 2020 from $250.9 million at June 30, 2019. The decrease in interest-bearing demand accounts and money market accounts was primarily due to stock subscription orders from our minority stock offering being fulfilled or returned to subscribers. The decrease in certificates of deposit was primarily due to the maturity of certain large dollar accounts. The increase in non-interest bearing demand accounts and the increase in savings accounts were primarily due to deposit customers increasing cash balances during the COVID-19 pandemic.
### Total Shareholders Equity.
Total shareholders equity increased $100.7 million, or 81.7%, to $224.0 million at June 30, 2020 from $123.3 million at June30, 2019. The increase was primarily due to the completion of our minority stock issuance which resulted in $109.1 million in net proceeds to the Company in July 2019, as well as, net income of $5.2 million during the year ended June 30, 2020. The increase was partially offset by unallocated common stock held by the ESOP of $12.6 million and an increase in accumulated other comprehensive loss of $6.3 million from our available for sale securities and employee benefit plans.
Comparison of Operating Results for theYears Ended June30, 2020 and June30, 2019
### General.
Net income decreased by $2.1 million, or 28.9%, to $5.2 million for the year ended June 30, 2020 from $7.3 million for the year ended June 30, 2019. The decrease was primarily due to a $13.8 million increase in non-interest expense and a $0.9 million decrease in net interest income, offset by an $11.4 million decrease in the provision for loan losses and a $1.3 million increase in non-interest income.
Interest and Dividend Income.
Interest and dividend income decreased $640,000, or 1.2%, to $53.5 million for the year ended June 30, 2020, from $54.2 million for the year ended June 30, 2019 primarily due to decreases in interest income on loans and interest income on securities, partially offset by an increase in interest income on interest-earning deposits. The decrease reflected a 40 basis points decrease in the average yield on interest-earning assets to 4.07% for the year ended June 30, 2020, from 4.47% for the year ended June 30, 2019, offset by a $102.7 million increase in the average balance of interest-earning assets.
Interest income on loans decreased $308,000, or 0.6%, to $49.5 million for the year ended June 30, 2020 from $49.8 million for the year ended June 30, 2019. Interest income on loans decreased primarily due to a 30 basis points decrease in the average yield on loans to 4.53% for the year ended June 30, 2020 from 4.83% for the year ended June 30, 2019, largely offset by a $60.8 million increase in the average balance of loans to $1.1 billion for the year ended June 30, 2020 from $1.0 billion for the year ended June 30, 2019. The decrease in the average yield on loans was primarily due to the downward adjustment of interest rates on our existing adjustable-rate loans following the actions taken by the Federal Reserve during the second and third fiscal quarters of 2020 to reduce short-term interest rates and the origination of PPP loans which have a 1.0% interest rate. The increase in the average balance of loans was due to our continued effort to increase our commercial loan portfolio, as well as, the Companys funding of PPP loans during the fourth fiscal quarter of 2020.
Interest income on securities decreased $433,000, or 17.0%, to $2.1 million for the year ended June 30, 2020 from $2.5 million for the year ended June 30, 2019. Interest income on securities decreased due to a $14.6 million decrease in the average balance of securities to $93.0 million for the year ended June 30, 2020 from $107.6 million for the year ended June 30, 2019 as well as a nine basis points decrease in the average yield on securities to 2.27% for the year ended June 30, 2020 from 2.36% for the year ended June 30, 2019. The decrease in the average balance and average yield of securities was due to scheduled U.S. government and agency and municipal obligation maturities of higher yielding securities, as well as, with the sale of U.S. government and agency obligations.
Interest income on interest-earning deposits increased $101,000, or 5.6%, to $1.9 million for the year ended June 30, 2020 from $1.8 million for the year ended June 30, 2019. Interest income on interest-earning deposits increased as average balances on interest-earning deposits increased by $56.4 million to $129.1 million for the year ended June 30, 2020 from $72.7 million for the year ended June 30, 2019 as management favored maintaining increased levels of cash and cash equivalents during the COVID-19 pandemic. The increase was offset by a 101 basis points decrease in the average yield on interest-earning deposits to 1.47% for the year ended June 30, 2020 from 2.48% for the year ended June 30, 2019 as market interest rates decreased.
### Interest Expense.
Interest expense increased $251,000, or 5.6%, to $4.7 million for the year ended June 30, 2020 from $4.5 million for the year ended June 30, 2019 as a result of an increase in interest expense on deposits. The increase primarily reflected a two basis points increase in the average cost of interest-bearing liabilities to 0.56% for the year ended June 30, 2020 from 0.54% for the year ended June 30, 2019, as well as a $4.5 million increase in the average balance of interest-bearing liabilities.
Interest expense on interest-bearing deposits increased $362,000, or 8.5%, to $4.6 million for the year ended June 30, 2020 from $4.2 million for the year ended June 30, 2019. Interest expense on interest-bearing deposits increased primarily due to a four basis points increase in the average cost on interest-bearing deposits to 0.55% for the year ended June 30, 2020 from 0.51% for the prior year as well as a $3.7 million increase in the average balance of deposits to $831.4 million for the year ended June 30, 2020 from $827.7 million for the year ended June 30, 2019. The increase in the average cost of deposits reflected competition from other financial service providers operating in our market, specifically with regard to certificates of deposit.
Interest | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
We may be deemed to be a blank check company under the United States securities laws. However, because we have net tangible assets in excess of $5,000,000 and will file a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold, which we refer to as the Excess Shares, without our prior consent.
If the net proceeds of the Initial Public Offering and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate for the 24 months following the closing of the Initial Public Offering, it could limit the amount available to fund our search for a partner business or businesses and complete our initial business combination, and we will depend on loans from our sponsor or founding team to fund our search and to complete our initial business combination.
Of the net proceeds of the Initial Public Offering and the sale of the private placement warrants, only
$2,000,000 will be available to us initially outside the trust account to fund our working capital requirements. We believe that, upon the closing of the Initial Public Offering, the funds available to us outside of the trust account, together with funds available from loans from our sponsor, members of our founding team or any of their affiliates will be sufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering;
In the event that our offering expenses exceed our estimate of$1,000,000, we may fund such excess with funds not to be held in the trust account. Conversely, in the event that the offering expenses are less than our estimate of$1,000,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount. Up to $1,500,000 of such loans may be convertible into warrants of the post-business combination entity at a price of$1.50 per warrant at the option of the lender.
Subsequent to our completion of our initial business combination, we may be required to take write- downs or write- offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.
If any third-party refuses to execute an agreement waiving such claims to the monies held in the trust account, our founders will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if our founding team believes that such third partys engagement would be significantly more beneficial to us than any alternative.
Upon redemption of our public shares, if we have not consummated an initial business combination within 24 months from the Initial Public Offering, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption.
Pursuant to a letter agreement, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (excluding our independent registered public accounting firm) for services rendered or products sold to us, or a prospective partner business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations, provided that such liability will not apply to any claims by a third party or prospective partner business who executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
Since only holders of our founder shares will have the right to vote on the appointment of directors, upon the listing of our shares on Nasdaq, Nasdaq may consider us to be a controlled company within the meaning of the rules of Nasdaq and, as a result, we may qualify for exemptions from certain corporate governance requirements.
After completion of Initial Public Offering, prior to our initial business combination only holders of our founder shares will have the right to vote on the appointment of directors. As a result, Nasdaq may consider us to be a controlled company within the meaning of the corporate governance standards of Nasdaq. Under the corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that: we have a board that includes a majority of independent directors, as defined under the rules of Nasdaq;
However, if we determine in the future to utilize some or all of these exemptions, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
While short-term U.S.
Our securities not intended for persons who are seeking a return on investments in government securities or investment securities. (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the Initial Public Offering or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre-initial business combination activity, and (iii) the redemption of our public shares if we have not consummated an initial business within 24 months from the Initial Public Offering, subject to applicable law and as further described herein.
If we do not consummate an initial business combination within 24 months from the Initial Public Offering, our public shareholders may be forced to wait beyond such 24 months before redemption from our trust account.
If we do not consummate an initial business combination within 24 months from the Initial Public Offering, the proceeds then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses), will be used to fund the redemption of our public shares, as further described herein. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless, prior thereto, we consummate our initial business combination or amend certain provisions of our amended and restated memorandum and articles of association, and only then in cases where investors have sought to redeem their Class A ordinary shares.
Furthermore our directors may be viewed as having breached their fiduciary duties to us or our creditors and/or may have acted in bad faith, thereby exposing themselves and our company to claims, by paying public shareholders from the trust account prior to addressing the claims of creditors. We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable for a fine of$18,293 and imprisonment for five years in the Cayman Islands.
Holders of Class A ordinary shares will not be entitled to vote on any appointment of directors we hold prior to the completion of our initial business combination.
However, under the terms of the warrant agreement, we have agreed to use our commercially reasonable efforts to file a registration statement under the Securities Act covering such shares and to maintain the effectiveness of such registration statement and a current prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if our Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a covered security under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
For example, if the holder is exercising 875 public warrants at $11.50 per share through a cashless exercise when the Class A ordinary shares have a fair market value of $17.50 per share, then upon the cashless exercise, the holder will receive 300 Class A ordinary shares.
The warrants may become exercisable and redeemable for a security other than the Class A ordinary shares, and you will not have any information regarding such other security at this time.
In certain situations, including if we are not the surviving entity in our initial business combination, the warrants may become exercisable for a security other than the Class A ordinary shares.
Pursuant to an agreement to be entered into concurrently with the issuance and sale of the securities in the Initial Public Offering, our initial shareholders, and their permitted transferees can demand that we register the Class A ordinary shares into which founder shares are convertible, the private placement warrants and the Class A ordinary shares issuable upon exercise of the private placement warrants, and warrants that may be issued upon conversion of working capital loans and the Class A ordinary shares issuable upon conversion of such warrants.
Unless we seek to complete our initial business combination with a company that is affiliated with our sponsor or any of our founders, officers or directors, we are not required to obtain an opinion from an independent accounting or investment banking firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our shareholders from a financial point of view.
Unless we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent valuation or accounting firm or independent investment banking firm<|endoftext|>Consultants), and the option exercise price must be at least equal to 100% of the fair market value of a share of common stock on the date the option is granted (110% in the case of an individual who is a 10% owner of the Company). An ISO may not be exercised later than 10 years after the date of grant (five years in the case of 10% owners of the Company). ISOs also may not be exercised later than three months (one year in the case of a termination of employment due to disability) after the option holders termination of employment other than due to his or her death. Common stock will be deemed to be acquired under an ISO only with respect to the first $100,000 worth of common stock (valued on the date of grant) first exercisable in any calendar year and the excess number of shares will not be deemed to have been acquired under an ISO.
ISOs may be transferred only by will or under the laws of descent and distribution and, during the participants lifetime, will be exercisable only by the participant or his or her legal representative. Each stock option agreement will specify the holders (or his or her beneficiarys) rights in the event of retirement, death or other termination of employment. Except as may be provided in the stock option agreement, if an option holders employment is terminated for cause, as defined by the 2014 Plan, all options granted to such holder will be forfeited. The option exercise price is payable in cash, in shares of common stock having a fair market value equal to the exercise price, by share withholding or a combination of the foregoing.
### SARS
SARs may be in the form of freestanding SARs, SARs granted together with options, or tandem SARS, or a combination of both. The base value of a freestanding SAR must be equal to the fair market value of a share of common stock on the date of grant. The base value of a tandem SAR must be equal to the exercise price of the related option. Freestanding SARs may be exercised upon such terms and conditions as are imposed by the committee and set forth under the SAR award agreement. A tandem SAR may be exercised only with respect to the shares of common stock for which its related option is exercisable. Tandem SARs will expire no later than the expiration of the related option and the term of any tandem SAR which is linked to an ISO may not exceed ten years. Tandem SARs may be exercised only when the fair market value of the shares subject to the option exceeds the option exercise price. Furthermore, the number of shares of common stock that may be acquired under the related option will be reduced, one for one, by the number of shares with respect to which the tandem SAR is exercised.
Upon the exercise of an SAR, a participant will receive the difference between the fair market value of a share of common stock on the date of exercise and the base value multiplied by the number of shares with respect to which the SAR is exercised. Payment due upon exercise may be in cash, in shares of common stock having a fair market value equal to such cash amount, or a combination of cash and shares, as determined by the committee.
SARs may only be transferred by will or under the laws of descent and distribution and, during the lifetime of a participant, may be exercised only by the participant or his or her legal representative. Each SAR award agreement will specify the participants (and his or her beneficiarys) rights in the event of death or other termination of employment. Except as may be provided in a grant award made to a particular participant, if a participant voluntarily terminates his employment (other than as a result of disability) without the Companys consent or without good reason, as defined, or if the participant is terminated for cause under the 2014 Plan, all SARs will be forfeited.
### Restricted Stock
Restricted stock are shares of common stock transferred to a participant which are subject to forfeiture if certain employment or vesting requirements are not met during the restriction period. Restricted stock may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated until the end of the applicable restriction period or upon earlier satisfaction of conditions specified by the committee. During the restriction period, holders may exercise full voting rights and will be credited with cash dividends. Dividends credited during the restriction period will be withheld by the Company until the related shares of restricted stock vest and will be subject to the same restrictions on transferability and forfeitability as the shares of restricted stock with respect to which they were paid. All rights with respect to restricted stock will be available only during a participants lifetime, and each restricted stock award agreement will specify the participants (and his or her beneficiarys) rights in the event of death or other termination of employment. Except as may be provided in an award agreement, if a participants employment is terminated for any reason prior to the end of the restriction period, all shares of restricted stock granted to such participant will be forfeited.
RSUs
Each RSU represents an agreement by the Company to deliver to the participant one share of common stock at a predetermined date. RSUs are subject to forfeiture if certain employment requirements or other vesting requirements are not met or if a participants employment is terminated for any reason prior to the end of the restriction period, unless otherwise provided in the award agreement. All rights with respect to RSUs will be available only during a participants lifetime, and each RSU award agreement will specify the participants (and his or her beneficiarys) rights in the event of death or other termination of employment.
Performance shares and units are similar to shares of restricted stock and RSUs except that certain individual, financial or other company-related goals and targets must be met in order for the performance shares and units to become non-forfeitable. The committee will set performance goals which will determine the number and/or value of performance shares or units that will be paid to participants. The committee also may develop, subject to stockholder approval, goals and targets that must be met in order to determine the vesting and/or the amount of performance shares and/or units granted to key executives in order to avoid Section 162(m) limitations. Participants will be entitled to receive payment of the value of performance shares or units earned in cash and/or shares of common stock which have an aggregate fair market value equal to the value of the earned performance shares or units after the end of the applicable performance period. Prior to the beginning of each performance period, participants may elect to defer receipt of payout on such terms as the committee deems appropriate. Participants may be entitled to have dividends declared with respect to performance shares earned in connection with performance share/unit grants earned but not yet distributed held in their performance accounts, subject to the same restrictions as are applicable to dividends earned with respect to restricted stock. The performance shares and units may also be subject to other vesting requirements or other restrictions, such as continued employment for specified periods of time.
Except as may be provided in an award agreement with respect to a particular participant, in the event a participants employment is terminated for any reason, all performance shares and units granted to such participant will be forfeited. Performance shares and units may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.
### Cash Incentives
Under the terms of a cash incentive grant, certain individual, financial or other Company-related goals and targets must be met in order for the cash incentives to become non-forfeitable and to determine the amount of the cash incentives to which a participant is entitled. The committee will set performance goals which, depending on the extent to which they are met during the performance periods established by the committee, will determine the value of cash incentives that will be paid to a participant. Participants will receive payment of the cash incentives at the end of the applicable performance periods. Prior to the beginning of each performance period, a participant may elect to defer receipt of payout on such terms as the committee deems appropriate. Except as may be provided in an award agreement with respect to a particular participant, if a participants employment is terminated for any reason, all unpaid cash incentives granted to such participant will be forfeited. Rights to cash incentives may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated.
### Limits on Grants
To avoid the income tax deduction limitation under Section 162(m) of the Code on annual compensation in excess of $1,000,000, there are limits on the maximum number of options and SARS that may be granted, the maximum value of restricted stock, RSUs, performance units and shares that may be distributed and the maximum dollar amount of cash incentives that may be paid to any key executive under the 2014 Plan in any year.
Merger, Consolidation, Sale of Assets or Change in Control of the Company
As of the effective date of a merger, consolidation, sale of all or substantially of the assets or the change in control of the Company (and if the merger, consolidation or other transaction agreement does not provide for the continuation of awards or the substitution of new awards), (1) any option or SAR outstanding will become immediately exercisable and (2) any restriction periods and restrictions imposed on restricted stock will be deemed to have expired. Performance shares or units payable after the date of a merger, consolidation or other transaction will be paid in cash as of the date they originally were to be paid unless, subject to the limitations imposed by Code Section 409A, the Company or its successor determines to pay such amounts as of an earlier date. Except as may be provided in a particular award, the number of performance shares and units will be prorated based on the attainment of the applicable performance goals at the target level if, as a result of the merger, consolidation, or other transaction the value of such awards cannot be determined.
Please refer to Item 13, Certain Relationships and Related Party Transactions in this Annual Report on Form 10-K for information on director and executive officer indemnification.
Summary Compensation Table
The following table provides information regarding the compensation of our named executive officers for the fiscal years ended December 31, 2020 and December 29, 2019:
(1)
Mr. Cain was appointed President and Chief Executive Officer effective September 30, 2019 with an annual base salary of $400,000. Following the termination of Mr. Tekieles employment with the Company, Mr. Cain served as Interim Chief Financial Officer for the Company beginning on October 11, 2019 until Mr. Loftus appointment became effective on April 6, 2020.
(2)
Mr. Loftus was appointed Vice President and Chief Financial Officer effective April 6, 2020 with an annual base salary of $270,000.
(3)
Mr. Weinhardts employment with the Company terminated on May 6, 2019.
(4)
Mr. Tekieles employment with the Company terminated on October 11, 2019.
(5)
All amounts in this column were calculated in accordance with FASB ASC Topic 718 and represent the aggregate grant date fair value of each option award granted during the fiscal years shown. On April 6, 2020, Mr. On September 30, 2019, Mr.
(6)
In response to the COVID-19 pandemic the Company suspended its annual incentive bonus plan for 2020 and thus our NEOs were not eligible for an annual cash bonus in 2020. Our NEOs, based on the Companys performance, did not earn an annual cash bonus in 2019.
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Agreed to the modification of its terms by signing the loan agreement for the Home State Bank term loan. The Company continues to accrue interest at the contract rate;
1847 Asien/Asiens
### Arvest Bank
Prime Rate plus 2%.
A portion of the purchase price for acquisition of Asiens was paid by the issuance of an 8% subordinated amortizing promissory note in the principal amount of $200,000 by 1847 Asien to the Asiens Seller.
1847 HOLDINGS LLC
On July 29, 2020, 1847 Asien entered into a securities purchase agreement with the Asiens Seller, pursuant to which the Asiens Seller sold to 415,000 of the Companys common shares to 1847 Asien a purchase price of $2.50 per share.
### Demand Promissory Note
A portion of the purchase price for acquisition of Asiens was paid by the issuance of demand promissory note in the principal amount of $655,000 by 1847 Asien to the Asiens Seller. The note accrued interest at a rate of one percent (1%) computed on the basis of a 360-day year. Principal and accrued interest on the note was payable 24 hours after written demand by the Seller. The note was repaid in June 2020.
Inventory Financing Agreement
On September 25, 2020, Asiens entered into an inventory financing agreement with Wells Fargo Commercial Distribution Finance, LLC (Wells Fargo), pursuant to which Wells Fargo may extend credit to Asiens from time to time to enable it to purchase inventory from Wells Fargo-approved vendors. The term of the agreement is one year, and from year to year thereafter, unless sooner terminated by either party upon 30 days written notice to the other party. The inventory financing agreement contains customary representations, warranties, affirmative and negative covenants and events of default for a loan of this type. The agreement is secured by all assets of Asiens and is guaranteed by 1847 Asien and the Company. As of December 31, 2020, Asiens has not borrowed any funds under this agreement.
Gwilliam and Terri L. The remaining balance of the note at December 31, 2020 is comprised of principal of $41,675.
### Agreement of Sale of Future Receipts
On May 28, 2020, 1847 Asien and Asiens entered into an agreement of sale of future receipts with TVT Direct Funding LLC (TVT), pursuant to which 1847 Asien and Asiens agreed to sell future receivables with a value of $685,000 to TVT for a purchase price of $500,000. 1847 Asien and Asiens agreed to deliver to TVT 20% of its weekly future receipts, or approximately $23,300, over the course of an estimated seven-month term, or such date when the above amount of receivables has been delivered to TVT. 1847 Asien used the proceeds from this sale to finance the Asiens Acquisition. In addition to all other sums due to TVT under this agreement, 1847 Asien and Asiens agreed to pay to TVT certain additional fees, including a one-time origination fees of $25,000, as reimbursement of costs incurred by TVT for financial and legal due diligence. The future payments under the TVT agreement are secured by a subordinated security interest in all of the tangible and intangible assets of 1847 Asien and Asiens. This agreement was terminated in 2020 and there is no remaining balance at December 31, 2020.
Loans on Vehicles
Asiens has entered into four retail installment sale contracts pursuant to which Asiens agreed to finance its delivery trucks at rates ranging 3.98% to 6.99% with an aggregate remaining principal amount of $90,375 as of December 31, 2020.
1847 HOLDINGS LLC
1847 Cabinet/Kyles
Vesting Promissory Note
A portion of the purchase price for the acquisition of Kyles on September 30, 2020 was paid by the issuance of a vesting promissory note by 1847 Cabinet to the Kyles Sellers in the principal amount of $1,050,000, which increased to a principal amount of up to $1,260,000 pursuant to the vested percentage calculation described below.
In connection with the acquisition of Kyles, the Company provided 1847 Cabinet with the funds necessary to pay the cash portion of the purchase price and cover acquisition expenses. In connection therewith, on September 30, 2020, 1847 Cabinet issued a secured promissory note to the Company in the principal amount of $4,525,000, which was amended and restated on December 11, 2020. Pursuant to such amendment and restatement, if and to the extent any amounts are owing under the units described under Note 17 below, due to a default or redemption, in addition to payment obligations due under the note, 1847 Cabinet is required to immediately make payments to the Company so that it may make any required payments in compliance with the terms of the units. The Company may demand payment in full of the note at any time, even if 1847 Cabinet has complied with all of the terms of the note;
1847 HOLDINGS LLC
PPP Loans
On April 10, 2020 and April 28, 2020, Neese and Asiens received $383,600 and $357,500, respectively, in PPP loans from the SBA under provisions of theCARES Act. The Company has classified $741,100 of the PPP loans as long-term liabilities upon receiving SBA forgiveness of the loans in early 2021.
### NOTE 12FLOOR PLAN LOANS PAYABLE
At December 31, 2020 and 2019, $0 and $10,581, respectively, of machinery and equipment inventory of Neese was pledged to secure a floor plan loan from a commercial lender. Neese must remit proceeds from the sale of the secured inventory to the floor plan lender and pays a finance charge that can vary monthly at the option of the lender. The balance of the floor plan payable was repaid in 2020.
NOTE 13CONVERTIBLE PROMISSORY NOTE
On April 5, 2019, the Company, Holdco and Goedeker (collectively, 1847) entered into a securities purchase agreement with Leonite Capital LLC, a Delaware limited liability company (Leonite), pursuant to which 1847 issued to Leonite a secured convertible promissory note in the aggregate principal amount of $714,286 due April 5, 2020. As additional consideration for the purchase of the note, (i) the Company issued to Leonite 50,000 common shares, (ii) the Company issued to Leonite a five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis, and (iii) Holdco issued to Leonite shares of common stock equal to a 7.5% non-dilutable interest in Holdco.
The note carries an original issue discount of $64,286 to cover Leonites legal fees, accounting fees, due diligence fees and/or other transactional costs incurred in connection with the purchase of the note. Furthermore, the Company issued 50,000 common shares valued at $137,500 and a debt-discount related to the warrants valued at $292,673. The Company amortized $292,673 of financing costs related to the shares and warrants in the year ended December 31, 2020.
In connection with the amendment, (i) the Company issued to Leonite another five-year warrant to purchase 200,000 common shares at an exercise price of $1.25 per share (subject to adjustment), which may be exercised on a cashless basis and (ii) upon closing of the Asiens acquisition, 1847 Asien issued to Leonite shares of common stock equal to a 5% interest in 1847 Asien. The amendment represented a prepayment of principal and accrued interest resulting in a debt extinguishment and we recorded an aggregate extinguishment loss of $773,856.
Under the note, Leonite had the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and accrued and unpaid interest of the note into fully paid and non-assessable common shares or any shares of capital stock or other securities of the Company into which such common shares may be changed or reclassified.
On May 4, 2020, Leonite converted $100,000 of the outstanding balance of the note into 100,000 common shares.
On July 21, 2020, Leonite converted $50,000 of the outstanding balance of the note into 50,000 common shares.
On August 4, 2020, Goedeker used a portion of the proceeds from the Goedeker IPO to repay the note in full.
As a result of this exercise, both warrants were cancelled.
1847 HOLDINGS LLC
DECEMBER 31, 2020 AND 2019
### NOTE 14FINANCING LEASE
The cash portion of the purchase price for the acquisition of Neese was financed under a capital lease transaction for Neeses equipment with Utica Leaseco, LLC (Utica), pursuant to a master lease agreement, dated March 3, 2017, between Utica, as lessor, and 1847 Neese and Neese, as co-lessees (collectively, the Lessee), which was amended on June 14, 2017. Under the master lease agreement, as amended, Utica loaned an aggregate of $3,240,000 for certain of Neeses equipment listed therein, which it leases to the Lessee. A portion of the proceeds from the term loan from Home State Bank (see Note 11) were applied to reduce the balance of this lease to $475,000. The lease was payable in 46 payments of $12,882 beginning July 3, 2018 and an end-of-term buyout of $38,000.
On October 31, 2017, the parties entered into a second equipment schedule to the master lease agreement, pursuant to which Utica loaned an aggregate of $980,000 for certain of Neeses equipment listed therein. The term of the second equipment schedule was 51 months and agreed monthly payments are $25,807.
On July 29, 2020, the Company paid $568,597 to repay this capital lease transaction with Utica in full.
Amortization of the Utica debt issuance costs totaled $23,360 and $11,055 for the years ended December 31, 2020 and 2019, respectively.
### NOTE 15OPERATING LEASES
Neese
The agreement of lease is for a term of ten (10) years and provides for a base rent of $8,333 per month. Under terms of the term loan agreement with Home State Bank (Note 11), the Company may not pay salary or rent to such officers of Neese in excess of $100,000 per year beginning on the date of the term loan agreement, June 13, 2018. The Company is accruing monthly rent, but because of the limitation in the term loan, $300,000 of accrued rent is classified as a long-term accrued liability.
The amount accrued for amounts included in the measurement of operating lease liabilities was $100,000 for the year ended December 31, 2020.
1847 HOLDINGS LLC
Neese leased a piece of equipment on an operating lease. The lease originated in May 2014 for a five-year term with annual payments of $11,830 with a final payment in July 2019.
### Kyles
### Asiens
Asiens has an office and showroom space that has been leased on a month-by-month basis for $11,665 per month.
1847 HOLDINGS LLC
DECEMBER 31, 2020 AND 2019
### NOTE 16RELATED PARTIES
Management Services Agreement
On April 15, 2013, the Company and the Manager entered into a management services agreement, pursuant to which the Company is required to pay the Manager a quarterly management fee equal to 0.5% of its adjusted net assets for services performed (the Parent Management Fee). The amount of the Parent Management Fee with respect to any fiscal quarter is (i) reduced by the aggregate amount of any management fees received by the Manager under any offsetting management services agreements with respect to such fiscal quarter, (ii) reduced (or increased) by the amount of any over-paid (or under-paid) Parent Management Fees received by (or owed to) the Manager as of the end of such fiscal quarter, and (iii) increased by the amount of any outstanding accrued and unpaid Parent Management Fees. The Company expensed $0 in Parent Management Fees for the years ended December 31, 2020 and 2019.
1847 Neese entered into an offsetting management services agreement with the Manager on March 3, 2017, Goedeker entered into an offsetting management services agreement with the Manager on April 5, 2019, which is included in discontinued operations, 1847 Asien entered into an offsetting management services agreement with the Manager on May 28, 2020 and 1847 Cabinet entered into an offsetting management services agreement with our manager on August 21, 2020. Pursuant to the offsetting management services agreements, 1847 Neese appointed the Manager to provide certain services to it for a<|endoftext|>Do not complete a business combination within 15 months (or up to 18 months, as applicable) from the closing of the IPO, we will (i)cease all operations except for the purpose of winding up, (ii)as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii)as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii)and (iii)above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our rights or warrants, which will expire worthless if we fail to complete our business combination within the time period.
However, if we anticipate that we may not be able to consummate our initial business combination within 15 months, our initial stockholders or their affiliates may, but are not obligated to, extend the period of time to consummate an initial business combination one time by up to an additional three months (for a total of up to 18 months to complete an initial business combination) without the need for a separate stockholder vote. Pursuant to the terms of our amended and restated certificate of incorporation and the trust agreement, the only way to extend the time available for us to consummate our initial business combination without the need for a separate stockholder vote is for our initial stockholders or their affiliates or designees, upon five days advance notice prior to the applicable deadline, to deposit into the trust account $1,725,000 (due to the exercise in full of the underwriters over-allotment option) ($0.10 per share), if extended for the full 3 months, on or prior to the date of the applicable deadline. Pursuant to our amended and restated certificate of incorporation and the trust agreement, if such funds are not deposited, the time to complete an initial business combination cannot be extended unless our stockholders otherwise approve an extension on different terms. In the event that they elected to extend the time to complete a business combination and deposited the applicable amount of money into trust, the initial stockholders would receive a non-interest bearing, unsecured promissory note equal to the amount of any such deposit that will not be repaid in the event that we are unable to close a business combination unless there are funds available outside the trust account to do so. Such notes would be paid upon consummation of our initial business combination. In the event that we receive notice from our insiders five days prior to the applicable deadline of their intent to effect an extension, we intend to issue a press release announcing such intention at least three days prior to the applicable deadline.
It is our intention to redeem our public shares as soon as reasonably possible following the 15 th month (or up to the 18 th month, as applicable) from the closing of the IPO and, therefore, we do not intend to comply with the above procedures.
Because we will not be complying with Section280 of the Delaware General Corporation Law, Section281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10years.
The underwriters in the IPO have executed such a waiver agreement.
In the event that a potential contracted party refuses to execute such a waiver, we will execute an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis, substantially similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where we may engage a third party that refuses to execute a waiver would be the engagement of a third party consultant who cannot sign such an agreement due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements, or whose particular expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver, or a situation in which management does not believe it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee that, even if third parties execute such agreements with us, they will not seek recourse against the trust account. Certain of our insiders have agreed that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below $10.10 per public share, except as to any claims by a third party who executed a valid and enforceable agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account and except as to any claims under our indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act. Our board of directors has evaluated such insiders financial net worth and believes they will be able to satisfy any indemnification obligations that may arise. However, these insiders may not be able to satisfy their indemnification obligations, as we have not required them to retain any assets to provide for their indemnification obligations, nor have we taken any further steps to ensure that they will be able to satisfy any indemnification obligations that arise. Moreover, these insiders will not be liable to our public stockholders, and instead will only have liability to us. As a result, if we liquidate, the per-share distribution from the trust account could be less than the estimated $10.10 due to claims or potential claims of creditors. We will distribute to all of our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the trust account, inclusive of any interest not previously released to us, subject to our obligations under Delaware law to provide for claims of creditors.
If we are unable to consummate an initial business combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the trust account, we anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after such date, and anticipate it will take no more than 10 business days to effectuate the redemption of our public shares. If such funds are insufficient, our insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $50,000), and have agreed not to seek repayment of such expenses. Each holder of public shares will receive a pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account and not previously released to us or necessary to pay our taxes.
To the extent any bankruptcy claims deplete the trust account, the per share redemption or conversion amount received by public stockholders may be less than $10.10.
### Competition
Furthermore, the requirement that we acquire a target business or businesses having a fair market value equal to at least 80% of the value of the trust account (excluding any taxes payable on the income earned on the trust account) at the time of the agreement to enter into the business combination, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights and the number of our outstanding warrants and the future dilution they potentially represent may not be viewed favorably by certain target businesses.
Facilities
### Employees
We will remain an emerging growth company until the earlier of (1)the last day of the fiscal year (a)following the fifth anniversary of the date of the IPO, (b)in which we have total annual gross revenue of at least $1.07 billion, or (c)in which we are deemed to be a large accelerated filer, which means the market value of our shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, and (2)the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.
ITEM 1A.
### RISK FACTORS
ITEM 1B.
Not applicable.
ITEM 2.
### PROPERTIES
ITEM 3.
### LEGAL PROCEEDINGS
ITEM 4.
### MINE SAFETY DISCLOSURES
Not Applicable.
part II
ITEM 5.
Our units, common stock, rights and warrants trade on The Nasdaq Stock Market LLC, or Nasdaq, under the symbols VTAQU, VTAQ, VTAQR and VTAQW, respectively.
### Holders of Record
As of March 29, 2021, there were 21,562,500 shares of common stock issued and outstanding held by one stockholder of record.
Dividends
We have not paid any cash dividends on our common stock to date, and do not intend to pay cash dividends prior to the completion of an initial business combination.
None.
There were no unregistered securities to report which have not been previously included in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K.
None.
ITEM 6.
### SELECTED FINANCIAL DATA
ITEM 7.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under Forward-Looking Statements and elsewhere in this Annual Report on Form 10-K.
This has been amended and restated to give effect to the restatement and revision of our financial statements as of December 31, 2020 and for the year ended December 31, 2020. We are restating our historical financial results for such period to reclassify our Private Warrants as derivative liabilities pursuant to ASC 815-40 rather than as a component of equity as we had previously treated the Private Warrants. The impact of the restatement is reflected in this below. Other than as disclosed in the Explanatory Note and with respect to the impact of the restatement, no other information in this Item 7 has been amended, and this Item 7 does not reflect any events occurring after the Original Filing. The impact of the restatement is more fully described in Note 2 to our financial statements included in Item 15 of Part IV of this Amendment and Item 9A: Controls and Procedures.
### Overview
We are a blank check company formed under the laws of the State of Delaware on July 10, 2019 for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses.
### Results of Operations
We have neither engaged in any operations (other than searching for a target for our initial business combination after our IPO) nor generated any revenues to date. Our only activities from July 10, 2019 (inception) through December 31, 2020 were organizational activities, including those necessary to prepare for the IPO. We expect to generate non-operating income in the form of interest earned on investments held since the IPO.
As a result of the restatement described in Note 2 of the notes to the financial statements included herein, we classify the Private Warrants issued in connection with our Initial Public Offering as liabilities at their fair value and adjust the warrant instrument to fair value at each reporting period.
For the year ended December31, 2020, we had a net loss of $1,363,061, which consisted of operating costs of $18,208, a change in fair value of warrant liabilities of $180,000, loss on initial issuance of private warrants of $1,140,000, and transaction costs allocable to warrant liabilities of $24,853.
For the period | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Stockholders may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and have the discretion to vote in any manner they choose.
Our sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by October 23, 2022 or (B) with respect to any other provision relating to stockholders rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares.
After the closing of our initial public offering, our initial stockholders owned 20% of our outstanding common stock (assuming they did not purchase any units in our initial public offering). These provisions of our amended and restated certificate of incorporation may only be amended by a majority of our Class B common stock.
If our initial stockholders purchased any units in the initial public offering or if our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Our sponsor has no current intention to purch ase additional securities
In addition, our board of directors, whose members were elected by our sponsor, is divided into three classes, each of which will generally serve for three years with only one class of directors being elected in each year.
We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants and forward purchase warrants.
The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants and forward purchase warrants. Accordingly, we may amend the terms of the public warrants and forward purchase warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment.
We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders and provided that certain other conditions are met. None of the private placement warrants will be redeemable by us except as described in our prospectus so long as they are held by our sponsor or its permitted transferees.
In addition, we may redeem your warrants at any time after they become exercisable and prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. In addition, such redemption may occur at a time when the warrants are out-of-the-money, in which case you would lose any potential embedded value from a subsequent increase in the value of the Class A common stock had your warrants remained outstanding, and may not compensate the holders for the value of the warrants, including because the number of common stock received is capped at 0.361 shares of our Class A common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
We have issued warrants to purchase 13,416,667 shares of our Class A common stock, at a price of $11.50 per whole share, and, simultaneously with the closing of our initial public offering, we issued in a private placement an aggregate of 6,700,000 private placement warrants, each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. We also issued 1,666,667 forward purchase warrants concurrently with the closing of the sale of the forward purchase shares. Our initial stockholders currently hold 10,062,500 founder shares. In addition, if our sponsor, an affiliate of our sponsor or certain of our officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.50 per warrant at the option of the lender. To the extent we issue shares of Class A common stock to effectuate a business transaction, including the forward purchase shares, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business.
This is different from other companies similar to ours whose units include one share of Class A common stock and one whole warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for a third of the number of shares compared to units that each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in our initial public offering, without our prior consent, which we refer to as the Excess Shares.
The underwriters of our initial public offering will not execute agreements with us waiving such claims to the monies held in the trust account.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (1) $10.00 per public share or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our inde mnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
The net proceeds of our initial public offering and certain proceeds from the sale of the private placement warrants are held in the trust account. While short-term U.S. In the event of very low or negative yields, the amount of interest income (which we are permitted to use for payment of our tax obligations, and up to $100,000 of dissolution expenses) would be reduced. In the event that we have not completed our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income. If the balance of the trust account is reduced below $402,500,000 as a result of negative interest rates, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.00 per share.
Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that we will only redeem our public shares so long as our net tangible assets, after payment of the deferred underwriting commissions and after such redemptions, will be at least $5,000,001 (a) in the case of our initial business combination, either prior to or upon consummation of such initial business combination, after payment of the deferred underwriting commission or (b) in the case of an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we have not consummated our initial business combination by October 23, 2022 or (ii) with respect to any other provision relating to stockholders rights or pre-initial business combination activity, upon such amendment (in each case such that we do not then become subject to the SECs penny stock rules), or any greater net tangible asset or cash requirement that may be contained in the agreement relating to our initial business combination.
We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that fiscal years second fiscal quarter, and (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that fiscal years second fiscal quarter.
Risks related to our management, directors and employees
Any past experience and performance of our management team and their respective affiliates is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; You should not rely on the historical record of our management teams or their respective affiliates performance as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.
or (2) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
Our operations are dependent upon a relatively small group of individuals and in particular our senior management. Moreover, certain of our directors and officers have time and attention requirements related to other obligations.
Each of our<|endoftext|>Our securities and subject us to additional trading restrictions.
Our securities are currently listed on NYSE. However, we cannot assure you that our securities will continue to be listed on the NYSE in the future or prior to our initial business combination.
For instance, in order for our shares to be listed upon the consummation of our business combination, at such time our share price would generally be required to be at least $4.00 per share, our total market capitalization would generally be required to be at least $200.0million, the aggregate market value of publicly held shares would be required to be at least $100.0million and we would be required to have at least 400 round lot shareholders.
Because our units, ClassA ordinary shares and warrants are currently listed on the NYSE, our units, ClassA ordinary shares and warrants are covered securities under the statute.
Since the net proceeds of our initial public offering and the sale of the private placement warrants are intended to be used to complete an initial business combination with a target business, we are considered to be a blank check company under the United States securities laws. Moreover, if our initial public offering were subject to Rule 419, that rule would have prohibited the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of an initial business combination.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a group of shareholders are deemed to hold in excess of 15% of our Class
A ordinary shares, you will lose the ability to redeem all such shares in excess of 15% of our Class
### A ordinary shares
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in our initial public offering, which we refer to as the Excess Shares, without our prior consent.
In recent years, the number of special purpose acquisition companies that have been formed has increased substantially, especially in the last six months.
We have encountered and expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire.
If the net proceeds of our initial public offering and the sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate until October
6, 2022, it could limit the amount available to fund our search for a target business or businesses and our ability to complete our initial business combination, and we will depend on loans from our Sponsor, its affiliates or members of our management team to fund our search and to complete our initial business combination
As of December31, 2020, we had $1,194,821 in cash held outside the trust account to fund our working capital requirements. We could also use a portion of the funds as a down payment or to fund ano-shopprovision
If we are required to seek additional capital, we would need to borrow funds from our Sponsor, its affiliates, members of our management team, or other third parties to operate or may be forced to liquidate.
Although these charges may benon-cashitems and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities.
Upon redemption of our public shares, if we have not consummated an initial business combination by October6, 2022, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Pursuant to a letter agreement our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.00 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations, provided that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per share redemption amount received by public shareholders may be less than $10.00 per share
The proceeds held in the trust account will be invested only in direct U.S. Treasury obligations. While short-term U.S. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public shareholders are entitled to receive theirpro-ratashare of the proceeds held in the trust account, plus any interest income, net of income taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest to pay dissolution expenses). Negative interest rates could reduce the value of the assets held in trust such that theper-shareredemption amount received by public shareholders may be less than $10.00 per share.
If, after we distribute the proceeds in the trust account to our public shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages
If, before distributing the proceeds in the trust account to our public shareholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our shareholders and the per-share amount that would otherwise be received by our shareholders in connection with our liquidation may be reduced
(ii)the redemption of any public shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A)to modify the substance or timing of our obligation to provide holders of our ClassA ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by October6, 2022 or (B)with respect to any other provision relating to the rights of holders of our ClassA ordinary shares; or (iii)absent our completing an initial business combination by October 6. 2022, our return of the funds held in the trust account to our public shareholders as part of our redemption of the public shares.
If we have not consummated an initial business combination by October6, 2022, our public shareholders may be forced to wait beyond such time before redemption from our trust account.
If we have not consummated an initial business combination by October6, 2022, the proceeds then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses), will be used to fund the redemption of our public shares, as further described herein. In that case, investors may be forced to wait beyond October6, 2022 before the redemption proceeds of our trust account become available to them, and they receive the return of their pro rata portion of the proceeds from our trust account.
We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offence and may be liable for a fine of $18,292.6 and imprisonment for five years in the Cayman Islands.
Holders of ClassA ordinary shares will not be entitled to vote on any election of directors we hold prior to our initial business combination.
Prior to our initial business combination, only holders of our founder shares will have the right to vote on the election of directors. Holders of our public shares will not be entitled to vote on the election of directors during such time.
We have not registered the ClassA ordinary shares issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a cashless basis and potentially causing such warrants to expire worthless.
We have not registered the ClassA ordinary shares issuable upon exercise of the warrants issued in our initial public offering under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that, as soon as practicable, but in no event later than 20 business days after the closing of our initial business combination, we will use commercially reasonable efforts to file with the Commission a registration statement covering the issuance of such shares, and we will use our commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of our initial business combination and to maintain the effectiveness of such registration statement and a current prospectus relating to those ClassA ordinary shares until the warrants expire or are redeemed. We may not be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus relating to our initial public filing, the financial statements contained or incorporated by reference therein are not current, complete or correct or the Commission issues a stop order. If the shares issuable upon exercise of the warrants issued in our initial public offering are not registered under the Securities Act in accordance with the above requirements, we will be required to permit holders to exercise their warrants on a cashless basis, in which case, the number of ClassA ordinary shares that you will receive upon cashless exercise will be based on a formula subject to a maximum amount of shares equal to 0.361 | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Of $2.72 per share, vesting on the one-year anniversary of the grant and expiring ten years thereafter. The term of the Independent Contractor Agreement is one year, provided that it may be terminated by either party at any time for any reason upon 30 days prior written notice. Except as set forth herein, there are no understandings or arrangements between Mr. Korb and any other person pursuant to which Mr. Korb was appointed as our Chief Financial Officer.
Former Chief Financial Officer
On November 30, 2018, we entered into a three year employment agreement (the MacLean Agreement) with Elizabeth J. MacLean, pursuant to which Ms. MacLean would serve as our Chief Financial Officer and Chief Compliance Officer effective as of December 1, 2018 (the Effective Date). On May 31, 2019 we notified Ms. MacLean that we were terminating the MacLean Agreement effective immediately. Pursuant to the terms of the MacLean Agreement, Ms. MacLean received a base salary of $235,000 and was eligible to receive a bonus (the Bonus) and receive awards pursuant to our equity incentive plan as determined by the Board of Directors. Upon termination by us of Ms. MacLeans employment during the initial six months following the commencement date (December 1, 2018) with or without Cause (as defined in the MacLean Agreement), Ms. MacLean was entitled to receive the following: (i) accrued but unpaid base salary through the May 31, 2019 and (ii) reimbursement of expenses properly incurred by Ms. MacLean payable on the May 31, 2019 termination date. The matter is subject to legal proceedings brought by Ms. MacLean which the Company has vigorously defended. On March 16, 2021, the Arizona Court of Appeals denied a Ms. MacLeans appeal of the trial courts decision to set aside a default judgement previously obtained by Ms. MacLean.
### Board of Directors Compensation
The following table sets forth information for the fiscal year ended December 31, 2020 regarding the compensation of our directors who on December 31, 2020 were not also our Named Executive Officers.
___________________
(1)
Mr. Sallwasser was appointed to the Board of Directors on June 13, 2019. Pursuant to his agreement Mr. Sallwasser receives compensation of $60,000 for the year ended June 30, 2020 and $110,000 for the year ended June 30, 2021. Mr. Sallwasser opted to take his compensation in stock options, on July 5, 2019, Mr. Sallwasser was awarded options to purchase 20,625 shares of common stock vesting over a twelve month period and on October 1, 2020, Mr. Sallwasser was awarded options to purchase 55,000 shares of common stock, vesting over a twelve month period.
(2)
Mr. Shallcross was appointed to the Board of Directors on June 13, 2019. Pursuant to his agreement Mr. Shallcross receives compensation of $60,000 for the year ended June 30, 2020 and $110,000 for the year ended June 30, 2021. Mr. Shallcross opted to take fifty percent of his $60,000 compensation in stock options, on July 5, 2019, Mr. Shallcross was awarded options to purchase 10,313 shares of common stock vesting over a twelve month period. Mr. Shallcross opted to take $40,000 of his $110,000 compensation in cash and on October 1, 2020, was awarded options to purchase 35,000 shares of common stock vesting over a twelve month period.
(3)
Mr. Kabatznik was appointed to the board on June 13, 2019. Pursuant to his agreement Mr. Kabatznik received compensation of $60,000 per annum. Mr. Kabatznik resigned as a director effective May 31, 2020.
(4)
Mr. Cooper was appointed to the Board of Directors on August 29, 2019. Pursuant to his agreement Mr. Cooper received compensation of $60,000 per annum. Mr. Cooper resigned as a director effective October 1, 2020.
(5)
Mr. Blanc was appointed to the Board of Directors on October 1, 2020. For the year ended September 30, 2021, Mr. Blanc receives compensation of $110,000 and opted to take his compensation in stock options. On October 1, 2020, Mr. Blanc was awarded options to purchase 55,000 shares of common stock vesting over a twelve month period.
### Director Option Awards
(a)
On July 5, 2019, Mr. Sallwasser was awarded options to purchase 20,625 shares of common stock vesting over a twelve month period, of which all are vested and on October 1, 2020, an additional 55,000 options were awarded of which 13,750 are vested as of December 31, 2020.
(b)
On July 5, 2019, Mr. Shallcross was awarded options to purchase 10,313 shares of common stock vesting over a twelve month period, of which all are vested and on October 1, 2020, an additional 35,000 options were awarded of which 8,750 are vested as of December 31, 2020.
(c)
On October 1, 2020, Mr. Blanc was awarded options to purchase 55,000 shares of common stock vesting over a twelve month period, of which 13,750 are vested as of December 31, 2020.
Each director is reimbursed for travel and other out-of-pocket expenses incurred in attending Board of Director and committee meetings.
### Fees and Equity Awards for Non-Employee Directors
On July 5, 2019, we adopted a new formal plan for compensating our director for service in their capacity as directors. The plan was modified during the current year whereby Directors are entitled to annual compensation at $110,000 a year, payable as to $40,000 in cash and the equivalent of $70,000 in inventive stock options, however, each director may elect to receive the entire compensation in incentive stock options. The incentive stock options issued in lieu of cash compensation to the non-executive directors have an exercise price equal to the fair market value of the common stock on the date of grant and vest monthly for twelve months and expire ten years thereafter. In this regard, Mr. Sallwasser and Mr. Blanc elected to take all of the non-executive director compensation in the form of incentive stock options to purchase 55,000 shares of our common stock and Mr. Shallcross elected to take the $40,000 cash compensation and stock options to purchase 35,000 shares of common stock.
Directors are also entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Board of Directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.
On October 1, 2020, the Board approved an amendment to the Companys 2018 Equity Incentive Plan (the Plan) to (x) increase the number of shares of common stock that the Company will have the authority to grant under the plan by an additional 1,850,000 shares of common stock, and (y) to increase the maximum number of shares that may be granted as an award under the Plan to any non-employee director during any one calendar year to: (i) chairperson or lead director 300,000 shares of common stock;
On November 11, 2019 the Company granted options to purchase 70,625 shares of common stock to various employees at an exercise price of $2.80 per share.
As of December 31, 2020, there was an aggregate of 974,938 options to purchase shares of common stock granted under our 2018 Equity Incentive Plan and 2,025,062 reserved for future grants.
Monteverdi, the Company granted non-plan options to purchase 648,000 shares of common stock that vest pro rata on each of September 1, 2021, September 1, 2022, September 1, 2023 and September 1, 2024.
Item 12.
The tables below set forth, as of April 5, 2021, the beneficial ownership of our common stock (i) by any person or group known by us to beneficially own more than 5% of the outstanding common stock, (ii) by each director and named executive officer and (iii) by all directors and executive officers as a group. Unless otherwise indicated, we believe that the beneficial owners of the shares have sole voting and investment power over such shares. The address of all individuals for whom an address is not otherwise indicated is c/o Elys Game Technology, Corp. 130 Adelaide Street, West, Suite 701, Toronto, Ontario M5H 2K4, Canada.
__________________
* less than 1%
(2)
Includes 607,313 shares of common stock; a further 4,494,525 shares and warrants exercisable into 11,916 shares of common stock held by Gold Street Capital Corp., a corporation owned by Gilda Pia Ciavarella, the spouse of Michele Ciavarella, and options to purchase 204,375 shares of common stock of which 72,605 are vested and a further 8,820 vests within the next 60 days.
(3)
Includes 15,000 shares of common stock and options to purchase 648,000 shares of common stock of which 0 are vested and 0 vest in the next 60 days.
(4)
Includes 867,930 shares of common stock and an option to purchase 83,000 shares of common stock of which 19,563 are vested and 4,264 vest in the next 60 days.
(5)
Includes 409,002 shares of common stock and an option to purchase 81,000 shares of common stock of which 19,230 are vested and 4,153 vest in the next 60 days.
(6)
Includes 4,494,525 shares of common stock and warrants exercisable into 11,916 shares of common stock.
### Changes In Control
None
Item 13.
The following includes a summary of transactions during our fiscal years ended December 31, 2020 and 2019 and our current year to which we have been a party, in which the amount involved in the transaction exceeds 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 in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other arrangements, which are described under Executive Compensation.
### The balances outstanding are as follows:
Ciavarella.
During the year ended December 31, 2020, Gold Street Capital Corp. advanced to us $36,300 all of which was repaid during the current period.
On September 4, 2019, we issued to Gold Street 15,196 shares of our common stock as payment in settlement of $48,508 of the reimbursable expenses owing to Gold Street. The balance owing to Gold Street was $0 and $2,551 as of December 31, 2020 and 2019, respectively.
In February 2018 we provided a loan of 39,048 (approximately $45,000) to Engage IT Services Srl to finance hardware purchased by third-party betting shops. In June 2018, we increased the loan by 45,675 (approximately $53,000). The loan bears interest at 4.47% and is due in February 2019. This loan has been repaid in full. During the year ended December 31, 2020, we contracted with Engage IT to provide us software development services of approximately 706,300 (approximately $806,029) of which approximately 20,000 (approximately $24,456) was outstanding at December 31, 2020. Luca Pasquini, one of our officers and directors, holds a 34% stake in Engage IT Services Srl.
During the years ended December 31, 2019, we paid management fees of approximately 120,000 (approximately $134,388) to Ulisse Services, Ltd. to cover call center services and office set-up expenses.
On January 30, 2019, we acquired all of the issued and outstanding ordinary shares of VG and Naos. The sellers included Mr. Luca Pasquini, our Vice President of Technology and a member of our Board of Directors, and Mr. Gabriele Peroni, our Vice President of Business Development, each of whom owned 800 ordinary shares of Naos (20% each of the issued and outstanding shares of Naos). On the closing date of the transaction we paid to each of Messrs. Pasquini and Peroni 21,600 (approximately $24,660) in cash, issued to each of them 6,490 shares of our common stock and issued to each of them a note in the principal amount of 478,400 (approximately $546,200). As of December 31, 2020, we made total cash payments to the former shareholders of VG under the VG Share Purchase Agreement equal to 2,166,700 (approximately $2,536,595), and we issued 562,605 shares amounting to 1,500,000 (approximately<|endoftext|>Premiums pursuant to the Designation would remain (a) 95% of the average of the lowest 5 individual daily volume weighted average prices during the applicable Measuring Period (as defined in the Designation), not to exceed 100% of the lowest sales prices on the last day of the Measuring Period, less $0.05 per share of common stock, unless a triggering event has occurred, and that such $0.05 per share discount would not be adjusted in connection with Cambers previously reported reverse stock splits; and (b) 85% of the average of the lowest individual daily volume weighted average price during the applicable Measuring Period (as defined in the Designation), not to exceed 100% of the lowest sales prices on the last day of the Measuring Period, less $0.10 per share of common stock, if a triggering event has occurred, and that such $0.10 per share discount would not be adjusted in connection with Cambers previously reported reverse stock splits.
The Amendment also provided that the Measuring Period (as defined the Designation) would begin on the date of the Agreement, February 3, 2020; and that the Designation would be amended to provide that holders of the Series C Preferred Stock will vote with holders of common stock as a single class, on an as converted basis subject to the beneficial ownership limitation set forth in the Designation; provided that the NYSE American has since advised Camber that such amendment would not be possible under the current rules of the NYSE American.
Securities Exchange Agreement and Termination Agreement
In connection with an Agreement and Plan of Merger entered into on July 9, 2019 with Lineal, Camber entered into (a) a Security Exchange Agreement dated July 8, 2019 (the
### Exchange Agreement
), by and between Camber and Discover Growth Fund LLC (
Discover
); and (b) a Termination Agreement dated July 8, 2019, by and between Camber and Discover Growth Fund (
### Discover Growth
), both of which agreements have since terminated prior to any transactions contemplated thereunder becoming effective as a result of the Redemption Agreement (discussed below).
June 2020 Stock Purchase Agreement
Face Value
).
### Repurchase Requirement
), which totals $6,930,000.
### SPA Amendment
Redemption Agreement
### On December 31, 2019 (the
Effective Date
), Camber entered into, and closed the transactions contemplated by, a Preferred Stock Redemption Agreement (the
### Redemption
), by and between Camber, Lineal Star Holdings, LLC, Cambers wholly-owned subsidiary at the time of the entry into the Redemption Agreement (
Lineal
), Lineals wholly-owned subsidiaries, and the holders of Cambers Series E Redeemable Convertible Preferred Stock (
### Series E Preferred Stock
Series F Preferred Stock
, and the holders of the Series E Preferred Stock and Series F Preferred Stock, the
Preferred Holders
).
Effective on July 9, 2019, Camber had acquired 100% ownership of Lineal from the Preferred Holders, then members of Lineal, in consideration for 1,000,000 shares of Series E Preferred Stock and 16,750 shares of Series F Preferred Stock, pursuant to the terms of an Agreement and Plan of Merger entered into on July 9, 2019 (the
Lineal Merger
).
The certificate of designations providing for the rights and preferences of the Series E Preferred Stock and Series F Preferred Stock allowed for certain rights of the Preferred Holders, including, in certain cases, the redemption, at the option of the Preferred Holders, of all shares of Series E Preferred Stock and Series F Preferred Stock, for 100% of the outstanding interests of Lineal held by Camber.
The mutual determination to move forward with such redemption transaction was due partially to the fact that Lineal had, since the date of the Lineal Merger, been unable to complete a further acquisition or combination which would allow the post-Lineal Merger combined company to meet the initial listing standards of the NYSE American. This was a requirement to Camber having to seek stockholder approval for the terms of the Series E Preferred Stock (including the voting rights (i.e., the right, together with the Series F Preferred Stock, to vote 80% of Cambers voting shares) and conversion rights (i.e., the right to convert into between 67-70% of Cambers post-stockholder approval capitalization) associated therewith). Consequently, and because no definitive timeline was able to be established for when Camber believed it would meet the NYSE American initial listing standards and consequently, when stockholder approval would be sought or received for the terms of the Series E Preferred Stock and Series F Preferred Stock, the Preferred Holders and Camber determined it was in their mutual best interests to unwind the Lineal Merger by way of the Redemption.
Additionally, all of the Series E Preferred Stock and Series F Preferred Stock of Camber was automatically cancelled and deemed redeemed by Camber and the Series F Holder waived and forgave any and all accrued dividends on the Series F Preferred Stock.
The Redemption Agreement also provided for (a) the entry by Lineal and Camber into a new promissory note in the amount of $1,539,719, evidencing the repayment of a promissory note in the original amount of $1,050,000 provided by Lineal to Camber at the time of the closing of the Lineal Merger, together with additional amounts loaned by Camber to Lineal through December 31, 2019 (the
### New Note
); (b) the loan by Camber to Lineal of an additional $800,000, which was evidenced by a promissory note in the amount of $800,000, entered into by Lineal in favor of Camber on December 31, 2019 (
Note No. 2
); and (c) the termination of the prior Plan of Merger and Funding and Loan Agreement entered into in connection therewith (pursuant to which all funds previously held in a segregated account for future Lineal acquisitions, less amounts loaned pursuant to Note No. 2, were released back to Camber).
The Redemption Agreement also requires Camber to obtain a tail directors and officers liability insurance policy for six years following the effective date of the Redemption, which must be in place prior to December 31, 2020 and provides for (i) mutual general releases by (a) Lineal, its subsidiaries, and each Preferred Holder, subject to certain limited exceptions in the event of a third-party claim and (b) Camber; (ii) non-disparagement and confidentiality obligations of the parties; and (iii) indemnification obligations, each as described in greater detail in the Redemption Agreement.
The New Note, issued by Lineal as borrower, in the amount of $1,539,719, accrues interest, payable quarterly in arrears, beginning on March 31, 2020, at 10% per annum (18% upon the occurrence of an event of default), and continuing until December 31, 2021, when all interest and principal is due. The New Note contains a provision whereby payments of principal and interest owed under the note are suspended and interest does not accrue if Camber fails to pay certain indemnification obligations under the Redemption Agreement, and if such amounts continue unpaid for 30 days, then the amount of principal and interest due under the note is offset by the amount of such unpaid obligations. The New Note contains standard and customary events of default, including cross-defaults with Note No. 2, and if a change of control of Lineal occurs (as described in the New Note) which is not pre-approved by Camber.
Note No. 2, issued by Lineal as borrower, in the amount of $800,000, accrues interest, payable quarterly in arrears, beginning on March 31, 2020, at 8% per annum (18% upon the occurrence of an event of default), and continuing until December 31, 2021, when all interest and principal is due. The New Note contains a provision whereby payments of principal and interest owed under the note are suspended and interest does not accrue if Camber fails to pay certain indemnification obligations under the Redemption Agreement, and if such amounts continue unpaid for 30 days then the amount of principal and interest due under the note is offset by the amount of such unpaid obligations (provided there is only one offset under either of the New Note and Note No. 2, with priority being given to the New Note). The New Note contains standard and customary events of default, including cross-defaults with the New Note, if a change of control of Lineal occurs (as described in the New Note) which is not pre-approved by Camber or if Lineal distributes cash or other assets to its members, other than amounts to cover taxes of the members, as described in greater detail in the New Note.
The result of the Redemption was to effectively unwind the Lineal Merger, effective as of December 31, 2019.
### Related Party Office Space Use
BlackBriar is also providing Cambers office space without charge to Camber.
Director Independence
During the year ended March 31, 2020, the Board determined that 67% of the Board is independent under the definition of independence and in compliance with the listing standards of the NYSE American listing requirements. Based upon these standards, the Board has determined that Mr. Miller and Mr. Zeidman are independent members of the Board of Directors as defined in Section 803(A) of the NYSE American Company Guide, and Mr. Schleizer is not independent due to his status as an officer of the Company (see Item 10. Directors, Executive Officers and Corporate Governance).
### ITEM 14.
Our Audit Committee of the Board of Directors approves in advance the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.
Audit Fees
The aggregate fees billed by our independent auditors, GBH, CPAs, PC (
GBH
), which combined its practice with Marcum , LLP (
### Marcum
) effective July 1, 2018, and Marcum LLP, for professional services rendered for the audit of our annual financial statements included in our Annual Reports on Form 10-K for the years ended March 31, 2020 and 2019, and for the review of quarterly financial statements included in our Quarterly Reports on Form 10-Q for the quarters ending June 30, September 30, and December 31, 2019 and 2018, were:
Audit fees incurred by the Company were pre-approved by the Audit Committee.
### Audit Related Fees:
A total of $100,000 of the fees disclosed above for fiscal 2020 relate to the audit of Lineal in connection with the Companys July 2019 acquisition of Lineal (which has since been divested).
Tax Fees:
None.
### All Other Fees:
A total of $30,000 of the fees disclosed above for fiscal 2020 relate to the review of the Companys pro forma financial statements relating to the July 2019 acquisition of Lineal (which has since been divested).
We do not use the auditors for financial information system design and implementation. Such services, which include designing or implementing a system that aggregates source data underlying the financial statements or that generates information that is significant to our financial statements, are provided internally or by other service providers. We do not engage the auditors to provide compliance outsourcing services.
The Audit Committee of the Board of Directors has considered the nature and amount of fees billed by GBH/Marcum and believes that the provision of services for activities unrelated to the audit is compatible with maintaining GBH/Marcums independence.
PART IV
### ITEM 15.
(a)
Documents filed as part of this report
(1) All financial statements
(2)
All financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto included in this Form 10-K.
(3)
### Exhibits required by Item 601 of Regulation S-K
The information required by this Section (a)(3) of Item 15 is set forth on the exhibit index that follows the Signatures page of this Form 10-K.
ITEM 16. FORM 10K SUMMARY
None. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Million of repayments on notes, $97.5 million of repayments on the revolving credit facility, $4.9 million in financing costs, $9.8 million of repayments under our finance lease obligations, $5.4 million in returns of capital associated with the spin-off of Wireless and $2.6 million in cost associated with offering securities.
For the year ended December31, 2018, net cash provided by financing activities was $196.4 million, consisting primarily of $810.0 million in borrowings on notes, $201.0 million in borrowings on the revolving credit facility and $4.7 million from a capital contribution. This was offset with $522.2 million of repayments on notes, $261.0 million of repayments on the revolving credit facility, $20.6 million in financing costs, $12.4 million of repayments under our capital lease obligations and $3.1 million in cost associated with offering securities.
### Long-Term Debt
We are a highly leveraged company with significant debt service requirements. As of December31, 2020, we had $2,844.9 million of aggregate principal total debt outstanding, consisting of $677.0 million of outstanding 2022 notes, $400.0 million of outstanding 2023 notes, $225.0 million of outstanding 2024 notes, $600.0 million of outstanding 2027 notes and $942.9 million of outstanding 2024 Term Loan B with $334.7 million of availability under our revolving credit facility (after giving effect to $15.3 million of outstanding letters of credit and no borrowings).
On November16, 2012, we entered into a $200.0 million senior secured revolving credit facility, with a five-year maturity. In addition, we may request one or more term loan facilities, increased commitments under the revolving credit facility or new revolving credit commitments, in an aggregate amount not to exceed $225.0 million.
On June 28, 2013, we amended and restated the credit agreement to provide for a new repriced tranche of revolving credit commitments with a lower interest rate. Nearly all of the existing tranches of revolving credit commitments were terminated and converted into the repriced tranche, with the unterminated portion of the existing tranche continuing to accrue interest at the original higher rate.
On March 6, 2015, we amended and restated the credit agreement to provide for, among other things, (1) an increase in the aggregate commitments previously available to us from $200.0 million to $289.4 million and (2) the extension of the maturity date with respect to certain of the previously available commitments.
On August 10, 2017, we amended and restated the credit agreement to provide for, among other things, (1) an increase in the aggregate commitments previously available to us from $289.4 million to $324.3 million and (2) the extension of the maturity date with respect to certain of the previously available commitments.
On February 14, 2020, we amended and restated the credit agreement (the Fourth Amended and Restated Credit Agreement) to provide for, among other things, (1) an increase in the aggregate commitments previously available to us from $288.2 million to $350.0 million and (2) the extension of the maturity date with respect to certain of the previously available commitments.
As of December31, 2020 there were no outstanding borrowings under the revolving credit facility. Borrowings under the Fourth Amended and Restated Credit Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (1)the base rate determined by reference to the highest of (a)the Federal Funds rate plus 0.50%, (b)the prime rate of Bank of America, N.A. The applicable margin for base rate-based borrowings (1)(a)under the Series A Revolving Commitments of approximately $10.9 million and the Series C Revolving Commitments of approximately $330.8 million is currently 2.0% and (b)under the Series B Revolving Commitments of approximately $8.3 million is currently 3.0% and (2)the applicable margin for LIBOR rate-based borrowings (a)under the Series A Revolving Commitments and the Series C Revolving Commitments is currently 3.0%per annum and (b)under the Series B Revolving Commitments is currently 4.0%. The applicable margin for borrowings under the revolving credit facility is subject to one step-down of 25 basis points based on our meeting a consolidated first lien net leverage ratio test.
In addition to paying interest on outstanding principal under the revolving credit facility, APX is required to pay a quarterly commitment fee (which is subject to one interest rate step-down of 12.5 basis points, based on APX meeting a consolidated first lien net leverage ratio test) to the lenders under the revolving credit facility in respect of the unutilized commitments thereunder. APX also pays a customary letter of credit and agency fees.
The principal amount outstanding under the revolving credit facility will be due and payable in full on March 31, 2021 with respect to the commitments under the Series A Revolving Credit Facility and Series B Revolving Credit Facility and on February 14, 2025 (or the applicable springing maturity date if the Revolving Springing Maturity Condition applies) with respect to the $330.8 million of Series C Revolving Credit Commitments. The Revolver Springing Maturity Condition applies if (i) on the 2022 Springing Maturity Date, an aggregate principal amount of the Borrowers 7.875% Senior Secured Notes Due 2022 (the 2022 Notes) in excess of $350.0 million are either outstanding or have not been repaid or redeemed with certain qualifying proceeds specified in the Fourth Amended and Restated Credit Agreement, (ii) on the 2023 Springing Maturity Date, an aggregate principal amount of the 2023 Notes in excess of $125.0 million are either outstanding or have not been repaid or redeemed with certain qualifying proceeds specified in the Fourth Amended and Restated Credit Agreement or (iii) on the 2024 Springing Maturity Date, an aggregate principal amount of the Borrowers 8.500% Senior Secured Notes Due 2024 (the 2024 Notes) in excess of $125.0 million are either outstanding or have not been repaid or redeemed with certain qualifying proceeds specified in the Fourth Amended and Restated Credit Agreement. The 2022 Springing Maturity Date means the date that is 91 days before the maturity date with respect to the 2022 Notes, the "2023 Springing Maturity Date" means the date that is 91 days before the maturity date with respect to the 2023 Notes and the 2024 Springing Maturity Date means the date that is 91 days before the maturity date with respect to the 2024 Notes.
2022 Notes
As of December31, 2020, APX had $677.0 million outstanding aggregate principal amount of its 2022 notes. Interest on the 2022 notes is payable semi-annually in arrears on June1 and December1 of each year.
We may, at our option, redeem at any time and from time to time some or all of the 2022 notes at 100.000% of the aggregate principal amount of the 2022 notes redeemed plus any accrued and unpaid interest to the date of redemption.
The 2022 notes mature on December1, 2022, or on such earlier date when any outstanding pari passu lien indebtedness matures as a result of the operation of any springing maturity provisions set forth in the agreements governing such pari passu lien indebtedness.
2023 Notes
As of December31, 2020, APX had $400.0 million outstanding aggregate principal amount of its 2023 notes. Interest on the 2023 notes is payable semi-annually in arrears on September1 and March1 of each year. The 2023 notes mature on September 1, 2023.
From and after September1, 2020, we may, at our option, redeem at any time and from time to time some or all of the 2023 notes at 103.813% of the aggregate principal amount of the 2023 notes redeemed, declining to par from and after September1, 2022, in each case, plus any accrued and unpaid interest to the date of redemption.
2024 Notes
As of December31, 2020, APX had $225.0 million outstanding aggregate principal amount of its 2024 notes. Interest on the 2024 notes is payable semi-annually in arrears on May1 and November 1 of each year.
We may, at our option, redeem at any time and from time to time prior to May 1, 2021, some or all of the 2024 notes at 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date plus the applicable make-whole premium. From and after May1, 2021, we may, at our option, redeem at any time and from time to time some or all of the 2024 notes at 104.25%, declining to par from and after May 1, 2023, in each case, plus any accrued and unpaid interest to the date of redemption. In addition, on or prior to May 1, 2021, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2024 notes with the proceeds from certain equity offerings at 108.50%, plus accrued and unpaid interest to the date of redemption. In addition, on or prior to May 1, 2021, during any 12 month period, we also may, at our option, redeem at any time and from time to time up to 10% of the aggregate principal amount of the 2024 notes at a price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, to but excluding the redemption date.
The 2024 notes mature on November 1, 2024, unless, under Springing Maturity provisions, on June1, 2023 (the 91st day prior to the maturity of the 2023 notes) more than an aggregate principal amount of $125.0 million of such 2023 notes remain outstanding or have not been refinanced as permitted under the indenture governing the 2023 notes, in which case the 2024 Notes will mature on June1, 2023.
2027 Notes
As of December31, 2020, APX had $600.0 million outstanding aggregate principal amount of its 2027 notes.
We may, at our option, redeem at any time and from time to time prior to February 15, 2023, some or all of the 2027 notes at 100% of the principal amount thereof plus accrued and unpaid interest to the redemption date plus the applicable make-whole premium. From and after February 15, 2023, we may, at our option, redeem at any time and from time to time some or all of the 2027 notes at 103.375%, declining to par from and after May 1, 2025, in each case, plus any accrued and unpaid interest to the date of redemption. In addition, on or prior to February 15, 2021, we may, at our option, redeem up to 40% of the aggregate principal amount of the 2027 notes with the proceeds from certain equity offerings at 100% plus an applicable premium, plus accrued and unpaid interest to the date of redemption. In addition, on or prior to February 15, 2023, during any 12 month period, we also may, at our option, redeem at any time and from time to time up to 10% of the aggregate principal amount of the 2027 notes at a price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, to but excluding the redemption date.
The 2027 notes will mature on February 15, 2027, unless, under Springing Maturity provisions on June1, 2023 (the 91st day prior to the maturity of the 2023 notes) more than an aggregate principal amount of $125.0 million of such 2023 notes remain outstanding or have not been refinanced as permitted under the indenture governing the 2023 notes, in which case the 2027 Notes will mature on June1, 2023.
2025 Term Loan B
As of December31, 2020, APX had $942.9 million outstanding aggregate principal amount of its 2025 Term Loan B.
Pursuant to the terms of the 2025 Term Loan B, quarterly amortization payments are due in an amount equal to 0.25% of the aggregate principal amount of the 2025 Term Loan B outstanding on the closing date. The remaining principal amount outstanding under the 2025 Term Loan B will be due and payable in full on (x) if the Term Springing Maturity Condition (as defined below) does not apply, December 31, 2025 and (y) if the Term Springing Maturity Condition does apply, the 2023 Springing Maturity Date (which date is the date that is 91 days before the maturity date with respect to the 2023 Notes).
The Term Springing Maturity Condition applies if on the 2023 Springing Maturity Date (which date is the<|endoftext|>Appreciation rights to participants who have been, or are being, granted stock options under the plan as a means of allowing the participants to exercise their stock options without the need to pay the exercise price in cash, or we may grant them alone and unrelated to an option. In conjunction with non-qualified stock options, stock appreciation rights may be granted either at or after the time of the grant of the non-qualified stock options. In conjunction with incentive stock options, stock appreciation rights may be granted only at the time of the grant of the incentive stock options. A stock appreciation right entitles the holder to receive a number of shares of common stock having a fair market value equal to the excess fair market value of one share of common stock over the exercise price of the related stock option, multiplied by the number of shares subject to the stock appreciation rights. The granting of a stock appreciation right in tandem with a stock option will not affect the number of shares of common stock available for awards under the plan. In such event, the number of shares available for awards under the plan will, however, be reduced by the number of shares of common stock acquirable upon exercise of the stock option to which the stock appreciation right relates.
Under the 2019 Plan, we may award shares of restricted stock and restricted stock units. Restricted stock units are the right to receive at a future date shares of common stock, or an amount in cash or other consideration determined by the committee to be of equal value as of such settlement date, in accordance with the terms of such grant. The committee determines the persons to whom grants of restricted stock or restricted stock units are made, the number of shares to be awarded, the price (if any) to be paid for the restricted stock or restricted stock units by the person receiving the stock from us, the time or times within which awards of restricted stock or restricted stock units may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the awards. Restrictions or conditions could also include, but are not limited to, the attainment of performance goals. A holder of restricted stock units will have no rights of a stockholder with respect to shares subject to any restricted stock unit award unless and until the shares are delivered in settlement of the award, except to the extent the committee provides for the right to receive dividend equivalents.
### Other Stock-Based Awards
Under the 2019 Plan, we may grant other stock-based awards, subject to limitations under applicable law that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, as deemed consistent with the purposes of the plan. These other stock-based awards may be in the form of purchase rights, shares of common stock awarded that are not subject to any restrictions or conditions, convertible or exchangeable debentures or other rights convertible into shares of common stock and awards valued by reference to the value of securities of, or the performance of, one of us or one of our subsidiaries. These other stock-based awards may include performance shares or options, whose award is tied to specific performance criteria. These other stock-based awards may be awarded either alone, in addition to, or in tandem with any other awards under the 2019 Plan or any of our other plans.
Accelerated Vesting and Exercisability
If any one person, or more than one person acting as a group, acquires the ownership of our stock that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of our stock, and the Board of Directors does not authorize or otherwise approve such acquisition, then the vesting periods of any and all stock options and other awards granted and outstanding under the 2019 Plan shall be accelerated and all such stock options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all common stock subject to such stock options and awards on the terms set forth in the plan and the respective agreements respecting such stock options and awards, and all performance goals will be deemed achieved at 100% of target levels. An increase in the percentage of stock owned by any one person, or persons acting as a group, as a result of a transaction in which we acquire our stock in exchange for property is not treated as an acquisition of stock.
In the event of an acquisition by any one person, or more than one person acting as a group, together with acquisitions during the 12-month period ending on the date of the most recent acquisition by such person or persons, of assets from us that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of our assets immediately before such acquisition or acquisitions, or if any one person, or more than one person acting as a group, acquires the ownership of our stock that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of our stock, which has been approved by the Board of Directors, the committee may (i) accelerate the vesting of any and all stock options and other awards granted and outstanding under the 2019 Plan, (ii) require a holder of any award granted under the plan to relinquish such award to us upon the tender by us to the holder of cash in an amount equal to the repurchase value of such award, and/or (iii) terminate all incomplete performance periods in respect of awards in effect on the date the acquisition occurs, determine the extent to which performance goals have been met based upon such information then available as it deems relevant and cause to be paid all or the applicable portion of the award based upon the committees determination. For this purpose, gross fair market value means the value of our assets, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
### Term and Amendments
Unless terminated by the Board, the 2019 Plan will continue to remain effective until no further awards may be granted and all awards granted under the plan are no longer outstanding. Notwithstanding the foregoing, grants of incentive stock options may be made only until ten years from the initial effective date of the plan. The Board may at any time, and from time to time, amend the plan or any award agreement, but no amendment will be made that would impair the rights of a holder under any agreement entered into pursuant to the plan without the holders consent.
(1) Securities remaining available for issuance under the 2019 Plan.
### Director Compensation
The table below sets forth the compensation earned by our non-employee directors for service on our Board of Directors during the year ended June30, 2021. Compensation paid to Harry Simeonidis, our President and Chief Executive Officer, for his service on the Board of Directors is set forth in Summary Compensation Table for named executive officers.
Non-Employee Director Compensation Arrangements
Prior to the December 2020 IPO, none of our non-employee directors received compensation for serving on our Board of Directors. From the date of the December 2020 IPO, our non-employee directors are entitled to cash fees of $30,000 (plus $10,000 each for the Chairman of the Board and Financial Expert/Chair of the Audit Committee) per year of service on our Board of Directors. Service rendered on any of the committees of the Board do not entitle our non-employee directors to any additional compensation.
ITEM 12.
The following table sets forth certain information regarding the ownership of our common stock as of September 28, 2021 by: (i)each director and nominee for director; (ii)each of the executive officers named in the Summary Compensation Table; and (iv)all those known by us to be beneficial owners of more than five percent of our common stock.
This table is based upon information supplied by officers and directors as well as Schedules 13D or 13G filed with the SEC by beneficial owners of more than five percent of our common stock. Unless otherwise indicated in the footnotes to this table and subject to community property laws, where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 14,882,552 shares of our common stock outstanding on September 28 2021. Beneficial ownership is determined in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities and includes shares of our common stock issuable pursuant to the exercise of stock options, warrants, or other securities that are immediately exercisable or convertible or exercisable or convertible within 60 days of September 28 2021.
Unless otherwise indicated, the address of each person listed below is
420 Lexington Ave, Suite 300, New York, NY 10170
* Less than 1%.
(1)
Consists of 4,900 common stock and currently exercisable Series A Warrants to purchase 2,450 shares of the common stock.
(2)
Consists of 2,000 shares of common stock.
(3)
Consists of 16,258 shares of common stock and currently exercisable Series A Warrants to purchase 1,479 shares of the common stock. Does not include 3,000 of common stock that will be issuable upon exercise of the pre-IPO warrants held by Mr. Sakiris during the one-year period commencing on the second anniversary of the consummation of December 2020 IPO.
(4)
Consists of 600 shares of common stock.
(5)
Consists of 800 shares of common stock.
(6)
Consists of 4,856,248 shares of common stock and currently exercisable 5-year non-transferable warrants with exercise price of $17 per share to purchase 3,000,000 shares of the common stock.
Life Science Biosensor Diagnostics Pty Ltd (LSBD), which is referred to in this filing as the Licensor, is an Australian company that is 81% owned by The iQ Group Global Ltd, which is a public Australian company that is 24% beneficially owned by Dr. George Syrmalis. The remainder of the outstanding shares of The iQ Group Global Ltd are publicly-owned and traded on the National Stock Exchange of Australia. In addition, Dr. Syrmalis is the Chief Executive Officer and one of four members of the Board of Directors of The iQ Group Global Ltd, along with Con Tsigounis, Peter Simpson and Peter Mercouris. Dr. Syrmalis and Messrs. Tsigounis, Simpson and Mercouris may be deemed to share voting and dispositive power with respect to the shares of our common stock held by the Licensor. Notwithstanding the foregoing, Dr. Syrmalis and Messrs. Tsigounis, Simpson and Mercouris disclaim beneficial ownership over the common stock owned by the Licensor. The address for LSBD is Level 9, 85 Castlereagh Street, Sydney NSW 2000.
ITEM 13.
Our Board of Directors has determined that each of our director nominees standing for election, except Mr. Simeonidis, is an independent director (as currently defined in Rule 5605(a)(2) of the NASDAQ listing rules). In determining the independence of our directors, the Board of Directors considered all transactions in which the Company and any director had any interest, including those discussed under Certain Related-Person Transactions below.
Our independent directors together constitute a majority of our full Board of Directors. The independent directors meet as often as necessary to fulfil their responsibilities, and will have regularly scheduled meetings at which only independent directors are present.
### Related-Person Transactions
Our code of ethics will require that we avoid, wherever | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Expenses).
The per-share amount to be distributed to public shareholders who redeemed their Public shares were not reduced by the deferred underwriting commissions the Company payable to the underwriters (as discussed in Note6). These Public shares have been recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with Accounting Standards Codification (ASC) Topic 480 Distinguishing Liabilities from Equity. In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $
5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by the law and the Company does not decide to hold a shareholder vote for business or other legal reasons, the Company will, pursuant to its Amended and Restated Articles of incorporation, conduct the redemptions pursuant to the tender offer rules of the SEC, and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a shareholder approval of the transactions is required by law, or the Company decides to obtain shareholder approval for business or legal reasons, the Company were to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks shareholder approval in connection with a Business Combination, the initial stockholders have agreed to vote their founder shares (and any Public shares purchased during or after the Initial Public Offering in favor of a Business Combination.
Notwithstanding the foregoing, the Companys Amended and Restated Articles of incorporation provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), were restricted from redeeming its shares with respect to more than an aggregate of 20% or more of the Class A common stock sold in the Initial Public Offering, without the prior consent of the Company.
On June 16, 2020, the Company held a special meeting of shareholders to extend (the Extension) the date by which the Company has to complete an initial Business Combinationfrom June 22, 2020 to September 22, 2020. The Extension was approved, and in connection with the vote to approve the Extension, in June 2020 the holders of
2,089,939 shares of ClassA common stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $
10.46 per share, for an aggregate redemption amount of approximately $
21.9 million.
On September 17, 2020, the Company held a special meeting of shareholders to extend (the September Extension) the date by which the Company has to complete an initial Business Combinationfrom September 22, 2020 to December 22, 2020. The September Extension was approved, and in connection with the vote to approve the September Extension, in September 2020 the holders of
1,215,698 shares of ClassA common stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $
10.57 per share, for an aggregate redemption amount of approximately $
12.8 million.
On December 21, 2020, the Company held a special meeting of shareholders to extend (the December Extension) the date by which the Company has to complete an initial Business Combinationfrom December 22, 2020 to January 22, 2021 (the Combination Period). The December Extension was approved, and in connection with the vote to approve the December Extension, in December 2020 the holders of
1,826,891 shares of ClassA common stock properly exercised their right to redeem their shares for cash at a redemption price of approximately $
10.56 per share, for an aggregate redemption amount of approximately $
19.3 million.
The Company previously deposited into the Trust Account (each deposit being referred to herein as a Deposit) $0.03 per month (or an aggregate of $0.09) for each public share that was not converted in connection with the Extension of the Companys termination date from June 22, 2020 through September 22, 2020. During the year ended December 31, 2020, the Company made a Deposit of approximately $
1.2 million to the Trust Account. Alternatively, if the Company did not have the funds necessary to make the Deposit referred to above, the Companys officers, directors or any of their affiliates or designees contributed to the Company as a loan (each loan being referred to herein as a Contribution) $0.03 for each public share that is not converted in connection with the shareholder votes to approve the Extension, for each monthly period, or portion thereof, that was needed by the Company to complete an initial Business Combination from June 22, 2020 until the date of the consummation of its Business Combination. The Contributions did not bear any interest and were repayable by the Company to the officers, directors or affiliates upon consummation of an initial Business Combination. On September 17, 2020, the Company held a special meeting for the September Extension which eliminated further Deposits after September 22, 2020.
If the Company was unable to complete a Business Combination within the Combination Period, the Company would have been required to (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem 100% of the outstanding public shares which redemption would completely extinguish public stockholders rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law and (iii)as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Companys board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirements of applicable law.
In connection with the redemption of 100% of the Companys outstanding Public shares for a portion of the funds held in the Trust Account, each holder would have received a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay for its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses).
The initial stockholders agreed to waive their liquidation rights with respect to the founder shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquired Public shares in or after the Initial Public Offering, they were entitled to liquidating distributions from the Trust Account with respect to such Public shares if the Company failed to complete a Business Combination within the Combination Period. The underwriters agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company did not complete a Business Combination within the Combination Period and, in such event, such amounts would have been included with the funds held in the Trust Account that were available to fund the redemption of the Companys Public shares. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company, jointly and severally, if and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability did not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under the Companys indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the Securities Act). Moreover, in the event that an executed waiver was deemed to be unenforceable against a third party, the Sponsor would not be responsible to the extent of any liability for such third-party claims.
The Company sought to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (other than the Companys independent auditors), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
### Business Combination
The transactions set forth in the Merger Agreement, including the Merger, will constitute a Business Combination as contemplated by the Companys Amended and Restated Certificate of Incorporation.
Subject to the terms of the Merger Agreement, the Seller received approximately $
344 million of stock consideration, consisting of
32,557,303 newly issued shares of the Companys publicly-traded Class A common stock, which shares will be valued at $
10.56 per share for purposes of determining the aggregate number of shares payable to the Seller (the Stock Consideration). The number of shares of Class A common stock issued to the Seller as Stock Consideration is not subject to adjustment. The Seller has registration rights under the Merger Agreement in respect of the Stock Consideration.
Each of the Company, Merger Sub and Landsea are making customary representations and warranties for a transaction of this type. The representations and warranties made by parties to the Merger Agreement do not survive after the closing of the Merger. The parties to the Merger Agreement also have agreed to certain customary covenants in connection with the Merger, including, among others, covenants with respect to the conduct of the Company, Merger Sub and Landsea and its subsidiaries prior to the closing of the Merger. The Company has agreed to seek approval of the holders of at least 65% of the Companys public warrants to effect an amendment to the warrant agreement related to the public warrants such that, as of the closing of the Merger, (i) each issued and outstanding public warrant, which currently entitles each holder thereof to purchase one share of Parent Class A Stock at an exercise price of $11.50 per share, will become exercisable for one-tenth of one share at an exercise price of $1.15 per one-tenth share ($11.50 per whole share) and (ii) each holder of public warrants issued and outstanding immediately prior to the closing of the Merger will be entitled to receive from the Company a one-time payment of $1.85 per public warrant, contingent upon the consummation of the closing.
The Merger is subject to customary conditions for a transaction of this type, including, among others: (i) approval of the Companys stockholders; (ii) approval of Landseas sole stockholder; (iii) there being no laws or injunctions by governmental authorities or other legal restraint prohibiting consummation of the transactions contemplated under the Merger Agreement; (iv) the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, having expired (or early termination having been granted); (v) the shares of the Companys Class A common stock to be issued in connection with the closing of the Merger shall have been approved for listing upon the closing on Nasdaq; (vi) the Company having at least $5,000,001 in net tangible assets; (vii) the amount in the Companys trust account equally or exceeding $90,000,000, after<|endoftext|>Result, holders of our securities may not find purchasers for our securities should they seek to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time. Transfer of our Common Stock may also be restricted under the securities or Blue-Sky laws of various states and foreign jurisdictions.
We will be subject to the penny stock rules which will adversely affect the liquidity of our Common Stock.
The SEC has adopted regulations which generally define penny stock to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. We expect the market price of our Common Stock will be less than $5.00 per share and therefore we will be considered a penny stock according to SEC rules. These rules limit the ability of broker-dealers to solicit purchases of our Common Stock and therefore reduce the liquidity of the public market for our shares should one develop.
Securities which are traded on the OTCPink, may not provide as much liquidity for our investors as more recognized senior exchanges such as the Nasdaq stock market or other national or regional exchanges.
There has never been a two-sided quotation for the stock, and it has yet to trade. As a result of the name change, our symbol was changed to SNBH.
The Companys Common Stock is currently quoted on the Pink tier of OTC Markets under the symbol of SNBH. OTC Markets is a computer network that provides information on current bids and asks, as well as volume information. As of the date hereof, no active trading market has developed for our Common Stock.Securities traded on OTC Markets are usually thinly traded, highly volatile, have fewer market makers and are not followed by analysts. The SECs order handling rules, which apply to NASDAQ-listed securities, do not apply to securities quoted on OTC Markets. Quotes for stocks included on OTC Markets are not listed in newspapers and are often unavailable at many of the online websites which publish stock quotes. Therefore, prices for securities traded solely on OTC Markets may be difficult to obtain and holders of our securities may be unable to resell their securities at or near their original acquisition price, or at any price.
FINRA has adopted rules that require a broker-dealer to have reasonable grounds for believing that the investment is suitable for that customer before recommending an investment to a customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives, and other information.
The sale of the additional shares of Common Stock could cause the value of our Common Stock to decline.
The sale of a substantial number of shares of our Common Stock, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish.
The Common Stock constitutes restricted securities and is subject to limited transferability.
The Common Stock should be considered a long-term, illiquid investment. The Common Stock has not been registered under the Securities Act of 1933, as amended (the Securities Act), and cannot be sold without registration under the Securities Act or any exemption from registration. In addition, the Common Stock is not registered under any state securities laws that would permit their transfer. Because of these restrictions and the absence of an active trading market for our securities, a stockholder will likely be unable to liquidate an investment even though other personal financial circumstances would dictate such liquidation.
Because we will likely issue additional shares of our Common Stock, investment in the Company could be subject to substantial dilution.
Investors interests in the Company will be diluted and Investors may suffer dilution in their net book value per share when we issue additional shares. We are authorized to issue 50,000,000 shares of Common Stock, $0.001 par value per share, and 25,000,000 shares of preferred stock, $0.001 par value per share. We anticipate that all or at least some of our future funding, if any, will be in the form of equity financing from the sale of our Common Stock. If we do sell or issue more Common Stock, investors investment in the Company will be diluted. Dilution is the difference between what you pay for your stock and the net tangible book value per share immediately after the additional shares are sold by us. If dilution occurs, any investment in the Companys Common Stock could seriously decline in value.
Under a regulation of the SEC known as Rule 144, a person who beneficially owns restricted securities of an issuer and who is not an affiliate of that issuer may sell them without registration under the Securities Act provided that certain conditions have been met. One of these conditions is that such person has held the restricted securities for a prescribed period, which would be six months for shares of a company which has never been a shell company. However, Rule 144 is unavailable for the resale of securities issued by an issuer that is a shell company (other than a business combination related shell company) or, unless certain conditions are met, that has been at any time previously a shell company. Because we had been a shell company in the past, shareholders purchasing restricted securities will be unable to publicly resell their shares until one year after this Form 8-K is filed at the earliest, if at all.
The SEC defines a shell company as a company that has (a) no or nominal operations and (b) either (i) no or nominal assets, (ii) assets consisting solely of cash and cash equivalents; or (iii) assets consisting of any amount of cash and cash equivalents and nominal other assets.
As a result of the Closing of the Reorganization as described in Items 1.01 and 2.01, the Company ceased being a shell company as such term is defined in Rule 12b-2 under the Exchange Act.
While we believe that as a result of the Closing of the Reorganization, the Company ceased to be a shell company, the SEC and others whose approval is required in order for shares to be sold under Rule 144 might take a different view.
Rule 144 is available for the resale of securities of former shell companies if and for as long as the following conditions are met:
(i) the issuer of the securities that was formerly a shell company has ceased to be a shell company,
(ii) the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act,
(iii) the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials), other than Current Reports on Form 8-K; and
(iv) at least one year has elapsed from the time that the issuer filed current comprehensive disclosure with the SEC reflecting its status as an entity that is not a shell company known as Form 10 Information.
Shareholders who receive the Companys restricted securities will not be able to sell them pursuant to Rule 144 without registration until the Company has met the other conditions to this exception and then for only as long as the Company continues to meet the condition described in subparagraph (iii), above, and is not a shell company. No assurance can be given that the Company will meet these conditions or that, if it has met them, it will continue to do so, or that it will not again be a shell company.
Fiduciaries investing the assets of a trust or pension or profit-sharing plan must carefully assess an investment in our Company to ensure compliance with ERISA.
In considering an investment in the Company of a portion of the assets of a trust or a pension or profit-sharing plan qualified under Section 401(a) of the Code and exempt from tax under Section 501(a), a fiduciary should consider (i) whether the investment satisfies the diversification requirements of Section 404 of ERISA; (ii) whether the investment is prudent, since the Companys common stock shares are not freely transferable and there may not be a market created in which the Common Stock may be sold or otherwise disposed; and (iii) whether interests in the Company or the underlying assets owned by the Company constitute Plan Assets under ERISA.
Our Common Stock price may decrease due to factors beyond our control.
The stock market from time to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for emerging growth companies, and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely affect the market price of our stock, if a trading market for our stock ever develops. If our shareholders sell substantial amounts of their stock in the public market, the price of our stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities, in the future at a price we deem appropriate.
The market price of our stock may also fluctuate significantly in response to the following factors, most of which are beyond our control: variations in our quarterly operating results, changes in general economic conditions, changes in market valuations of similar companies, announcements by us or our competitors of significant acquisitions, strategic partnerships or joint ventures, or capital commitments, poor reviews; loss of a major customer, partner or joint venture participant; and the addition or loss of key managerial and collaborative personnel.
Any such fluctuations may adversely affect the market price or value of our Common Stock, regardless of our actual operating performance. As a result, stockholders may be unable to sell their shares, or may be forced to sell them at a loss.
In addition to the penny stock rules described above, FINRA has adopted Rule 2111 that requires a broker-dealer to have reasonable grounds for believing that an investment is suitable for a customer before recommending the investment. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We do not intend to pay dividends for the foreseeable future.
We have never declared or paid any cash dividends on our stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our Board.
If we are unable to comply with the financial reporting requirements mandated by the SECs regulations, investors may lose confidence in our financial reporting and the price of our common stock, if a market ever does develop for it, could decline.
If we fail to maintain effective internal controls over financial reporting, our ability to produce timely, accurate and reliable periodic financial statements could be impaired. If we do not maintain adequate internal control over financial reporting, investors could lose confidence in the accuracy of our periodic reports filed under the Exchange Act. Additionally, our ability to obtain additional financing could be impaired or a lack of investor confidence in the reliability and accuracy of our public reporting could cause our stock price to decline. In the past we have been delinquent in our SEC reporting and have not maintained adequate internal control over financial reporting. We plan remain current with our filing obligations with the SEC after the filing of | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
If we are unable to consummate our initial business combination by December 7, 2022, the funds then on deposit in the trust account, including interest earned on the funds held in the trust account (less taxes payable and up to $100,000 of interest income to pay dissolution expenses), will be used to fund the redemption of our public shares, as further described herein. If we are required to wind-up, liquidate the trust account and distribute such amount therein, pro rata, to our public shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of the Companies Act. In that case, investors may be forced to wait beyond December 7, 2022 before the redemption proceeds of our trust account become available to them, and they receive the return of their pro rata portion of the funds from our trust account. We have no obligation to return funds to investors prior to the date of our redemption or liquidation unless we consummate our initial business combination prior thereto and only then in cases where investors have sought to redeem their Class A ordinary shares.
In accordance with the NYSE corporate governance requirements, we are not required to hold an annual general meeting until no later than one year after our first fiscal year end following our listing on the NYSE. Our board of directors is divided into three classes with only one class of directors being appointed in each year and each class (except for those directors appointed prior to our first general meeting) serving a three-year term. In addition, as holders of our Class A ordinary shares, our public shareholders will not have the right to vote on the appointment of directors until after the consummation of our initial business combination.
You will not be permitted to exercise your warrants unless we register and qualify the underlying Class A ordinary shares or certain exemptions are available.
If the issuance of the Class A ordinary shares upon exercise of the warrants is not registered, qualified or exempt from registration or qualification under the Securities Act and applicable state securities laws, holders of warrants will not be entitled to exercise such warrants and such warrants may have no value and expire worthless.
We have not registered, and will not register, the Class A ordinary shares issuable upon exercise of the warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that, as soon as practicable, but in no event later than 15 business days, after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement covering the registration under the Securities Act of the Class A ordinary shares issuable upon exercise of the warrants and thereafter will use our commercially reasonable efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the Class A ordinary shares issuable upon exercise of the warrants until the expiration or redemption of the warrants in accordance with the provisions of the warrant agreement.
If the Class A ordinary shares issuable upon exercise of the warrants are not registered under the Securities Act, under the terms of the warrant agreement, holders of warrants who seek to exercise their warrants will not be permitted to do so for cash and, instead, will be required to do so on a cashless basis
, in which case the number of Class A ordinary shares that the holders of warrants will receive upon cashless exercise will be based on a formula subject to a maximum number of shares equal to 0.361 Class A ordinary shares per warrant (subject to adjustment).
If our Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of covered securities under Section 18(b)(1) of the Securities Act, we may, at our option, not permit holders of warrants who seek to exercise their warrants to do so for cash and, instead, require them to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act; in the event we so elect, we will not be required to file or maintain in effect a registration statement or register or qualify the shares underlying the warrants under applicable state securities laws, and in the event we do not so elect, we will use our commercially reasonable efforts to register or qualify the shares underlying the warrants under applicable state securities laws to the extent an exemption is not available.
Our ability to require holders of our warrants to exercise such warrants on a cashless basis after we call the warrants for redemption or if there is no effective registration statement covering the Class A ordinary shares issuable upon exercise of these warrants will cause holders to receive fewer Class A ordinary shares upon their exercise of the warrants than they would have received had they been able to pay the exercise price of their warrants in cash.
If we choose to require holders to exercise their warrants on a cashless basis or if holders elect to do so when there is no effective registration statement, the number of Class A ordinary shares received by a holder upon exercise will be fewer than it would have been had such holder exercised his or her warrant for cash. For example, if the holder is exercising 875 public warrants at $11.50 per share through a cashless exercise when the Class A ordinary shares have a fair market value of $17.50 per share when there is no effective registration statement, then upon the cashless exercise, the holder will receive 300 Class A ordinary shares. The holder would have received 875 Class A ordinary shares if the exercise price was paid in cash. This will have the effect of reducing the potential upside of the holders investment in our company because the warrant holder will hold a smaller number of Class A ordinary shares upon a cashless exercise of the warrants they hold.
The grant of registration rights to our initial shareholders and holders of our private placement warrants may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market price of our Class A ordinary shares.
Pursuant to an agreement that was entered into concurrently with the consummation of our initial public offering, our initial shareholders and their permitted transferees can demand that we register the Class A ordinary shares into which founder shares are convertible, holders of our private placement warrants and their permitted transferees can demand that we register the private placement warrants and the Class A ordinary shares issuable upon exercise of the private placement warrants, and holders of securities that may be issued upon conversion of working capital loans may demand that we register such units, shares, warrants or the Class A ordinary shares issuable upon exercise of such warrants. This is because the shareholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the market price of our Class A ordinary shares that is expected when the ordinary shares owned by our initial shareholders, holders of our private placement warrants or holders of our working capital loans or their respective permitted transferees are registered.
investors.
Holder may be subject to adverse United States federal income tax consequences and may be subject to additional reporting requirements. If we determine we are a PFIC for any taxable year (of which there can be no assurance), we will endeavor to provide to a U.S. We urge U.S.
our inability to pay dividends on our Class A ordinary shares; using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
If our initial shareholders purchase any additional Class A ordinary shares in the aftermarket or in privately negotiated transactions, this would increase their control. In addition, our board of directors, whose members were appointed by our sponsor, is and will be divided into three classes, each of which will generally serve for a terms for three years with only one class of directors being appointed in each year.
As a result, the exercise price of your warrants could be increased, the exercise period could be shortened and the number of Class A ordinary shares purchasable upon exercise of a warrant could be decreased, all without your approval.
Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or shares, shorten the exercise period or decrease the number of Class A ordinary shares purchasable upon exercise of a warrant.
We have the ability to redeem the outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, if, among other things, the last reported sales price of our Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like). Redemption of the outstanding warrants as described above could force you to (i) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, we expect would be substantially less than the volume-weighted average trading price of our Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which we complete our initial business combination of your warrants.
In addition, we have the ability to redeem the outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the last reported sales price of our Class A ordinary shares equals or exceeds $10.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like). In such a case, the holders will be able to exercise their warrants prior to redemption for a number of our Class A ordinary shares determined based on the redemption date and the fair market value of our Class A ordinary shares. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, including because the number of ordinary shares received is capped at 0.361 of our Class A ordinary shares per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of Class A ordinary shares to be issued to the warrant holder.
While short-term U.S.
Federal courts may be limited.
Each of our officers is engaged in other business endeavors for which he or she may be entitled to substantial compensation, and our officers are not obligated to contribute any specific number of hours per week to our affairs. For example,<|endoftext|>The repricing date in accordance with ACS topic 718.
(2)
Amount reflects fees paid for consulting services provided by Mr. Nigro in 2020.
The table below shows the aggregate numbers of option awards (exercisable and unexercisable) and unvested stock awards held as of December 31, 2020 by each non-employee director who was serving as of December 31, 2020.
In December 2020, we adopted a compensation program for our non-employee directors, referred to herein as the Director Compensation Program, which supersedes the current arrangements with our non-employee directors and will apply broadly to all of our non-employee directors.
and
Under the Director Compensation Program, upon a directors initial appointment or election to our Board, such non-employee director will automatically be granted a number of restricted stock units relating to shares of our Class A common stock equal to the quotient obtained by dividing $280,000 by the fair market value of a share of common stock of the Company on the date of grant (with any partial shares that result rounded up to the nearest whole share), or the Initial Grant. Additionally, on the date of each annual stockholders meeting following the completion of the Business Combination, each non-employee director will automatically be granted a number of restricted stock units relating to shares of our Class A common stock equal to the quotient obtained by dividing $140,000 by the fair market value of a share of Class A common stock of the Company on the date of grant (with any partial shares that result rounded up to the nearest whole share), or the Annual Grant. The Initial Grant will vest in substantially equal monthly installments for three years from the date of grant, subject to continued service as a non-employee director through each applicable vesting date. The Annual Grant will vest on the earlier of the first anniversary of the date of grant or the date of the next annual stockholders meeting following the date of grant, subject to continued service as a non- employee director through the vesting date.
(1)
Consists of our 2020 Plan, 2015 Stock Incentive Plan and Make Composites, Inc. 2018 Equity Incentive Plan.
(2)
No shares remain available for issuance under the Make Composites, Inc.
(3)
Consists of 279,198 outstanding shares of restricted stock under our 2015 Stock Incentive Plan.
(4)
Consists of 682,896 outstanding restricted stock units under our 2015 Stock Incentive Plan.
(5)
Consists of 19,415,510 outstanding options to purchase stock under our 2015 Stock Incentive Plan and 137,443 outstanding options to purchase stock under our Make Composites, Inc. 2018 Equity Incentive Plan.
(6)
As of December 31, 2020, the weighted-average exercise price of outstanding options under our 2015 Stock Incentive Plan was $1.53.
The following table sets forth information with respect to the beneficial ownership of our Class A common stock, as of April 1, 2021 by: each person or group of affiliated persons known by us to beneficially own more than 5% of our Class A common stock; each of our directors;
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Applicable percentage ownership is based on 252,660,082 shares of Class A common stock outstanding as of April 1, 2021. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of Class A common stock subject to options, warrants or other rights held by such person that are currently exercisable or will become exercisable within 60 days of April 1, 2021 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless noted otherwise, the address of all listed stockholders is c/o Desktop Metal, Inc., 63 3rd Ave., Burlington, MA 01803.
*less than 1%
(1)
Consists of (a) 135,514 shares of Class A common stock held by NEA Seed IV, LLC (Seed), (b) 17,161 shares of Class A common stock held by NEA Ventures 2015, L.P. (Ven 2015), and (c) 28,263,413 shares of Class A common stock held by New Enterprise Associates 15, L.P. (NEA 15). Sandell, and Peter Sonsini. NEA Partners 16, L.P. Karen P. The address for these entities and individuals is 1954 Greenspring Drive, Suite 600, Timonium, MD 21093.
(2)
Consists of (a) 193,592 shares of Class A common stock held by Lux Ventures V, L.P., (b) 16,630,411 shares of Class A common stock held by Lux Ventures IV, L.P., and (c) 1,827,971 shares of Class A common stock held by Lux Ventures IV, L.P. Peter Hebert and Josh Wolf are the individual managing members of Lux Venture Partners V, LLC, Lux Venture Partners IV, LLC and Lux Co- Invest Partners, LLC (the Individual Managers). The address for these entities and individuals is c/o Lux Capital Management, 920 Broadway, 11th Floor, New York, NY 10010.
(3)
All shares are held for convenience in the name of KPCB Holdings, Inc., as nominee for the accounts of such entities. Consists of 17,134,580 shares held by Kleiner Perkins Caufield & Byers XVI, LLC (KPCB XVI), 586,570 shares held by KPCB XVI Founders Fund, LLC (XVI Founders), 131,219 shares held by Kleiner Perkins Caufield & Byers XVII, LLC (KPCB XVII), and 4,296 shares held by KPCB XVII Founders Fund, LLC (XVII Founders). Beth Seidenberg, L. Beth Seidenberg, Ilya Fushman, Mamoon Hamid, Theodore E. The principal business address for all entities and individuals affiliated with Kleiner Perkins Caufield & Byers is c/o Kleiner Perkins Caufield & Byers, LLC, 2750 Sand Hill Road, Menlo Park, CA 94025.
(4)
Consists of (a) 2,332,177 shares of Class A common stock held by GV 2017, L.P., (b) 8,923,643 shares of Class A common stock held by GV 2016, L.P., and (c) 3,046,618 shares of Class A common stock held by GV 2017, L.P. GV 2017 GP, L.P. GV 2016 GP, L.P. GV 2019 GP, L.P. The principal mailing address for each of GV 2016, L.P., GV 2016 GP, L.P., GV 2016 GP, L.L.C, GV 2017, L.P., GV 2017 GP, L.P., GV 2017 GP, L.L.C, GV 2019, L.P., GV
2019 GP, L.P., GV 2019 GP, L.L.C., Alphabet Holdings LLC, XXVI Holdings Inc., and Alphabet Inc.
(5)
Consists of (a) 20,095,149 shares of Class A common stock held directly by Mr. Fulop, (b) 628,927 shares of Class A common stock held by Bluebird Trust, (c) 628,927 shares of Class A common stock held by Khaki Campbell Trust, and (d) 628,927 shares of Class A common stock held by Red Tailed Hawk Trust. Voting and investment power over the shares held of record by the trusts is exercised by Mr. Fulop and his wife.
(6)
Consists of shares of Class A common stock subject to options held by Mr. Billow that are exercisable within 60 days of April 1, 2021.
(7)
Consists of Class A common stock subject to options held by Ms. Linardos that are exercisable within 60 days of April 1, 2021.
(8)
Consists of 2,897,317 shares of Class A common stock. The business address of Mr. Hindery and RTH is 405 Lexington Avenue, 48th Floor, New York, New York 10174.
(9)
Consists of (a) 39,256 shares of Class A common stock and (b) 219,819 shares of Class A common stock subject to options held by Mr. Immelt that are exercisable within 60 days of April 1, 2021.
(10)
Consists of (i) 47,811,310 shares of Class A common stock and (ii) 1,452,555 shares of Class A common stock subject to options that are exercisable within 60 days of April 1, 2021.
Item13.
The following includes a summary of transactions since January 1, 2020 to which we have been a party in which the amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than transactions that are described under the section
Stockholders Agreement
Pursuant to the Stockholders Agreement, the Sponsor and its permitted transferees have (i) the right to nominate Leo Hindery, Jr. to our Board of Directors for so long as the Sponsor and its permitted transferees beneficially own, in the aggregate, a number of shares of Class A common stock equal to or greater than 25% of the aggregate number of shares of Class A common stock beneficially owned by the Sponsor and its permitted transferees immediately following the closing of the Business Combination (the Initial Sponsor Shares), and (ii) certain information rights for so long as the Sponsor and its permitted transferees beneficially own, in the aggregate, a number of shares of Class A common stock equal to or greater than 25% of the Initial Sponsor Shares. The Stockholders Agreement will terminate with respect to the Sponsor at the time that it and its permitted transferees cease to collectively beneficially own, in the aggregate, a number of shares of Class A common stock equal to or greater than 25% of the Initial Sponsor Shares.
Pursuant to the Registration Rights Agreement, we agreed to file a shelf registration statement with respect to the registrable securities under the Registration Rights Agreement within 45 days of the closing of the Business Combination. Up to twice in any 12 month period, certain Legacy Desktop Metal stockholders and Trine stockholders may request to sell all or any portion of their registrable securities in an underwritten offering so long as the total offering price is reasonably expected to exceed $75.0 million.
### Warrants
In August 2020, Legacy Desktop Metal issued a warrant to purchase up to 300,000 shares of Legacy Desktop Metals common stock to KDT Desktop Metal Holdings, LLC, which held more than 5% of Desktop Metals capital stock, in exchange for technical research and development advisor services.
Option Repricing
In July 2020, Legacy Desktop Metals board of directors approved a stock option repricing in which the strike price of employees unvested stock option awards was modified to the strike price consummate with the recent third-party stock valuation.
### Restricted Stock Unit Grant to Director
In August 2020, Legacy Desktop Metals board of directors approved a grant of 50,000 restricted stock units to Stephen Nigro in connection with his role as a consultant to Desktop Metal.
Transaction Bonuses
In December 2020, our Chief Executive Officer and Chairman, Ric Fulop, our General Counsel, Meg Broderick, and our Chief Product Officer, Arjun Aggarwal, were each awarded a cash bonus of $150,000 in connection with their efforts related to the Business Combination. Ms. Broderick was previously awarded a cash bonus in the amount of $40,000 in connection with the Business Combination. In February 2021, our Chief Financial Officer and Treasurer, James Haley, was awarded a cash bonus in the amount of $150,000 in connection with his efforts related to the Business Combination.
### Director and Officer Indemnification
PIPE Investment
In August 2020, Jeffrey Immelt, a director, entered into a Subscription Agreement with Trine to subscribe for 25,000 shares of Class A common stock at a purchase price of $250,000 pursuant to a private placement of Trine Class A common stock that closed immediately prior to the Business Combination.
### Acquisition
On February 16, 2021, pursuant to a Purchase Agreement and Plan of Merger by and among Desktop Metal and certain of its affiliates, Ali El Siblani, EnvisionTec, Inc. Upon completion of the EnvisionTec Acquisition, (i) Mr. El Siblani, a director and executive officer, received (a) $143.58 million in cash, and (b) 5,036,142 shares of Class A common stock of Desktop Metal, with a fair value of approximately $159.8 million as of the close of business on the acquisition date, and (ii) Mr. El Siblani was elected to our Board of Directors.
As a result of our EnvisionTec Acquisition in February 2021, we entered into several lease agreements with entities controlled by Ali El Siblani, a director and executive officer, for facility space located in Dearborn, Michigan and Gladbeck, Germany. Following the | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Defined in the Credit Agreement as the highest of M&Ts prime rate, the Federal Funds rate plus 0.50% or one-month LIBOR plus 1.00%. The interest rate in effect as of December 31, 2020 was 2.14675%. Principal payments become due upon the sale of the vehicle. Additionally, principal payments are required to be made once the vehicle reaches a certain number of days on the lot. The average outstanding principal balance was $99,200 and the related floor plan interest expense was $2,255 for the year ended December 31, 2020.
The M&T Floor Plan Line of Credit consists of the following as of December 31, 2020 and 2019:
The $20,000 M&T Term Loan is being repaid in equal monthly principal installments of $242 plus accrued interest through the maturity date of March 15, 2021. At the maturity date, the Company must pay a principal balloon payment of $11,300 plus any accrued interest. The interest rate in effect at December 31, 2020 was 2.4375%.
On February 13, 2021 the Company signed an agreement with M&T to extend the maturity date of the M&T Facility to June 15, 2021.
### PPP Loans
In response to economic uncertainty caused by the COVID-19 pandemic, subsidiaries of the Company took the additional step of applying for loans (PPP Loans) under the Paycheck Protection Program of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) with M&T Bank (the Lender). On April 28, 2020, certain of the Companys subsidiaries executed promissory notes (the Notes) in favor of the Lender for PPP Loans in an aggregate amount of $6,831 which mature on April 29, 2022. Applications were submitted by other subsidiaries of the Company, which resulted in the execution of a promissory note on April 30, 2020 for $1,236 and on May 4, 2020 for $637, which will mature on April 30, 2022 and May 4, 2022, respectively. Pursuant to the promissory notes evidencing the PPP loans (the Notes), such PPP Loans bear interest at a rate of 1.0% per year. Commencing six months after each PPP Loan was disbursed, monthly payments of principal and interest are required in amounts necessary to fully amortize the principal amount by the maturity date. The PPP Loans are unsecured and are non-recourse obligations. The Notes provide for customary events of default, and the PPP Loans may be accelerated upon the occurrence of an event of default. All or a portion of the PPP Loans may be forgiven upon application to the Lender for payroll and certain other costs incurred during the 8-week period beginning on the date each PPP Loan is disbursed, in accordance with the requirements and limitations under the CARES Act. While the Companys subsidiaries used the entire amount of the PPP Loans for qualifying expenses, no assurance can be provided that forgiveness of any portion of the PPP Loans will be obtained.
Long-term debt consists of the following as of December 31, 2020 and 2019:
Future maturities of long term debt are as follows:
### Future Maturities of Long Term Debt
The $5,000 M&T Revolver allows the Company to draw up to $5,000. The M&T Revolver bears interest at (a) 30-day LIBOR plus an applicable margin of 2.25% to 3.00% based on the total leverage ratio (as defined in the M&T Facility) or (b) the Base Rate plus a margin of 1.25% to 2.00% based on the total leverage ratio (as defined in the M&T Facility). During the year ended December 31, 2020, there were no outstanding borrowings under the M&T Revolver. The M&T Revolver also includes a $1,000 Letter of Credit Sublimit which decreases the availability of the line. As of December 31, 2020, there were no outstanding letters of credit. As a result, there was $5,000 available under the M&T Revolver.
NOTE 12 INCOME TAXES
The components of the Companys income tax expense are as follows:
A reconciliation of income taxes calculated using the statutory federal income tax rate (21% in 2020 and 2019) to the Companys income tax expense is as follows:
Due to limitations on the deductibility of compensation under Section 162(m) stock-based compensation expense attributable to certain employees has been treated as a permanent difference in the calculation of tax expense. The Company does not expect that these expenses will be deductible on the estimated exercise date of the awards. As such, no deferred tax asset has been established related to these amounts.
Deferred tax assets and liabilities were as follows:
No significant increases or decreases in the amounts of unrecognized tax benefits are expected in the next 12 months.
The Company is subject to U.S. federal income tax and income tax in the states of Florida, Arizona, Colorado, Minnesota, Tennessee, Texas and Indiana. The Company is no longer subject to the examination by Federal and state taxing authorities for years prior to 2017. Florida has completed its examinations through December 31, 2017 with no additional taxes due. The Company recognizes interest and penalties related to income tax matters in income tax expense. Interest and penalties recorded in the statements of operations for the periods presented were insignificant.
### NOTE 13 RELATED PARTY TRANSACTIONS
On December 18, 2019, pursuant to the Companys stock repurchase program, the Company repurchased 75,000 shares of common stock from B. Luke Weil for $302 including broker fees. (See Note 17-Stockholders Equity)
NOTE 14 EMPLOYEE BENEFIT PLANS
The Company has a 401(k) plan with profit sharing provisions (the Plan). The Plan allows employee contributions to be made on a salary reduction basis under Section 401(k) of the Internal Revenue Code. Under the 401(k) provisions, the Company makes discretionary matching contributions to employees 401(k). The Company made contributions to the Plan of $847 and $785 for the year ended December 31, 2020 and 2019, respectively.
### NOTE 15 - COMMITMENTS AND CONTINGENCIES
Employment Agreements
The Company entered into employment agreements with the Chief Executive Officer (CEO) and the former Chief Financial Officer (CFO) of the Company effective as of the consummation of the Mergers. The employment agreements with the CEO and the former CFO provide for initial base salaries of $540 and $325, respectively, subject to annual discretionary increases. In addition, each executive is eligible to participate in any employee benefit plans adopted by the Company from time to time and is eligible to receive an annual cash bonus based on the achievement of performance objectives. The CEOs target bonus is 100% of his base salary and the former CFOs target bonus was 75% of her base salary. The employment agreements also provide that each executive is to be granted an option to purchase shares of common stock of the Company (See Note 17 Stockholders Equity).
The employment agreements provide that if the CEO is terminated for any reason, he is entitled to receive any accrued benefits, including any earned but unpaid portion of base salary through the date of termination, subject to withholding and other appropriate deductions. In addition, in the event the executive resigns for good reason or is terminated without cause (all as defined in the employment agreement) prior to January 1, 2022, subject to entering into a release, the Company will pay the executive severance equal to (i) two times base salary and average bonus for the CEO and (ii) one times base salary and average bonus for the former CFO.
In May 2018, the Company entered into an offer letter with the new Chief Financial Officer (the new CFO) of the Company. The offer letter provides for an initial base salary of $325 per year subject to annual discretionary increases. In addition, the executive is eligible to participate in any employee benefit plans adopted by the Company from time to time and is eligible to receive an annual cash bonus based on the achievement of performance objectives. The new CFOs target bonus is 75% of his annual base salary (with a potential to earn a maximum of up to 150% of his target bonus). The offer letter also provides that the executive is to be granted an option to purchase shares of common stock of the Company. He is also being provided with a relocation allowance of $100 which the new CFO will be required to repay if he resigns from the Company or is terminated by the Company for cause within two years of his start date. If he is terminated without cause, he will receive twelve months of his base salary as severance. If he is terminated following a change in control, he is also eligible to receive a pro-rated bonus, if the board of directors determines that the performance objectives have been met. He also was granted an option to purchase shares of common stock of the Company (See Note 17- Stockholders Equity).
### Director Compensation
The Companys non-employee members of the board of directors will receive annual cash compensation of $50 for serving on the board of directors, $5 for serving on a committee of the board of directors (other than the Chairman of each of the committees) and $10 for serving as the Chairman of any of the committees of the board of directors. In addition, in lieu of stock options for the year ended December 31, 2019, the board members received a one time cash payment of $50 during the year ended December 31, 2020.
Legal Proceedings
The Company is a party to multiple legal proceedings that arise in the ordinary course of business. The Company has certain insurance coverage and rights of indemnification. The Company does not believe that the ultimate resolution of these matters will have a material adverse effect on the Companys business, results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty and an unfavorable resolution of one or more of these or other matters could have a material adverse effect on the Companys business, results of operations, financial condition, and/or cash flows.
The Company records legal expenses as incurred in its consolidated statements of operations.
### NOTE 16 PREFERRED STOCK
Simultaneous with the closing of the Mergers, the Company consummated a private placement with institutional investors for the sale of convertible preferred stock, common stock, and warrants for an aggregate purchase price of $94,800 (the PIPE Investment). At the closing, the Company issued an aggregate of 600,000 shares of Series A Preferred Stock for gross proceeds of $60,000. The investors in the PIPE Investment were granted certain registration rights as set forth in the securities purchase agreements. The holders of the Series A Preferred Stock include 500,000 shares owned by funds managed by a member of the Companys Board of Directors.
The Series A Preferred Stock ranks senior to all outstanding stock of the Company. Holders of the Series A Preferred Stock are entitled to vote on an as-converted basis together with the holders of the Common Stock, and not as a separate class, at any annual or special meeting of stockholders. Each share of Series A Preferred Stock is convertible at the holders election at any time, at an initial conversion price of $10.0625 per share, subject to adjustment (as applicable, the Conversion Price). Upon any conversion of the Series A Preferred Stock, the Company will be required to pay each holder converting shares of Series A Preferred Stock all accrued and unpaid dividends, in either cash or shares of common stock, at the Companys option. The Conversion Price will be subject to adjustment for stock dividends, forward and reverse splits, combinations and similar events, as well as for certain dilutive issuances.
Dividends on the Series A Preferred Stock accrue at an initial rate of 8% per annum (the Dividend Rate), compounded quarterly, on each $100 of Series A Preferred Stock (the Issue Price) and are payable quarterly in arrears. Accrued and unpaid dividends, until paid in full in cash, will accrue at the then applicable Dividend Rate plus 2%. The Dividend Rate will be increased to 11% per annum, compounded quarterly, in the event that the Companys senior indebtedness less unrestricted cash during<|endoftext|>And 12.8 million warrants (the Sponsor Warrants) issued pursuant to a private placement simultaneously with the IPO. Each of the Companys warrants entitled the registered holder to purchase one-half of one share of the Companys Class A Stock at a price of $5.75 per half share ($11.50 per full share), subject to adjustment pursuant the terms of the warrant agreement.Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares of the Class A Stock.
The Company had the right to call the Public Warrants for redemption if the reported last sale price of the Class A Stock equaled or exceeded $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sent the notice of redemption to the warrant holders. The Sponsor Warrants are not redeemable by the Company so long as they are held by the Sponsor or its permitted transferees. In addition, with respect to the Sponsor Warrants, so long as such Sponsor Warrants are held by the Sponsor or its permitted transferee, the holder may elect to exercise the Sponsor Warrants on a cashless basis, by surrendering their Sponsor Warrants for that number of shares of Class A Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Stock underlying the Sponsor Warrants, multiplied by the difference between the exercise price of the Sponsor Warrants and the fair market value (defined below), by (y) the fair market value. The fair market value means the average reported last sale price of the Class A Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. All other terms, rights and obligations of the Sponsor Warrants remain the same as the Public Warrants.
On October 27, 2020, the Company provided notice to the holders of the Public Warrants that the Company was exercising its right under the terms of the Public Warrants to redeem such warrants by paying to the warrant holders the redemption price of $0.01 per warrant on November 30, 2020.
During the year ended December 31, 2020, 15.5 million Public Warrants and 4.3 million Sponsor Warrants were exercised or redeemed resulting in the issuance of 7.6 million shares of Class A common stock.
### Incremental Loan Warrants
In connection with the Amended and Restated Credit Agreement, the Company issued to the Incremental Lenders 2.6 million Incremental Loan Warrantsto purchase 2.6 million shares of the Companys Class A Stock. Each Incremental Loan Warrant entitled the registered holder to purchase one share of the Companys Class A Stock at a price of $5.74 per share, subject to adjustment pursuant to the terms of the warrant agreement.
The Company had the right to call the warrants for redemption at a price of $0.01 per Share of Class A Stock if the reported last sale price of the Class A Stock equaled or exceeded $24.00 per share for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sent the notice of redemption to the warrant holders. If the Company called the Incremental Loan Warrants for redemption, it had the option to require the holder to exercise the Incremental Loan Warrants on a cashless basis, by surrendering their Incremental Loan Warrants for that number of shares of Class A Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A Stock underlying the Incremental Loan Warrants, multiplied by the difference between the exercise price of the Sponsor Warrants and the fair market value (defined below), by (y) the fair market value. The fair market value means the average reported last sale price of the Class A Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Incremental Loan Warrants.
On October 27, 2020, the Company provided notice to the holders of the Incremental Loan Warrants that the Company was exercising its right to redeem such warrants by paying to the warrant holders the redemption price of $0.01 per warrant on November 30, 2020. On November 9, 2020, upon the exercise of all the Incremental Loan Warrants, the Company issued 2.6 million shares of Class A common stock in exchange for the Incremental Loan Warrants held by the Incremental Lenders.
### Noncontrolling Interest
Noncontrolling interest (NCI) is the membership interest in Purple LLC held by holders other than the Company. Upon the close of the Business Combination and at December 31, 2018, InnoHolds and other Class B Unit holders combined NCI percentage in Purple LLC was approximately 82%. At December 31, 2020, the combined NCI percentage in Purple LLC was approximately 1%. The Company has consolidated the financial position and results of operations of Purple LLC and reflected the proportionate interest held by all such Purple LLC Class B Unit holders as NCI.
17. Net Loss Per Common Share
The following table sets forth the calculation of basic and diluted weighted average shares outstanding and net loss per share for the periods presented (in thousands, except per share amounts):
For the year ended December 31, 2020, the Company excluded 0.1 million shares of issued Class A Stock subject to vesting, 6.5 million shares of Class A Stock issuable upon conversion of the Companys warrants and options, and 0.5 million Paired Securities convertible into shares of Class A Stock as the effect was anti-dilutive. For the year ended December 31, 2019, the Company excluded 1.4 million shares of issued Class A Stock subject to vesting, 18.9 million shares of Class A Stock issuable upon conversion of the Companys warrants and options, and 31.4million Paired Securities convertible into shares of Class A Stock as the effect was anti-dilutive.
18. Equity Compensation Plans
2017 Equity Incentive Plan
The Purple Innovation, Inc. 2017 Equity Incentive Plan (the 2017 Incentive Plan) provides for grants of stock options, stock appreciation rights, restricted stock and other stock-based awards. Directors, officers and other employees and subsidiaries and affiliates, as well as others performing consulting or advisory services for the Company and its subsidiaries, will be eligible for grants under the 2017 Incentive Plan. The aggregate number of shares of Common Stock which may be issued or used for reference purposes under the 2017 Incentive Plan or with respect to which awards may be granted may not exceed 4.1 million shares. As of December 31, 2020, approximately 1.9 million shares remain available under the 2017 Incentive Plan.
### Class A Stock Awards
In March 2020, the Company granted a restricted stock award under the Companys 2017 Equity Incentive Plan to the Companys Board advisor and GPAC observer. During 2020, the Company granted stock awards under the Companys 2017 Equity Incentive Plan to independent directors on the Board and to the Board advisor and GPAC observer. The stock awards vested immediately and the Company recognized $0.5 million in expense during the year ended December 31, 2020 which represented the fair value of the stock award on the grant date. In 2019, the Company granted stock awards under the Companys 2017 Equity Incentive Plan to independent directors on the Board and to the Board advisor and GPAC observer. The stock awards vested immediately and the Company recognized $0.3 million in expense during the year ended December 31, 2019 which represented the fair value of the stock award on the grant date.
The estimated fair value of the restricted stock is measured on the grant date and is recognized over the vesting period. The Company determined that the fair value of the restricted stock on the grant dates was $0.7 million.
In May 2019, the Company granted a restricted stock award to the Companys Chief Executive Officer (the CEO) pursuant to the terms of his employment agreement. The restricted stock award is for 0.1 million shares and has certain vesting conditions, including vesting on the earlier of a change in control or the satisfaction of all three specific service and market conditions. Such conditions require: (i) the CEO to stay employed as CEO through September 30, 2021, unless terminated without cause; (ii) the CEO to retain certain shares of common stock owned at the time of the grant through September 30, 2021; and (iii) the common stock of the Company to trade above $10 a share for any twenty of thirty consecutive trading days during the twelve months ended March 31, 2022. Accordingly, the earliest the three vesting conditions could all be met is at some point during the twelve months ended March 31, 2022. As this award includes a market vesting condition, the estimated fair value of the restricted stock is measured on the grant date and incorporates the probability of vesting occurring. The Company determined the fair value of the restricted stock on the grant date to be $0.2 million and the derived service period to be 2.58 years using a Monte Carlo Simulation of a Geometric Brownian Motion stock path model with the following assumptions:
The estimated fair value is recognized over the derived service period (as determined by the valuation model) on a straight-line basis, with such recognition occurring whether the instrument ultimately vests or not. During both years ended December 31, 2020 and 2019, the Company recognized a de minimis amount of expense.
### Employee Stock Options
During the year ended December 31, 2020, the Company granted 0.5 million stock options under the Companys 2017 Equity Incentive Plan to certain management of the Company. These stock options have exercise prices ranging from $12.76 to $21.70. The estimated fair value of the stock options, less expected forfeitures, is amortized over the options vesting period on a straight-line basis. The Company determined the fair value of the 0.5 million options granted during the year ended December 31, 2020 to be $3.4 million which will be expensed over the vesting period.
During the year ended December 31, 2019, the Company granted 1.6 million stock options under the Companys 2017 Equity Incentive Plan to certain management of the Company. These stock options have exercise prices that range from $5.75 to $8.55 per option. The estimated fair value of the stock options, less expected forfeitures, is being amortized over the options vesting period on a straight-line basis. The Company determined the fair value of the 1.6million options granted during the year ended December 31, 2019 to be $2.9 million which will be expensed over the vesting period.
The following are the weighted average assumptions used in calculating the fair value of the total stock options granted in 2020 and 2019 using the Black-Scholes method:
During the year ended December 31, 2019, 0.3 million of unvested stock options were forfeited by Mark Watkins, the former Chief Financial Officer (CFO) of the Company, upon his resignation and departure from the Company. As the CFO, he was not permitted to exercise and sell all of his 0.1 million vested options during the limited 90-day exercise time period under the terms of his option grant. The Company entered into an agreement whereby the Company paid Mr. Watkins a settlement amount equal to the difference between the closing price of the stock on the date of the settlement and the exercise strike price of $5.95. The Company paid Mr. Watkins $0.1 million and cancelled his vested stock options.
The following table summarizes the Companys total stock option activity for the years ended December31, 2020 and 2019:
Outstanding and exercisable stock options as of December31, 2020 are as follows:
The following table summarizes the Companys unvested stock option activity for the years ended December31, 2020 and 2019:
The estimated fair value of the Company stock options, less expected forfeitures, is amortized over the options vesting period on the straight-line basis. The Company | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
In December 2019, the Company engaged Maxim Group LLC (Maxim) for financial advisory and investment banking services to assist the Company in articulating its growth strategy to the investment community and up-list its securities to a National Securities Exchange. On February 10, 2020, the Company issued 150,000 shares of common stock valued at $262,500 to Maxim Group LLC as a part of its compensation for the services. On May 19, 2020, the Company and Maxim mutually agreed to terminate all rights and obligations under their agreements and in May 2020, Maxim returned 75,000 shares of common stock shares to the Company for cancellation.
On February 18, 2020, the Company issued a total of 11,834 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $10,000 according to the conditions of the convertible note dated as July 25, 2019.
On February 28, 2020, the Company issued a total of 15,448 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $12,000 according to conditions of the convertible note dated as July 25, 2019.
On May 19, 2020, the Company issued a total of 16,484 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019.
On May 29 2020, the Company issued a total of 19,724 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as July 25, 2019.
On June 18, 2020, the Company issued a total of 20,000 shares of common stock to Crown Bridge Partners, LLC for the conversion of debt in the principal amount of $3,615.6 according to the conditions of the convertible note dated as November 12, 2019.
On July 9, 2020, the Company issued a total of 42,079 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in the principal amount of $20,000 according to the conditions of the convertible note dated as July 25, 2019.
On July 13, 2020, the Company issued a total of 68,500 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $37,503.75 according to the conditions of the convertible note dated as January 10, 2020.
On August 19, 2020, the Company issued a total of 222,891 shares of common stock to Power Up Lending Group Ltd for the conversion of debt in $19,000.00 of the principal amount of the Note together with $4,916.22 of accrued and unpaid interest thereto, totaling $23,916.22 according to the conditions of the convertible note dated as July 25, 2019.
On August 20,2020, the Company issued a total of 600,000 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $54,180 according to the conditions of the convertible note dated as January 10, 2020. The remaining principal balance due under this convertible note after these conversions is $55,166.
On September 1, 2020, the Company issued a total of 75,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $10,200 according to the conditions of the convertible note dated as September 11, 2019.
On September 14, 2020, the Company issued a total of 350,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $13,550 according to the conditions of the convertible note dated as September 11, 2019.The remaining principal balance due under this convertible note after these conversions is $141,250.
On September 24, 2020, the Company issued a total of 568,182 shares of common stock to Morningview Financial, LLC for the conversion of debt in the principal amount of $15,000 according to the conditions of the convertible note dated as November 20, 2019.The remaining principal balance due under this convertible note after these conversions is $150,000.
On September 24, 2020, the Company issued a total of 400,000 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $6,065.11 according to the conditions of the convertible note dated as January 10, 2020.
On October 12, 2020, the Company issued a total of 650,000 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $14,844.39 according to the conditions of the convertible note dated as January 10, 2020.
On October 16, 2020, the Company issued a total of 181,500 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $2,722.5 according to the conditions of the convertible note dated as January 10, 2020.
On October 16, 2020, the Company issued a total of 1,200,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $14,100 according to the conditions of the convertible note dated as September 11, 2019.
On October 19, 2020, the Company issued a total of 2,112,478 shares of common stock to Labrys Fund, LP for the conversion of debt in the principal amount of $31,674.16 according to the conditions of the convertible note dated as January 10, 2020.
On October 29, 2020, the Company issued a total of 2,500,000 shares of common stock to Firstfire Global Opportunities Fund LLC for the conversion of debt in the principal amount of $31,000 according to the conditions of the convertible note dated as September 11, 2019.
On December 5, 2020, the Company issued a total of 20,370,000 shares of common stock to five Chinese citizen subscribers for an aggregate purchase price of $305,500 at $0.015 per share, according to the conditions of the five subscription agreements dated as November 20, 2020 signed by the between the Company and the subscribers.
1,500,000 shares of common stock to FirstFire Global Opportunities Fund, LLC for the full exercise of the warrants, according to the conditions of the convertible note dated as September 11, 2019.
On December 29, 2020, the Company issued a total of 8,499,999 shares of common stock to four Chinese citizen subscribers for an aggregate purchase price of $127,500 at $0.015 per share, according to the conditions of the four subscription agreements dated as December 9, 2020 and December 28, 2020 signed by the between the Company and the subscribers.
On December 31, 2020, the Company issued a total of 1,119,402 shares of common stock (the Second Commitment Shares) to Labrys Fund, LLP related to the promissory note as a commitment fee.
On January 13, 2021, the Company issued a total of 7,000,000 shares of common stock to a Chinese citizen subscriber for an aggregate purchase price of $105,000 at $0.015 per share, according to the conditions of the subscription agreement dated as January 13, 2021 between the Company and the subscriber.
On March 10, 2021, the Company issued 1,042,000 shares of common stock (the Second Commitment Shares) to Labrys Fund, LLP related to the promissory note as a commitment fee.
On July 8, 2021, the Company issued 300,000 shares of common stock (the First Commitment Shares) and 1,042,000 shares of common stock (the Second Commitment Shares) to FirstFire Global Opportunities Fund, LLC related to the promissory note as a commitment fee.
The sales of the above securities were exempt from registration under the Securities Act of 1933, as amended (Securities Act), in reliance upon Section 4(2) of the Securities Act, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions 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 placed upon the stock certificates issued in these transactions.
### Exemption From Registration.
The shares of Common Stock and Preferred Stock referenced herein were issued in reliance upon one of the following exemptions:
(a)The shares of Common Stock referenced herein were issued in reliance upon the exemption from securities registration afforded by the provisions of Section 4(2) of the Securities Act of 1933, as amended, ("Securities Act"), based upon the following: (a) each of the persons to whom the shares of Common Stock were issued (each such person, an "Investor") confirmed to the Company that it or he is an "accredited investor," as defined in Rule 501 of Regulation D promulgated under the Securities Act and has such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities, (b) there was no public offering or general solicitation with respect to the offering of such shares, (c) each Investor was provided with certain disclosure materials and all other information requested with respect to the Company, (d) each Investor acknowledged that all securities being purchased were being purchased for investment intent and were "restricted securities" for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act and (e) a legend has been, or will be, placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequently registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.
(b)The shares of common stock referenced herein were issued pursuant to and in accordance with Rule 506 of Regulation D and Section 4(2) of the Securities Act. We made this determination in part based on the representations of the Investor(s), which included, in pertinent part, that such Investor(s) was an accredited investor as defined in Rule 501(a) under the Securities Act, and upon such further representations from the Investor(s) that (a) the Investor is acquiring the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (b) the Investor agrees not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (c) the Investor either alone or together with its representatives has knowledge and experience in financial and business matters such that he, she or it is capable of evaluating the merits and risks of an investment in us, and (d) the Investor has no need for the liquidity in its investment in us and could afford the complete loss of such investment.Our determination is made based further upon our action of (a) making written disclosure to each Investor prior to the closing of sale that the securities have not been registered under the Securities Act and therefore cannot be resold unless they are registered or unless an exemption from registration is available, (b) making written descriptions of the securities being offered, the use of the proceeds from the offering and any material changes in the Companys affairs that are not disclosed in the documents furnished, and (c) placement of a legend on the certificate that evidences the securities stating that the securities have not been registered under the Securities Act and setting forth the restrictions on transferability and sale of the securities, and upon such inaction ofthe Company of any general solicitation or advertising for securities herein issued in reliance upon Rule 506 of Regulation D and Section 4(2) of the Securities Act
(c) The shares of Common Stock referenced herein were<|endoftext|>Long-term economic impact and near-term financial impacts of the COVID-19 pandemic.
Minority Investments without Readily Determinable Fair Values.
As of December31, 2020 and 2019, the carrying values of our minority investments without readily determinable fair values totaled $330 million and $467 million. During 2020, we recorded $134 million of losses related to a minority investment, which had recent observable and orderly transactions for similar investments, using an option pricing model that utilizes judgmental inputs such as discounts for lack of marketability and estimated exit event timing. During 2019, we recorded $2 million of losses related to the minority investments. During 2018, we recorded $33million of gains related to these minority investments, which had recent observable and orderly transactions for similar investments. As of December 31, 2020, total cumulative adjustments made to the initial cost basis of these investments included $2million in unrealized upward adjustments and $105 million in unrealized downward adjustments (including impairments).
### NOTE4 Property and Equipment, Net
Our property and equipment consists of the following:
As of December31, 2020 and 2019, our recorded capitalized software development costs, net of accumulated amortization, which have been placed in service were $898 million and $893 million. For the years ended December31, 2020, 2019 and 2018, we recorded amortization of capitalized software development costs of $593 million, $556 million and $479 million included in depreciation and amortization expense.
As of December31, 2020, 2019 and 2018, we had $9 million, $34 million and $55 million, respectively, included in accounts payable for the acquisition of property and equipment, which is considered a non-cash investing activity in the consolidated statements of cash flows.
### NOTE 5 Leases
We have operating leases for office space and data centers. Our leases have remaining lease terms of one year to 17 years, some of which include options to extend the leases for up to ten years, and some of which include options to terminate the leases within one year.
Operating lease costs were $159 million and $170million for the years ended December31, 2020 and 2019, respectively. Under the lease accounting guidance in effect for the year ended December 31, 2018, rent expense was $182 million, which included operating lease costs as well as expense for non-lease components such as common area maintenance.
Supplemental cash flow information related to leases were as follows:
Supplemental consolidated balance sheet information related to leases were as follows:
### Maturities of lease liabilities are as follows:
As of December31, 2020, our additional operating lease payments, primarily for corporate offices, that have not yet commenced were not material.
NOTE6 Goodwill and Intangible Assets, Net
The following table presents our goodwill and intangible assets as of December31, 2020 and 2019:
### Impairment Assessments.
We perform our annual assessment of possible impairment of goodwill and indefinite-lived intangible assets as of October1, or more frequently if events and circumstances indicate that an impairment may have occurred.
During 2020, due to the severe and persistent negative effect COVID-19 had on global economies, the travel industry and our business, as well as the uncertainty and high variability in anticipated versus actual rates of recovery, in addition to our annual assessment, we deemed it necessary to perform various interim assessments of goodwill and intangible assets. As a result of these assessments, we recognized goodwill impairment charges of $799million, of which $559million related to our Retail segment, primarily our Vrbo reporting unit, and $240million related to our trivago segment. We also incurred impairment charges of $175million related to intangible assets with both indefinite-lives and definite lives, primarily within our Retail segment.
During 2019, we had no impairments of goodwill or intangible assets with indefinite-lives. During 2018, we incurred impairment charges related to intangible assets with indefinite-lives of $42million and goodwill of $86million both within our Retail segment.
### Goodwill.
The following table presents the changes in goodwill by reportable segment:
As of December31, 2020, accumulated goodwill impairment losses in total were $3.4 billion of which $3.1 billion was associated with our Retail segment and $240 million was associated with our trivago segment. As of December 31, 2019, accumulated goodwill impairment losses in total were $2.6 billion, which was associated with our Retail segment.
Our indefinite-lived intangible assets relate principally to trade names and trademarks acquired in various acquisitions.
Intangible Assets with Definite Lives.
The following table presents the components of our intangible assets with definite lives as of December31, 2020 and 2019:
Amortization expense was $154 million, $198 million and $283 million for the years ended December31, 2020, 2019 and 2018. The estimated future amortization expense related to intangible assets with definite lives as of December31, 2020, assuming no subsequent impairment of the underlying assets, is as follows, in millions:
### NOTE7 Debt
The following table sets forth our outstanding debt:
(1)
Net of discounts and debt issuance costs.
### Current Maturities of Long-term Debt
In August 2020, our $750million in registered senior unsecured notes that bore interest at 5.95% matured and the balance was repaid.
Long-term Debt
### July 2020 Senior Note Private Placements.
In July 2020, we privately placed the following senior notes:
$500million of senior unsecured notes that are due in December 2023 that bear interest at 3.6% (the 3.6% Notes). Interest is payable semi-annually in arrears in June and December of each year, beginning December 15, 2020. We may redeem some or all of the 3.6% Notes at any time prior to November 15, 2023 by paying a make-whole premium plus accrued and unpaid interest, if any. We may redeem some or all of the 3.6% Notes on or after November 15, 2023 at par plus accrued and unpaid interest, if any.
$750million of senior unsecured notes that are due in August 2027 that bear interest at 4.625% (the 4.625% Notes). , beginning February 1, 2021. We may redeem some or all of the 4.625% Notes at any time prior to May 1, 2027 by paying a make-whole premium plus accrued and unpaid interest, if any. We may redeem some or all of the 4.625% Notes on or after May 1, 2027 at par plus accrued and unpaid interest, if any.
We also entered into a registration rights agreement with respect to the 3.6% Notes and the 4.625% Notes (together, the July 2020 Notes), under which we agreed to use commercially reasonable best efforts to file a registration statement to permit the exchange of the July 2020 Notes for registered notes having the same financial terms and covenants, and cause such registration statement to become effective and complete the related exchange offer within 365 days of the issuance of the July 2020 Notes. If we fail to satisfy certain of its obligations under the registration rights agreement, we will be required to pay additional interest of 0.25% per annum to the holders of the July 2020 Notes until such failure is cured.
### May 2020 Senior Note Private Placements.
In May 2020, we privately placed the following senior notes:
$2billion of senior unsecured notes that are due in May 2025 that bear interest at 6.25% (the 6.25% Notes). The 6.25% Notes were issued at a price of 100% of the aggregate principal amount. We may redeem some or all of the 6.25% Notes at any time prior to February 1, 2025 by paying a make-whole premium plus accrued and unpaid interest, if any. We may redeem some or all of the 6.25% Notes on or after February 1, 2025 at par plus accrued and unpaid interest, if any.
$750million of senior unsecured notes that are due in May 2025 that bear interest at 7.0% (the 7.0% Notes). The 7.0% Notes were issued at a price of 100% of the aggregate principal amount. We may redeem some or all of the 7.0% Notes at any time prior to May 1, 2022 by paying a make-whole premium plus accrued and unpaid interest, if any. We may redeem some or all of the 7.0% Notes on or after May 1, 2022 at specified redemption prices set forth in the 7.0% Indenture, plus accrued and unpaid interest, if any. In addition, at any time or from time to time prior to May 1, 2022, we may redeem up to 40% of the aggregate principal amount of the 7.0% Notes with the net proceeds of certain equity offerings at the specified redemption price described in the 7.0% Indenture plus accrued and unpaid interest, if any.
### Previous Senior Note Issuances.
In prior years, we have issued the following senior notes:
Euro 650million of registered senior unsecured notes that are due in June 2022 that bear interest at 2.5% (the 2.5% Notes). The 2.5% Notes were issued at 99.525% of par resulting in a discount, which is being amortized over their life. Interest is payable annually in arrears in June of each year. We may redeem the 2.5% Notes at our option, at whole or in part, at any time or from time to time. If we elect to redeem the 2.5% Notes prior to March 3, 2022, we may redeem them at a specified make-whole premium. If we elect to redeem the 2.5% Notes on or after March 3, 2022, we may redeem them at a redemption price of 100% of the principal plus accrued and unpaid interest. Subject to certain limited exceptions, all payments of interest and principal for the 2.5% Notes will be made in Euros.
$500million of registered senior unsecured notes that are due in August 2024 that bear interest at 4.5% (the 4.5% Notes). The 4.5% Notes were issued at 99.444% of par resulting in a discount, which is being amortized over their life. Interest is payable semi-annually in February and August of each year. We may redeem the 4.5% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 4.5% Notes prior to May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a make-whole premium. If we elect to redeem the 4.5% Notes on or after May 15, 2024, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
$750million of registered senior unsecured notes that are due in February 2026 that bear interest at 5.0% (the 5.0% Notes). The 5.0% Notes were issued at 99.535% of par resulting in a discount, which is being amortized over their life. We may redeem the 5.0% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 5.0% Notes prior to November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a make-whole premium. If we elect to redeem the 5.0% Notes on or after November 12, 2025, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
$1billion of registered senior unsecured notes that are due in February 2028 that bear interest at 3.8% (the "3.8% Notes"). The 3.8% Notes were issued at 99.747% of par resulting in a discount, which is being amortized over their life. We may redeem the 3.8% Notes at our option at any time in whole or from time to time in part. If we elect to redeem the 3.8% Notes prior to November 15, 2027, we may redeem them at a redemption price of 100% of the principal plus accrued interest, plus a make-whole premium. If we elect to redeem the 3.8% Notes on or after November 15, 2027, we may redeem them at a redemption price of 100% of the principal plus accrued interest.
$1.25billion of privately placed senior unsecured notes that are due in February 2030 and bear interest at 3.25% (the 3.25% Notes). In February 2020, we completed an offer to exchange these notes for registered notes having substantially the same financial terms and covenants as the original notes (the unregistered and registered notes collectively, the 3.25% Notes). The 3.25% Notes were issued | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Below.
### c) DB BEP
Employees at the rank of Vice President and above (including the NEOs) who exceed income limitations established by the IRC for three out of five consecutive years and who are also approved for inclusion by the Banks Nonqualified Plan Committee are eligible to participate in the DB BEP, a non-qualified retirement plan that in many respects mirrors the DB Plan with the exception of the benefit multiplier reduction to 1.5% implemented effective July1, 2014 under DB Plan C.
The primary objective of the DB BEP is to ensure that participants receive the full benefit to which they would have been entitled under the DB Plan in the absence of limits on maximum benefit levels imposed by the IRC. In the event that the benefits payable from the DB Plan have been reduced or otherwise limited by government regulations, the employees lost benefits are payable under the terms of the DB BEP. The DB BEP also enhances benefits for certain NEOs as follows:
NON-QUALIFIED
DEFINEDBENEFIT(DB
BEP PLAN)
PROVISIONS
DB BEP PLAN A*
### DB BEP PLAN B**
Benefit Multiplier
2.5%
2.0%
### Final Average Pay Period
High 3-Year
High 5-Year
### Normal Formof Payment
Life Annuity with Guaranteed 12 Year Payout
Straight Life Annuity
### Cost of Living Adjustments
None
* This includes the following NEOs: J. Gonzlez and K. Neylan. Effective January 1, 2019, the DB BEP Component of the Supplemental Executive Retirement Plan was amended to provide J. Gonzlez with the provisions under DB Plan A of the DB Plan.
** This includes the following NEOs:
### M. Feinberg; A. Goldstein and P. Scott.
The DB BEP is an unfunded arrangement. However, the Bank has established a grantor trust to assist in financing the payment of benefits under this plan. The Banks policy is to maintain assets in the grantor trust at a level up to the Accumulated Benefit Obligation for the DB BEP. The financing level for the DB BEP is reviewed annually.
The Nonqualified Plan Committee administers various oversight responsibilities pertaining to the DB BEP. These matters include, but are not limited to, approving employees as participants of the DB BEP and adopting any amendment or taking any other action which may be appropriate to facilitate the DB BEP. The Nonqualified Plan Committee is chaired by the Chair of the C&HR Committee; other members include a Board Director who is a member of the C&HR Committee, our Chief Financial Officer, and the Director of Human Resources. The Nonqualified Plan Committee reports its actions to the C&HR Committee.
### d) DC Plan
NEOs may contribute to the DC Plan, a retirement savings plan qualified under the IRC. All employees are eligible for membership in the DC Plan on the first day of the month following three full calendar months of employment.
An employee may contribute 1% to 100% of base salary into the DC Plan, up to IRC limitations. The IRC limit for 2020 was $19,500 for employees under the age of 50. An additional catch up contribution of $6,500 is permitted under IRC rulesfor employees who attain age 50 before the end of the calendar year.
If an employee contributes at least 4% of base salary, the Bank provides the maximum employer match of 6% of elective contributions upon plan entry. If an employee contributes less than 4% of base salary, the Bank will match at a rate of 150% of elective contributions. Contributions of less than 2% of base salary receive a match of up to 1.5% of the employees base salary.
### e) DC BEP
Employees at the rank of Vice President and above (including the NEOs) who exceed income limitations established by the IRC, and who contribute to their qualified DC Plan up to the IRC Limits, are eligible to participate in the DC BEP. Participating employees are allowed to defer up to 19% of the employees base salary (less the amount of salary deferrals allowed under the DC Plan pursuant to the IRS Limits).
As a continuation of the qualified DC Plan, the Bank will make a matching contribution each plan year of up to 6% of base salary on the elective deferrals made under the DC BEP. If an employee elects to defer less than 4% of base salary, the Bank will match at a rate of 150% of elective deferred contributions. For deferrals beginning January 1, 2020, the Bank will make a matching contribution of up to 9% of base salary for NEO elective deferrals (in excess of the DC Plan contribution limits).
Amounts deferred and contributed as matching contributions under the DC BEP shall be credited to the participants DC BEP account. Participants may choose to invest their DC BEP funds within a menu of investment options.
### f) NDICP
The NDICP allows employees serving at the rank of a Vice President or above (including the NEOs) with a hire date of October 31st or before in a calendar year toelect to defer all or a portion of the employees annual incentive compensation that is paid to the employee under the terms of any Board-approved IC Plan or deferred portion of such IC Plan. The Bank does not provide a match on these deferrals.
Amounts deferred and contributed under the NDICP shall be credited to the participants NDICP account. Participants may choose to invest their NDICP funds within a menu of investment options. Participants may elect to receive their funds in a lump sum or in at least two annual installments (not to exceed ten annual installments).
V.
### Health and Welfare Programs and Other Benefits a)
Perquisites and Benefits
We offer the following additional perquisites and other benefits to all employees, including the NEOs, under the same general terms and conditions:
Medical, dental, and vision insurance (subject to employee expense sharing);
Vacation leave, which increases based upon officer title and years of service;
Life and long-term disability insurance (NEOs are eligible for enhanced monthly benefits under our disability insurance program);
Travel and accident insurance which include life insurance benefits;
### Educational assistance
Employee relocation assistance, where appropriate, for new hires; and Vacation Payout (employees were allowed to elect up to ten unused vacation days for a one-time payout) b)
### Retiree Medical
We offer eligible employees, including certain NEOs, medical coverage when they retire. Employees are eligible to participate in the Retiree Medical Benefits Plan if they were at least 55years old as of January 1, 2015 with 10years of service when they retire from active service.
Retirees who retire before age 62 pay the full premium for the coverage they had as employees until they attain age 62. The premium paid by retirees upon becoming Medicare-eligible (either at age 65 or prior thereto as a result of disability) is a premium reduced to take into account the status of Medicare as the primary payer of the medical benefits of Medicare-eligible retirees.
Under the Plan as in effect from May 1, 1995 until December 31, 2007, herein identified as Grandfathered, retirees beginning at age 62, we contributed a percentage of the premium based on their total completed years of service (no adjustment is made for partial years of service) on a Defined Benefit basis.
Effective January1, 2008, for employees who, as of December31, 2007, did not have 5years of service and were age 60 or older, herein identified as Non-Grandfathered, we contributed $45 per month toward the premium of a Non-Grandfathered retiree multiplied by the number of years of service earned by the retiree after age 45. ) from age 62 until the retiree or a covered dependent of the retiree becomes Medicare-eligible (usually at age 65 or earlier, if disabled).
For all covered employees as of January 1, 2015, including the NEOs, from age 62 until the retiree or a covered dependent of the retiree becomes Medicare-eligible (usually at age 65 or earlier, if disabled), we contribute $26.87 per month toward the premium of a Non-Grandfathered retiree multiplied by the number of years of service earned by the retiree after age 45.
After the retiree or a covered dependent of the retiree becomes Medicare-eligible, our contribution toward the premium for the coverage of the Medicare-eligible individual will be reduced to $14.93 per month multiplied by the number of years of service earned by the retiree after age 45. The $26.87 and $14.93 amounts are fixed and not cost-of-living adjusted.
Below is a summary of the Retiree Medical Benefits Plan:
### Retiree Medical Benefit Plan
Provisions for Retirees January1,2015andAfter*
Plan Type
### Defined Dollar Plan:
A medical plan in which medical coverage is provided to a retired employee up to a fixed cost for the coverage elected by the employee and the retiree assumes all costs above the stated contribution.
Eligibility
Active employee who has completed 10 years of employment at FHLBNY and attained age 55 as of January 1,2015.
### Medical Plan Formula
1) Retiree (and covered individual), is eligible for $26.87/month x years of service after age 45 and has attained the age of 62.
2) Retiree (and covered individual) is eligible for $14.93/month x years of service after age 45 and after age 65.
$0 for Pre-62 Pre-65/Post-65
### Employer Cost Share Examples:
10years of service after age 45
$3,224/$1,792/Annually
15years of service after age 45
$4,837/$2,687/Annually
20years of service after age 45
$6,449/$3,583/Annually
*
### This includes the following NEOs: K. Neylan
VI.Severance Plan, Executive Change in Control Agreements and Golden Parachute Rule a)
### Severance Plan
Other than as described below, all Bank employees are employed under an at will arrangement. Accordingly, an employee may resign employment at any time and the Bank may terminate the employees employment at any time for any reason with or without cause.
Severance benefits to an employee in the event of termination of his or her employment may be paid in accordance with the Banks formal Board-approved Severance Pay Plan (Severance Plan) available to all Bank employees who work twenty or more hours a week and have completed at least two periods of service (the number of six (6) month periods, in the aggregate, for which an employee is employed by the Bank).
### Severance benefits may be paid to employees who:
(i)are part of a reduction in force;
(ii)have resigned from the Bank following a reduction in salary grade, level, or rank;
(iii)refuse a transfer of fifty miles or more;
(iv)have their position eliminated;
(v)are unable to perform his/her duties in a satisfactory manner and is warranted that the employee would not be discharged for cause; or
(vi) had their employment terminated as a result of a change in control (however, in the event of a change in control that affects the Bank President, the other Bank NEOs, and the Chief Audit Officer, provisions contained in separate Executive Change in Control Agreements shall govern; see below for more information).
An officer shall be eligible for two weeks of severance benefits for each six month period of service with the Bank (even if the employment has been less than six months), but not less than eight weeks of severance benefits nor more than thirty-six weeks of such benefits; in the event of a change in control, the floor and cap shall be twelve weeks and fifty-two weeks, respectively. Non-officers are eligible for severance benefits in accordance with different formulas.
If the terminated employee is enrolled in the Banks medical benefits plan at the time of termination and elects to purchase health insurance continuation coverage, the Bank may provide a lump sum payment in an amount to be determined by the Bank intended to be used in connection with payments by terminated employees related to health insurance. The Bank may also in its discretion arrange for outplacement services.
Payment of severance benefits under the Severance Plan is contingent on an employee executing a severance agreement which includes a release of any claim the employee may have against the Bank and any present and former director, officer and employee.
Severance benefits payable under the Severance<|endoftext|>Of our initial business combination at a newly issued price of less than $9.50 per share, then the exercise price of the warrants will be adjusted to be equal to 115% of the newly issued price and the redemption price of the warrants shall be adjusted to equal 180% of the newly issued price. Any of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.
Indemnity
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
### Employees
We have three officers.
We will be required to evaluate our internal control procedures for the fiscal year ending December 31, 2020 as required by the Sarbanes-Oxley Act.
Item 1A.
### Risk Factors
For risk factors related to the Business Combination with indie Semiconductor, Inc., see the S-4 to be filed by the Company.
We are a company with limited operating history and no revenues, and you have little basis on which to evaluate our ability to achieve our business objective.
We are an early stage company established under the laws of the Cayman Islands with limited operating results and no revenues.
Our public shareholders may not be afforded an opportunity to vote on our proposed business combination, which means we may complete our initial business combination even if a majority of our public shareholders do not support such a combination.
We may not hold a shareholder vote to approve our initial business combination unless the business combination would require shareholder approval under applicable Cayman Islands law or the rules of NASDAQ or if we decide to hold a shareholder vote for business or other reasons. For instance, the NASDAQ rules currently allow us to engage in a tender offer in lieu of a shareholder meeting but would still require us to obtain shareholder approval if we were seeking to issue more than 20% of our outstanding shares to a target business as consideration in any business combination. Therefore, if we were structuring a business combination that required us to issue more than 20% of our outstanding shares, we would seek shareholder approval of such business combination. Except as required by law or NASDAQ rules, the decision as to whether we will seek shareholder approval of a proposed business combination or will allow shareholders to sell their shares to us in a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors, such as the timing of the transaction and whether the terms of the transaction would otherwise require us to seek shareholder approval. Please see the section entitled Business Shareholders may not have the ability to approve our initial business combination for additional information.
Our sponsor, officers and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote any founder shares held by them, as well as any public shares purchased during or after our initial public offering, in favor of our initial business combination. As a result, in addition to our initial shareholders founder shares and 100,000 units owned by one of our officers, we would need only 12,837,501, or 37.3%, of the 34,500,000 public shares sold in our initial public offering to be voted in favor of a transaction (assuming all outstanding shares are voted) in order to have our initial business combination approved.
Furthermore, this dilution would increase to the extent that the anti-dilution provisions of the Class B ordinary shares result in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B shares at the time of the initial business combination.
The ability of our public shareholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that public shareholders would have to wait for liquidation in order to redeem their shares.
If our initial business combination is unsuccessful, public shareholders would not receive their pro rata portion of the trust account until we liquidate the trust account. If public shareholders are in need of immediate liquidity, they could attempt to sell their shares in the open market; In either situation, public shareholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with our redemption until we liquidate or they are able to sell their shares in the open market.
Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination by August 13, 2021.
We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public shareholders may only receive $10.13 per share (based on the balance of our trust account as of December 31, 2020), or less than such amount in certain circumstances, and our warrants will expire worthless.
Our sponsor, officers and directors have agreed that we must complete our initial business combination by August 13, 2021. If we have not completed our initial business combination within such time period, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (which interest shall be net of taxes payable, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such case, our public shareholders may only receive $10.13 per share, or less than such amount in certain circumstances based on the balance of our trust account as of December 31, 2020, and our warrants will expire worthless.
Please see Business Permitted purchases of our securities for a description of how such persons will determine which shareholders to seek to acquire shares from.
In addition, if such purchases are made, the public float of our ordinary shares and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain the quotation, listing or trading of our securities on a national securities exchange.
Our public shareholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) the completion of our initial business combination, (ii) the redemption of any public shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of association to (A) modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by August 13, 2021 or (B) with respect to any other provision relating to shareholders rights or pre-business combination activity and (iii) the redemption of all of our public shares if we are unable to complete our initial business combination by August 13, 2021, subject to applicable law and as further described herein. Accordingly, to liquidate an investment, our public shareholders may be forced to sell their public shares or warrants, potentially at a loss.
Our units, Class A ordinary shares and warrants are listed on NASDAQ. For instance, our stock price would generally be required to be at least $4.00 per share, our shareholders equity would generally be required to be at least $5.0 million and we would be required to have a minimum of 300 round lot holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) of our securities.
Since our units, Class A ordinary shares and warrants are listed on NASDAQ, they are covered securities.
Our shareholders will not be entitled to protections normally afforded to investors of some other blank check companies.
However, because we had net tangible assets in excess of $5,000,000 at the time of our initial public offering, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Among other things, this means our securities are tradable and we have a longer period of time to complete our initial business combination than do companies subject to Rule 419.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our initial public offering, which we refer to as the Excess Shares.
If we are unable to complete our initial business combination, our public shareholders may receive only approximately $10.13 per share (based on the balance of our trust account as of December 31, 2020), or less in certain circumstances, on our redemption, and our warrants will expire worthless.
If the net proceeds of our initial public offering and sale of the private placement warrants not being held in the trust account are insufficient to allow us to operate until August 13, 2021, we may be unable to complete our initial business combination.
The funds available to us outside of the trust account may not be sufficient to allow us to operate until August 13, 2021, assuming that our initial business combination is not completed during that time.
We believe that the funds currently available to us outside of the trust account, will be sufficient to allow us to operate until August 13, 2021; however there can be no assurances that our estimate is accurate.
If funds available to us outside of the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search, to pay our taxes and to complete our initial business combination. If we are unable to obtain these loans, we may not be able to complete our initial business combination.
As of December 31, 2020, we had $133,695 held outside | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
That the functions of such committees can be adequately performed by our board of directors.
We do not have any defined policy or procedure requirements for our stockholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or stockholders, and makes recommendations for election or appointment.
A stockholder who wishes to communicate with our board of directors may do so by directing a written request to the address appearing on the first page of this annual report.
### ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation
(a) all individuals serving as our principal executive officer during the year ended December 31, 2020;
(b) each of two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2020; and
(c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at December 31, 2020, who we will collectively refer to as the named executive officers, for all services rendered in all capacities to our company for the years ended December 31, 2020 and 2019 are set out in the following summary compensation table:
Summary Compensation Table Years Ended December 31, 2020 and 2019
Notes:
(1)
On October 15, 2017, Mr. Elliott was appointed as the president of our company.
(2)
On October 9, 2017, Mr. Blum was appointed as the chief financial officer, secretary, treasurer and a director of our company. On December 4, 2018, Mr. Blum resigned as our chief financial officer in order to accommodate the appointment of Swapan Kakumanu as our chief financial officer. On the same day, Mr. Blum was appointed as chief operating officer. On September 14, 2020, Mr. On September 16, 2020, Mr.
(3)
On December 4, 2018, Mr. Kakumanu was appointed as the chief financial officer of our company. On September 16, 2020, we appointed Mr.
In connection with the appointment of Bruce Elliott as president, we have entered into an independent consultant agreement dated October 15, 2017 with Bruce Elliott whereby we agreed to pay Mr. Elliott a signing bonus of $7,500, payable within 30 days, and a consulting fee in the amount of $10,000 per month, which was increased to $12,000 per month commencing on February 1, 2018 with the approval of our board of directors. On June 1, 2018, his consulting fee increased to $16,000 per month with the approval of our board of directors. Elliott 200,000 stock options within 60 days at a price of $0.10 per share, which stock options become exercisable as follows: (i) 1/3 upon the date of grant; The agreement continues for twelve months terms which will automatically be renewed unless we provide 90 days prior written notice of our intention to not renew the agreement. Elliott by providing at least 90 days advance notice in writing, (ii) us by giving at least 90 days advance notice in writing, or (iii) us without notice in the event that Mr. Elliott: (a) breaches any term of the agreement, (b) neglects the services or any other duty to be performed under the agreement, (c) engages in any conduct which is dishonest, or damages our reputation or standing, (d) is convicted of any criminal act, (e) engages in any act of moral turpitude, (f) files a voluntary petition in bankruptcy, or (g) is adjudicated as bankrupt or insolvent. Mr. Elliott has also agreed for the term of the agreement not to compete with us in the business of providing services for blockchain initial coin offerings. Elliott has agreed not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee or independent contractor involved with us to terminate or breach any employment, contractual or other relationship with us, or to otherwise discontinue or alter such third partys relationship with us.
In connection with the appointment of Michael Blum as chief financial officer, we have entered into an independent consultant agreement dated October 9, 2017 with Michael Blum whereby we agreed to pay Mr. Blum a signing bonus of $25,000, payable within 30 days, and a consulting fee in the amount of $10,000 per month. Blum stock options in an amount to be determined by our board of directors. The agreement continues for twelve months terms which will automatically be renewed unless we provide 30 days prior written notice of our intention to not renew the agreement. Blum by providing at least 30 days advance notice in writing, (ii) us by giving at least 30 days advance notice in writing, or (iii) us without notice in the event that Mr. Blum: (a) breaches any term of the agreement, (b) neglects the services or any other duty to be performed under the agreement, (c) engages in any conduct which is dishonest, or damages our reputation or standing, (d) is convicted of any criminal act, (e) engages in any act of moral turpitude, (f) files a voluntary petition in bankruptcy, or (g) is adjudicated as bankrupt or insolvent. Mr. Blum has also agreed for the term of the agreement not to compete with us in the business of providing services for blockchain initial coin offerings. Blum has agreed not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee or independent contractor involved with us to terminate or breach any employment, contractual or other relationship with us, or to otherwise discontinue or alter such third partys relationship with us. In connection with the appointment of Michael Blum as chief operating officer, on December 4, 2018, we have entered into an amendment to the independent consultant agreement dated October 9, 2017 with Mr. Blum whereby the parties (i) modified the services to be provided by Mr. Blum to reflect his new position with our company as chief operating officer and (ii) increased his consulting fee to $12,000 per month commencing December 4, 2018.
Since October 1, 2017, we have paid Red to Black Inc., a company controlled by Swapan Kakumanu $4,000 per month which was amended to $10,000 per month from February 1, 2018 for providing accounting and controller services. In connection with the appointment of Swapan Kakumanu as chief financial officer, we have entered into an independent consultant agreement dated December 4, 2018 with Swapan Kakumanu whereby we agreed to pay a consulting fee of $5,000 per month. Commencing December 1, 2019, the consulting agreement was amended to pay $1 per month. Kakumanu stock options in an amount to be determined by our board of directors. The agreement continues for a twelve month term, which will automatically be renewed unless we provide 30 days prior written notice of our intention to not renew the agreement. Kakumanu by providing at least 30 days advance notice in writing, (ii) us by giving at least 30 days advance notice in writing, or (iii) us without notice in the event that Mr. Kakumanu: (a) breaches any term of the agreement, (b) neglects the services or any other duty to be performed under the agreement, (c) engages in any conduct which is dishonest or damages our reputation or standing, (d) is convicted of any criminal act, (e) engages in any act of moral turpitude, (f) files a voluntary petition in bankruptcy, or (g) is adjudicated as bankrupt or insolvent. Mr. Kakumanu has also agreed, for the term of the agreement, not to compete with us in the business of providing services for blockchain initial coin offerings. During the term of the agreement, and for a period of one year immediately following the termination or expiration of the agreement, Mr. Kakumanu has agreed not to solicit or induce any customer, prospective customer, supplier, sales personnel, employee, or independent contractor involved with us to terminate or breach any employment, contractual or other relationship with us, or to otherwise discontinue or alter such third partys relationship with us.
On October 15, 2017, as amended on January 22, 2018, November 22, 2018, and December 7, 2020, our board of directors adopted and approved the 2017 Equity Incentive Plan. The purpose of the plan is to (a) enable us and any of our affiliates to attract and retain the types of employees, consultants and directors who will contribute to our long range success; (b) provide incentives that align the interests of employees, consultants and directors with those of our stockholders; and (c) promote the success of our business. On November 22, 2018, our board of directors amended our 2017 Equity Incentive Plan in connection with our application to list our common stock on the TSX Venture Exchange. On December 7, 2020, the plan was amended to provide that a total of 6,985,207 shares of our common stock will be available for the grant of stock options and no shares will be available for the grant of non-stock option awards.
Effective October 15, 2017, we granted a total of 1,400,000 stock options to our directors and officers (200,000 stock options to Bruce Elliott, 400,000 stock options to Michael Blum, 400,000 stock options to Cameron Chell and 400,000 stock options to James P. Geiskopf). The stock options become exercisable as follows: (i) 1/3 upon the date of grant; The grant also included 100,000 stock options to Swapan Kakumanu. These stock options become exercisable as follows: (i) 1/3 on the first anniversary date;
Effective October 15, 2017, we granted 100,000 stock options to Red to Black Inc., a company controlled by Swapan Kakumanu.
Effective June 8, 2018, we granted 75,000 stock options to Red to Black Inc.
On February 10, 2021, we granted an aggregate of 2,200,000 stock options to our directors and officers (400,000 stock options to Bruce Elliott, 200,000 stock options to Michael Blum, 400,000 stock options to Cameron Chell, 400,000 stock options to James P. Geiskopf, 200,000 to Edmun Moy, 400,000 to Swapan Kakumanu, and 200,000 to James M. Carter). Each stock option is exercisable for a period of 10 years at a price of $1.17 per share. The stock options vest as to one-third on the date of grant, one-third on the first anniversary of the date of grant and one-third on the second anniversary of the date of grant.
We have no contract, agreement, plan or arrangement, whether written or unwritten, that provides for payments to our directors or executive officers at, following, or in connection with the resignation, retirement or other termination of its directors or executive officers, or a change in control of our company or a change in our directors or executive officers responsibilities following a change in control.
The following table sets forth for each named executive officer certain information concerning the outstanding equity awards as of December 31, 2020:
Notes:
(1)
The stock options become exercisable as follows: (i) 1/3 upon the date of grant (October 15, 2017);
(2)
The stock options become exercisable as follows: (i) 1/3 on the first anniversary date of grant (October 15, 2018);
(3)
The stock options become exercisable as follows: (i) 1/3 upon the date of grant (June 8, 2018);
(4)
These stock options are held by Red to Black Inc., a company controlled by Swapan Kakumanu
During the year ended December 31, 2020, compensation to directors who were not our named executive officers is set out in the director compensation table below:
Director Compensation
(1)
Does not include the fees and stock options received by Business Instincts Group Inc. On October 18, 2017, we entered into a business services agreement with Business Instincts Group Inc., a company of which Mr. Chell was a director, officer and indirect shareholder until January 15, 2021. The fees and stock options received by Business Instincts Group Inc. are compensation for the services provided by that company as a whole and we did not compensate Mr. Chell separately for these services.<|endoftext|>Price of $1,000 per share, for an aggregate purchase consideration of $15.0 million. The terms, rights, obligations and preferences of the Series A Preferred Stock are set forth in the Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company (the Series A Certificate of Designation).
Pursuant to the Series A Certificate of Designation, the holders of the Series A Preferred Stock have the right, voting separately as a class, to elect a Series A Director to the Board, for so long as PWAM and its affiliates hold at least twenty-five percent (25%) of the issued and outstanding Series A Preferred Stock. The Series A Preferred Stockholders nominated and appointed Mr. Bartsh in March 2019 to serve as the Series A Director.
On March 13, 2020, the Company entered into a Purchase Agreement (the Series B Purchase Agreement) with the Series A Investors and MSD Credit Opportunity Master Fund (collectively, the Series B Investors). On May 15, 2020, pursuant to the Series B Purchase Agreement, the Company issued 8,000 shares of the Companys newly created Series B Preferred Stock to the Series B Investors at a price of $1,000 per share, for an aggregate purchase consideration of $8.0 million. The terms, rights, obligations and preferences of the Series B Preferred Stock are set forth in the Series B Certificate of Designation.
Pursuant to the Series B Certificate of Designation, the holders of the Series B Preferred Stock have the right, voting separately as a class, to elect a Series B Director, for so long as PWAM and its affiliates hold at least twenty-five percent (25%) of the issued and outstanding Series B Preferred Stock. However, for so long as PWAM has the right to elect a Series A Director, the Series B Director shall be the same individual as the Series A Director.
### Private Placement
On November 16, 2020, the Company entered into a securities purchase agreement with certain institutional and accredited investors (collectively, the Investors), pursuant to which the Company agreed to issue and sell to the Investors an aggregate of 4,755,373 immediately separable units (the Units), with each Unit being comprised of (i) one share of the Companys Common Stock and (ii) a warrant to purchase 1.1 shares of Common Stock (the 2020 Private Placement Warrants), at a price per Unit of $3.787, for gross proceeds of approximately $18 million (the Private Placement). Michael Valentino, one of our executive officers, purchased 264,900 Units for an aggregate Unit purchase price of approximately $1,003,176in the Private Placement.
Public Offering
On March 3, 2021, the Company entered into an Underwriting Agreement with Raymond James & Associates, Inc., as representative of the underwriters identified therein, pursuant to which the Company agreed to issue and sell 7,875,000 shares of Common Stock at a public offering price of $8.00 per share (the Offering). Michael Valentino, one of our executive officers, purchased 25,000 shares of our Common Stock in the Offering at the public offering price of $8.00 per share, for a total of $200,000.
The Board has determined that all of our non-employee directors are independent within the meaning of the SEC rules. The Board has also determined that all directors serving on the Audit Committee, the Compensation Committee and the Nominating and Governance Committee are independent within the meaning of the SEC rules with respect to membership on each such committee.
ITEM 14.
### Audit and Non-Audit Fees
The following table presents aggregate fees billed for professional services rendered by Marcum LLP, our independent registered public accounting firm for fiscal years 2020 and 2019. There were no other professional services rendered or fees billed by Marcum LLP for fiscal years 2020 and 2019.
(1)
These fees include the audits of our annual consolidated financial statements and the reviews of our consolidated financial statements included in our Quarterly Reports on Form 10-Q for fiscal years 2020 and 2019 .
(2)
These audit-related fees in 2020 relate to the registration statements on Form S-3 filed with the SEC in June 2020 and January 2021. The fees in 2019 relate to the registration statement on Form S-3 filed with the SEC in March 2019.
All services provided by our independent registered public accounting firm are subject to pre-approval by our Audit Committee. The Audit Committee has also adopted policies and procedures that are detailed as to the particular service and that do not include delegation of the Audit Committees responsibilities to management under which management may engage our independent registered public accounting firm to render audit or non-audit services. Before granting any approval, the Audit Committee gives due consideration to whether approval of the proposed service will have a detrimental impact on the independence of the independent registered public accounting firm. The full Audit Committee pre-approved all services provided by Marcum LLP for fiscal years 2020 and 2019.
PART IV
ITEM 15.
### Documents filed as part of this Form 10-K:
(a)
Financial Statements:
The consolidated balance sheets of the Company as of December31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders equity, and cash flows for each of the years ended December31, 2020 and 2019, the footnotes thereto, and the report of Marcum LLP, independent registered public accounting firm, are set forth on pages F-1 through F-19 of this Form 10-K.
(b)
### Exhibits:
See Exhibit Index.
(c)
All schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.
Exhibit Index
The representations and warranties contained in the agreements listed in this Exhibit Index are not for the benefit of any party other than the parties to such agreement and are not intended as a document for investors or the public generally to obtain factual information about the Company or its shares of Common Stock.
### Number
Exhibit Table
2.1
Agreement and Plan of Merger and Reorganization
2.1 to the Company s Current Report on Form 8-K filed on December 22, 2016 (File No. 001-36351)).
3.1
Amended and Restated Certificate of Incorporation of PLx Pharma Inc.
3.3 to the Company s Quarterly Report on Form
10-Q filed on August 11, 2017 (File No. 001-36351)).
3.2
Certificate of Amendment to the Amended Certificate of Incorporation of the Company 3.1 to the Company s Current Report on Form 8-K filed on February 20, 2019 (File No. 001-36351)).
3.3
Amended and Restated Bylaws of PLx Pharma Inc.
3.3 to the Company s Annual Report on Form
10-K filed on January 20, 2017) (File No. 001-36351)).
4.1
Form of Warrant, to be issued by PLx Pharma Inc. to the Investors on June 14, 2017
4.1 to the Company s Form
8-K filed on June 12, 2017 (File No. 001-36351)).
4.2
in connection with the Loan and Security Agreement among PLx Pharma Inc., PLx Opco Inc., and Silicon Valley Bank, dated as of August 9, 2017
4.1 to the Company s Current Report on Form
8-K filed on August 10, 2017 (File No. 001-36351)).
4.3
in connection with the Securities Purchase Agreement among PLx Pharma Inc. and the investors set forth on the signature pages thereto, dated as of November 16, 2020 4.1 to the Companys Current Report on Form 8-K filed on November 16, 2020).
4.4
Amended and Restated Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock of the Company 3.3 to the Company s Current Report on Form 8-K filed on February 20, 2019 (File No. 001-36351)).
4.5
Description of Registered Securities (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
10.1
Employment Agreement with Natasha Giordano, dated January 1, 2016 (incorporated by Reference to Exhibit
10.1 to the Company s Current Report on Form 8-K filed on April 20, 2017 (File No. 001-36351)).
10.2
Amended and Restated Employment Agreement with Michael J. Valentino, dated April 1, 2016 (incorporated by Reference to Exhibit
10.4 to the Company s Current Report on Form 8-K filed on April 20, 2017 (File No. 001-36351)).
10.3
PLx Pharma 2015 Omnibus Incentive Plan (incorporated by reference to Annex G to the Company s Registration Statement on Form S-4 filed on January 25, 2017 (File No. 333-215684)).
10.4
Separation and Settlement Agreement and Release of All Claims between PLx Pharma Inc. and David E. Jorden, dated May 1, 2017
10.2 to the Company s Form
001-36351)).
10.5
### Executive Employment Agreement of Rita M. O
Connor, dated May 1, 2017
10.1 to the Company s Form
001-36351)).
10.24
Placement Agency Agreement, dated November 16, 2020, by and between the Company and Raymond James & Associates, Inc. 10.3 to the Companys Current Report on Form 8-K filed on November 16, 2020 (File No. 001-36351)).
10.25
Manufacturing Services Agreement, dated June 28, 2019, between the Company and Patheon Pharmaceuticals Inc.
10.1 to the Company s Quarterly Report on Form 10-Q filed on August 9, 2019 (File No. 001-36351)).+
10.26
Termination of Equity Distribution Agreement, dated as of March 2, 2021, between the Company and JMP Securities LLC 10.1 to the Companys Current Report on Form 8-K filed on March 2, 2021 (File No. 001-36351)).
10.27
Underwriting Agreement, dated March 3, 2021, between the Company and Raymond James & Associates, Inc., as representative of the several underwriters listed on Schedule I thereto (incorporate by reference to Exhibit 1.1 to the Company Current Report on Form 8-K filed on March 3, 2021 (File No. 001-36351)).
21.1
Subsidiaries of the Company (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
23.1
Consent of Marcum LLP (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
31.1
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
31.2
Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
31.3
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.4
Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of the Principal Executive Officer and Principal Financial and Accounting Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.INS
XBRL Instance Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.SCH
XBRL Taxonomy Extension Schema Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.CAL
XBRL Taxonomy Calculation Linkbase Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.LAB
XBRL Taxonomy Label Linkbase Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
101.PRE
XBRL Taxonomy Presentation Linkbase Document (filed with the initial filing of the Annual Report on Form 10-K for the year ended December 31, 2020).
+
Filed with confidential portions omitted pursuant to a request for confidential treatment. The omitted portions have been separately filed with the SEC.
*
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December 31, 2020, each director held 2,667 unvested RSUs.
2020 Compensation of Directors
For 2020, non-employee directors received an annual retainer of $40,000, the chairs of the Audit, Compensation and Nominating& Corporate Governance Committees received an additional retainer of $20,000, $15,000 and $10,000, respectively, and members of the Audit, Compensation and N&CG Committees received an additional retainer of $10,000, $7,500 and $5,000, respectively. Additionally, the Lead Director received an additional fee of $22,500 for his services as lead director. No meeting fees were paid. Further, directors received a grant of stock options for 2020 services.
### Item12.
As of April 28, 2021, we had 103,444,322 shares of our common stock outstanding. The following table sets forth, as of such date, certain information regarding the shares of common stock owned of record or beneficially by (i)each person who owns beneficially more than 5% of our outstanding common stock; (ii)each of our directors and executive officers; and (iii)all directors and executive officers as a group.
*
Less than one percent
(1)
Unless otherwise indicated, each person named in the table has the sole voting and investment power with respect to the shares beneficially owned. Further, unless otherwise indicated, the address for each person named in this table is c/o Catalyst Pharmaceuticals, Inc.
(2)
Reported on a Schedule 13G filed by Armistice Capital on February16, 2021. According to the Schedule 13G, Armistice Capitals address is 510 Madison Avenue, 7 th
Floor, New York, New York 10022.
(3)
Reported in a Schedule 13G filed by BlackRock on January28, 2021. According to the Schedule 13G, BlackRocks address is 55 East 52 nd
Street, New York, New York 10055.
(4)
Reported in a Schedule 13G filed by State Street on February5, 2021. According to the Schedule 13G, State Streets address is State Street Financial Center, One Lincoln Street, Boston, Massachusetts 02111.
(5)
Reported in a Schedule 13G filed by Vanguard Group on February10, 2021. According to the Schedule 13G, Vanguards address is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(6)
Includes options to purchase 2,263,332 shares of our common stock, of which (i) 300,000 shares are exercisable at a price of $3.12 per share, (ii) 300,000 shares are exercisable at a price of $2.53 per share, (iii) 200,000 shares are exercisable at an exercise price of $0.79 per share, (iv) 250,000 shares that are exercisable at an exercise price of $1.13 per share, (v) 300,000 shares are exercisable at a price of $4.01 per share, (vi) 333,333 shares that are exercisable at a price of $3.54 per share, (vii) 333,333 shares that are exercisable at a price of $2.24 per share, and (viii) 246,666 shares that are exercisable at a price of $4.64 per share. Excludes: (i) 166,667 shares at a price of $3.54 per share that will vest on May29, 2021, (ii) 166,667 shares at a price of $2.24 per share that will vest on December19, 2021, (iii) 493,334 shares at a price of $4.64 per share that will vest in two annual tranches beginning on December2, 2021, (iv) 400,000 shares at a price of $3.42 per share that will vest in three annual tranches beginning on December30, 2021, and (v) 61,667 restricted stock units that will vest in two annual tranches beginning on December2, 2021.
(7)
Includes options to purchase 301,166 shares of our common stock, of which (i) 50,000 shares are exercisable at a price of $3.12 per share, (ii) 40,000 shares are exercisable at a price of $2.53 per share, (iii) 50,000 shares are exercisable at a price of $0.79 per share, (iv) 60,000 shares are exercisable at a price of $1.13 per share, (v) 40,000 shares are exercisable at a price of $4.01 per share, (vi) 50,000 shares are exercisable at a price of $2.24 per share, and (vii) 11,166 shares are exercisable at a price of $4.64 per share.
(8)
Includes options to purchase 301,166 shares of our common stock, of which (i) 50,000 shares are exercisable at a price of $3.35 per share, (ii) 40,000 shares are exercisable at a price of $2.53 per share, (iii) 50,000 shares are exercisable at a price of $0.79 per share, (iv) 60,000 shares are exercisable at a price of $1.13 per share, (v) 40,000 shares are exercisable at a price of $4.01 per share, (vi) 50,000 shares are exercisable at a price of $2.24 per share, and (vii) 11,166 shares are exercisable at a price of $4.64 per share.
(9)
Includes options to purchase 1,080,000 shares of our common stock, of which (i) 185,000 shares are exercisable at a price of $3.12 per share, (ii) 150,000 shares are exercisable at a price of $2.53 per share, (iii) 100,000 shares are exercisable at a price of $0.79 per share, (iv) 150,000 shares are exercisable at a price of $1.13 per share, (v) 285,000 shares are exercisable at a price of $4.01 per share, (vi) 150,000 shares are exercisable at a price of $2.24 per share and (vii) 60,000 shares are exercisable at a price of $4.64 per share. Excludes (i)unvested stock options to purchase 75,000 shares at a price of $2.24 per share that will vest on December19, 2021, (ii) unvested stock options to purchase 120,000 shares at a price of $4.64 per share that will vest in two annual tranches beginning on December2, 2021, (iii) unvested stock options to purchase 275,000 shares at a price of $3.42 per share that will vest in three annual tranches beginning on December30, 2021, and (iv) 40,000 restricted stock units that will vest in two annual tranches beginning on December2, 2021.
(10)
Includes options to purchase 1,049,000 shares of our common stock, of which (i) 170,000 shares are exercisable at a price of $3.12 per share, (ii) 150,000 shares are exercisable at a price of $2.53 per share, (iii) 100,000 shares are exercisable at a price of $0.79 per share, (iv) 150,000 shares are exercisable at a price of $1.13 per share, (v) 285,000 shares are exercisable at a price of $4.01 per share, (vi) 150,000 shares are exercisable at a price of $2.24 per share, and (vii) 44,000 shares are exercisable at a price of $4.64 per share. Excludes (i)unvested stock options to purchase 75,000 shares at a price of $2.24 per share that will vest on December19, 2021, (ii) unvested stock options to purchase 88,000 shares at a price of $4.64 per share that will vest in two annual tranches beginning on December2, 2021, (iii) unvested stock options to purchase 250,000 shares at a price of $3.42 per share that will vest in three annual tranches beginning on December30, 2021, and (iv) 29,334 restricted stock units that will vest in two annual tranches beginning on December2, 2021.
(11)
Includes options to purchase 679,000 shares of our common stock, of which (i) 150,000 shares are exercisable at a price of $4.13 per share, (iv) 50,000 shares are exercisable at a price of $1.13 per share, (iii) 285,000 shares are exercisable at a price of $4.01 per share, (iv) 150,000 shares are exercisable at a price of $2.24 per share, and (v) 44,000 shares are exercisable at a price of $4.64 per share.
(12)
Includes options to purchase 409,000 shares of our common stock, of which (i) 65,000 shares are exercisable at a price of $1.85 per share, (ii) 40,000 shares are exercisable at a price of $0.79 per share, (iii) 50,000 shares are exercisable at a price of $1.13 per share, (iv) 60,000 shares are exercisable at a price of $4.01 per share, (v) 150,000 shares are exercisable at a price of $2.24 per share, and (vi) 44,000 shares are exercisable at a price of $4.64 per share.
(13)
Includes options to purchase 96,666 shares of our common stock, of which (i) 60,000 shares are exercisable at a price of $2.86 per share, (ii) 26,666 shares are exercisable at a price of $2.24 per share, and (iii) 10,000 shares are exercisable at a price of $4.21 per share. Excludes (i)unvested stock options to purchase 90,000 shares at a price of $2.86 per share that will vest in three annual tranches beginning on August6, 2021, (ii) unvested stock options to purchase 13,334 at a price of $2.24 per share that will vest on December19, 2021, (iii) unvested stock options to purchase 20,000 shares at a price of $4.21 per share that will vest in two annual tranches beginning on January6, 2022, (iv) unvested stock options to purchase 150,000 shares at a price of $4.70 per share that will vest in five annual tranches beginning on June23, 2021, (v) unvested stock options to purchase 200,000 shares at a price of $3.42 per share that will vest in three annual tranches beginning on December30, 2021, and (vi) 30,000 restricted stock units that will vest in three annual tranches beginning on June23, 2021.
(14)
Includes options to purchase 7,082,828 shares of our common stock at prices ranging from $0.79 per share to $4.70 per share. Excludes (i)unvested stock options to purchase 3,570,672 shares of our common stock, and (ii) 233,004 unvested restricted stock units.
The following table gives information about our common stock that may be issued upon the exercise of options as of December31, 2020:
(1)
Includes our 2014 Stock Incentive Plan and our 2018 Stock Incentive Plan
(2)
Remaining shares are only under our 2018 Stock Incentive Plan
### Item13.
Related Person Transaction Parties and Procedures
In November 2017, we adopted our Code of Business Conduct and Ethics, including a conflict of interest transaction policy that identifies our procedures for the identification, review, consideration and approval or ratification of conflict of interest transactions. The policy applies where ones private life or interest interferes, or even appears to interfere, with the interests of our company. Under the policy, a conflict can arise when any of our personnel (or a member of their family) acts or has interests that make it difficult, or makes it appear difficult, to perform their duties for us objectively and effectively. Conflicts can also arise under the policy when our personnel (or a member of their family) receives significant personal benefits as a result of their position in the Company. Any such determination regarding the approval of such a transaction will be made by the Audit Committee or the Board of Directors, with any interested directors abstaining.
### Certain Related Party Transactions
Since 2019, we have had no transactions or proposed transactions in which we were or are to be participants and in which any related person had or will have a direct or indirect material interest.
Director Independence
The information included under Item 10 above in this Part III is incorporated herein by reference.
Item14.
Independent Auditor Fees
The following table represents fees for professional audit and other services rendered by Grant Thornton LLP for the fiscal years ended December31, 2020 and 2019.
(1)
Represents aggregate fees billed for professional services rendered by Grant Thornton LLP for the audit of our financial statements included in our 2020 Original Form
10-K, for their reviews of our quarterly reports during 2020 and 2019, and for their report on the effectiveness of our internal control over financial reporting as of December31, 2020 and December31, 2019. Includes for 2020, $7,950 in fees in connection with an
S-3
Registration Statement. Includes for 2019, $30,210 in fees in connection with an offering that we did not conclude which was being made pursuant to our shelf registration statement (No.
333-219259).
### Pre-Approval of Audit Functions
Pursuant to its written charter, the Audit Committee is responsible for pre-approving all audit and permitted non-audit services to be performed for us by our independent registered public accounting firm or any other auditing or accounting firm. 100% of the services provided to us by Grant Thornton in 2020 and 2019 were pre-approved by the Audit Committee.
### AUDIT COMMITTEE REPORT
Management has the primary responsibility for our internal control over financial reporting, the financial reporting process and preparation of our financial statements. Grant Thornton LLP, our independent registered public accounting firm, is responsible for performing<|endoftext|>Rights as shareholders (including the right to receive further liquidation distributions, if any);
Our sponsor and each member of our founding team entered into an agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 24 months from the closing of our Initial Public Offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within 24 months from the closing of our Initial Public Offering).
Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of our Initial Public Offering or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre-initial business combination activity, unless we provide our public shareholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any, divided by the number of the then-outstanding public shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the initial $2,000,000 of proceeds held outside the trust account plus up to $100,000 of funds from the trust account available to us to pay dissolution expenses, although we cannot assure you that there will be sufficient funds for such purpose.
If any third-party refuses to execute an agreement waiving such claims to the monies held in the trust account, our founding team will perform an analysis of the alternatives available to it and will only enter into an agreement with a third-party that has not executed a waiver if our founding team believes that such third partys engagement would be significantly more beneficial to us than any alternative. In order to protect the amounts held in the trust account, our sponsor agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective partner business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations, provided that such liability will not apply to any claims by a third party or prospective partner business who executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
We will have access to up to $1,500,000 from the proceeds of our Initial Public Offering and the sale of the private placement warrants with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000). In the event that we liquidate, and it is subsequently determined that the reserve for claims and liabilities is insufficient, shareholders who received funds from our trust account could be liable for claims made by creditors;
Additionally, if we file a bankruptcy or insolvency petition or an involuntary bankruptcy or insolvency petition is filed against us that is not dismissed, any distributions received by shareholders could be viewed under applicable debtor/ creditor and/or bankruptcy laws as either a preferential transfer or a fraudulent conveyance.
Our public shareholders are entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not consummate an initial business combination within 24 months from the closing of our Initial Public Offering, (ii) in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A) to modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not consummate an initial business combination within 24 months from the closing of our Initial Public Offering or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre-initial business combination activity, and (iii) if they redeem their respective shares for cash upon the completion of the initial business combination. Public shareholders who redeem their Class A ordinary shares in connection with a shareholder vote described in clause (ii) in the preceding sentence shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination or liquidation if we have not consummated an initial business combination within 24 months from the closing of our Initial Public Offering, with respect to such Class A ordinary shares so redeemed.
### Competition
### Facilities
We currently maintain our executive offices at 505 Montgomery Street, Suite 1100, San Francisco, CA 94111. The cost for our use of this space is included in the $50,000 per month fee we will pay to our sponsor for office space, administrative and support services.
Employees
The amount of time they will devote in any time period will vary based on whether a partner business has been selected for our initial business combination and the stage of the business combination process.
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, located at [IDX]
A partner business may not be in compliance with the provisions of the Sarbanes- Oxley Act regarding adequacy of their internal controls.
Prior to the date of this Annual Report on Form 10-K, we have filed a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section 12 of the Exchange Act.
As an exempted company, we applied for and received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section 6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, for a period of 30 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i) on or in respect of our shares, debentures or other obligations or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our Initial Public Offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A ordinary shares that are held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our ordinary shares held by non- affiliates exceeds $700 million as of the prior June 30.
### Legal Proceedings
Item 1A.
### Risk Factors
Past performance by our founding team, the PIMCO private funds or their respective affiliates may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, our founding team, the PIMCO private funds or their respective affiliates, including PIMCO is presented for informational purposes only. Any past experience of and performance by our founding team, the PIMCO private funds or their respective affiliates, including PIMCO, is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; You should not rely on the historical record of our founding team, the PIMCO private funds or any of their respective affiliates, including PIMCO, as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.
For instance, the Nasdaq rules currently allow us to engage in a tender offer in lieu of a general meeting but would still require us to obtain shareholder approval if we were seeking to issue more than 20% of our issued and outstanding shares to a partner business as consideration in any business combination.
Please see the section entitled for additional information.
Our sponsor and members of our founding team also may from time-to-time purchase Class A ordinary shares prior to the completion of our initial business combination. If the PIMCO private funds or their respective affiliates vote these shares in favor of our initial business combination, we would need 10,964,250 or 27.9%, of the 37,950,000 public shares sold in the Initial Public Offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming all issued and outstanding shares are).
Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,000 (so that we do not then become subject to the SECs penny stock rules). Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to be less than $5,000,000 or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination.
The requirement that we consummate an initial business combination within 24 months after the closing of the Initial Public Offering may give potential partner businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination partners, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our shareholders.
Any potential partner business with which we enter into negotiations concerning a | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Held by Steel Veritone Fund I, LLC; (iv) 2,979,915 shares of common stock subject to outstanding options that are exercisable within 60 days after April 25, 2021; and (v) 212,633 shares of common stock that are issuable within 60 days after April 25, 2021 upon the settlement of RSUs that have vested or will vest during such time period. Ryan Steelberg is the sole member and manager of RVH, LLC and, as such, has sole voting and dispositive power over all shares held by RVH, LLC.Ryan Steelbergs grantor trust (of which he is the trustee) owns 50% of the membership interests of Steel Veritone Fund I, LLC and, as such, Ryan Steelberg is deemed to have shared voting and dispositive power over the shares and warrants held by Steel Veritone Fund I, LLC.
(5)
Includes 120,000 shares of common stock subject to outstanding options that are exercisable within 60 days after April 25, 2021.
(6)
Includes (i) 29,400 shares of common stock held by Mr. Gehl as trustee of his living trust; (ii) 43,184 shares of common stock, and warrants to purchase 15,672 shares of common stock that are exercisable within 60 days after April 25, 2021, held by BigBoy, LLC; and (iii) 6,925 shares of common stock that are issuable within 60 days after April 25, 2021 upon the vesting and settlement of RSUs. Mr. Gehl is the Manager of BigBoy, LLC and has sole voting and dispositive power over all of the shares and warrants held by BigBoy, LLC.
(7)
Includes (a) 7,134 shares of common stock held by the George & Reva Graziadio Charitable Lead Annuity Trust; 6,434 shares of common stock held by Ginarra Partners, LLC; 16,091 shares of common stock held by Ginmarra Investors Fund 1, LLC; 9,034 shares of common stock held by the George & Reva Graziadio Grandchildren Trust II for the benefit of Mr. Graziadios children; 13,034 shares held by the Graziadio Dynasty Trust II; and 59,271 shares of common stock held by Boss Holdings, Inc., with respect to which Mr.Graziadio has sole voting and dispositive power; and (b) 3,368 shares held by Mr.Graziadios spouse; 4,534 shares of common stock held by Mr. Graziadios son; 4,534 shares of common stock held by Mr.Graziadios daughter; and 3,693 shares held by Western Metals Corporation, with respect to which Mr.Graziadio has shared voting and dispositive power.Mr. Graziadio disclaims beneficial ownership of all such shares, except to the extent of his pecuniary interest in such shares.Also includes 6,925 shares of common stock that are issuable within 60 days after April 25, 2021 upon the vesting and settlement of RSUs.Does not include (i) 315,166 shares of common stock held by the Graziadio Family Trust u/d/t 11/13/75, as Mr. Graziadio does not have any voting or dispositive power over any of such shares, and Mr.Graziadio disclaims beneficial ownership of such shares; and (ii) 2,334 shares of common stock held by the George and Reva Graziadio Foundation, as Mr. Graziadio does not have any voting or dispositive power over any of such shares, and Mr. Graziadio disclaims beneficial ownership of such shares.
(8)
(9)
(10)
Includes (i) 40,979 shares held by Mr. Taketa and his spouse as trustees of a family trust, and (ii) 6,925 shares of common stock that are issuable within 60 days after April 25, 2021 upon the vesting and settlement of RSUs.
(11)
Includes (i) an aggregate of 3,929,292 shares of common stock held indirectly by our executive officers and directors, as described in footnotes (1) through (11) above; (ii) warrants to purchase an aggregate of 94,034 shares of common stock that are exercisable within 60 days after April 25, 2021; (iii) an aggregate of 6,587,566 shares of common stock subject to outstanding options that are exercisable within 60 days after April 25, 2021; and (iv) 669,891 shares of common stock issuable within 60 days after April 25, 2021 upon the settlement of RSUs that have vested or will vest during such time period.
(12)
The holder has sole voting and dispositive power with respect to 2,320,075 shares of common stock and has shared voting and dispositive power with respect to 606,750 shares of common stock.The beneficial ownership information reflected in the table is included in the Schedule 13G, Amendment No. 6, filed by the holder with the SEC on January 6, 2021.
(13)
The holder has sole voting power with respect to 1,636,516 shares of common stock and has sole dispositive power with respect to 1,647,098 shares of common stock.The beneficial ownership information reflected in the table is included in the Schedule 13G filed by the holder with the SEC on February 2, 2021.
(14)
The holder has shared voting power with respect to 47,291 shares of common stock, sole dispositive power with respect to 1,577,859 shares of common stock and shared dispositive power with respect to 57,916 shares of common stock.The beneficial ownership information reflected in the table is included in the Schedule 13G filed by the holder with the SEC on February 10, 2021.
Equity Compensation Plan Information at 2020 Fiscal Year End
The following table sets forth information with respect to securities authorized for issuance under our equity compensation plans as of December 31, 2020:
### Plan Category
(a)
(b)
(3)
(c)
(1)
$11.59
(2)
$7.84
### Total
____________
(1)
The number of shares reflected in column(a) of the table above for equity compensation plans approved by security holders consists of: (i) outstanding options to purchase an aggregate of 9,371,090 shares of our common stock, which were granted under our 2014 Plan, 2017 Plan and 2018 Plan; and (ii)outstanding RSUs representing the right to receive upon vesting an aggregate of 750,124 shares of our common stock, which were awarded under our 2017 Plan.The number of shares reflected in column(c) of the table above for equity compensation plans approved by security holders consists of (a) an aggregate of 596,999 shares available for issuance under future grants made under our 2017 Plan and 2018 Plan as of December 31, 2020, and (b) 1,268,222 shares available for future issuance under our ESPP as of December 31, 2020, of which 67,068 shares were subsequently issued on January 29, 2021 for the purchase interval that had been open as of December 31, 2020. At the time of the adoption of the 2017 Plan, the Board resolved not to make any further awards under our 2014 Plan following our initial public offering. Our 2017 Plan provides that the number of shares reserved for issuance thereunder will increase automatically on the first trading day of January each calendar year by an amount equal to 3% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year, up to an annual maximum of 750,000 shares.Our ESPP provides that the number of shares reserved for issuance thereunder will increase automatically on the first trading day of January each calendar year by an amount equal to 1% of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year, up to an annual maximum of 250,000 shares.
(2)
The number of shares reflected in column(a) of the table above for equity compensation plans not approved by security holders consists of: (i) outstanding options to purchase an aggregate of 263,000 shares of our common stock, which were granted under our Inducement Grant Plan; (ii) outstanding RSUs representing the right to receive upon vesting an aggregate of 79,000 shares of our common stock, which were awarded under our Inducement Grant Plan; and (iii) outstanding warrants to purchase an aggregate of 466,000 shares of our common stock, which were issued to consulting firms as partial consideration for services rendered to us.The number of shares reflected in column(c) of the table above for equity compensation plans not approved by security holders consists of 408,000 shares available for issuance under future grants made under our Inducement Grant Plan.See additional information regarding our Inducement Grant Plan under the heading Inducement Grant Plan above.On October 8, 2020, we granted to Mr. Zemetra under our Inducement Grant Plan options to purchase an aggregate of 180,000 shares of our common stock, having an exercise price of $11.10 per share, and an award of RSUs representing the right to receive upon vesting 40,000 shares of our common stock, all of which equity awards were outstanding as of December 31, 2020.The outstanding warrants are comprised of (1) a warrant to purchase up to 50,000 shares of our common stock, which was issued on April 14, 2020, has an exercise price of $3.01 per share, was fully vested and exercisable upon issuance, and expires on December 31, 2021; (2) a warrant to purchase up to 396,000 shares of our common stock, which was issued on April 14, 2020, has an exercise price of $3.01 per share, shall vest and become exercisable in three substantially equal installments of 133,333 shares upon the achievement of specified performance goals and/or a market condition (which market condition has been achieved), and expires on December 31, 2023; and (3) a warrant to purchase up to 20,000 shares of our common stock, which was issued on April 6, 2018, has an exercise price of $11.73 per share, was fully vested and exercisable upon issuance, and expires on April 6, 2023.
(3)
The weighted-average exercise prices reflected in column(b) represents the weighted-average exercise prices of outstanding options.All outstanding RSUs were awarded without payment of any purchase price.For equity compensation plans not approved by security holders, the weighted-average exercise price consists of: (i) a weighted-average exercise price of $15.74 with respect to options to purchase an aggregate of 263,000 shares of our common stock, and (ii) a weighted-average exercise price of $3.38 with respect to warrants to purchase an aggregate of 466,000 shares of our common stock.
Item 13.
The following is a description of transactions since January1, 2019 to which we have been a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at the end of our last two completed fiscal years and in which any of our directors, executive officers or beneficial holders of more than 5% of our common stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
Warrants
In March 2017, we entered into a Note Purchase Agreement with Acacia and Veritone LOC I, LLC (VLOC and collectively with Acacia, the Lenders), which provided for an $8.0 million line of credit (the Bridge Loan).In connection with the Bridge Loan, we issued to the Lenders warrants to purchase an aggregate of 313,440 shares of our common stock at an exercise price of $13.6088 per share, of which warrants to purchase an aggregate of 145,945 shares are currently outstanding.At the time of these transactions, the members of VLOC included entities controlled by Chad Steelberg and Ryan Steelberg, and Mr. Gehl was the Manager of VLOC and was deemed to beneficially own all of the securities held by VLOC. In March 2018, VLOC distributed all of the shares of our common stock and warrants to purchase our common stock held by VLOC to its members.
Our Board has adopted a written policy setting forth the policies and procedures for the review and approval or ratification of transactions with related persons. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.<|endoftext|>Stock), equal in value to (i) $1,303,000,000, divided by (ii) the number of such issued and outstanding shares of ATI, and (b) the contingent right to receive a certain number of shares of Company Class A Stock that may be issued pursuant to an earnout payable to Wilco Acquisition, LP (the sole holder of common stock of ATI as of the date of the Merger Agreement) or its designees, if certain price targets for one share of the Companys Class A Stock are achieved any time between the Closing and the 10 year anniversary of the Closing. The consideration to be paid in respect of each share of preferred stock of ATI issued and outstanding (other than any such shares held by ATIs treasury or held, directly or indirectly, by the Company, Merger Sub or any direct, wholly-owned subsidiary of ATI) will be (a) an amount in cash, equal to $59,000,000, divided by the number of such issued and outstanding shares of preferred stock of ATI (the Preferred Cash Consideration), and (b) a number of shares of Company Class A Stock equal in value to (i) the product of (A) (x) the aggregate Liquidation Amount (as defined in ATIs Certificate of Incorporation (the ATI Charter)) as of the date on which the closing occurs with respect to ATIs preferred stock (after reducing such Liquidation Amount by the Preferred Cash Consideration) (the Preferred Stock Adjusted Base) plus (y) an aggregate accrued amount, calculated based on the Preferred Stock Adjusted Base, at the Dividend Rate (as defined in the ATI Charter) from the Closing Date through the date that is 180 days from the date on which the closing occurs, multiplied by (B) 1.05, divided by (ii) the number of issued and outstanding shares of ATI preferred stock.
The consummation of the Business Combination contemplated by the Merger Agreement is subject to customary closing conditions for special purpose acquisition companies, including, among others: (a) approval by the Companys stockholders and ATIs stockholders (which, with respect to ATIs stockholders, was satisfied immediately following the execution of the Merger Agreement); (b) the Company having at least $5,000,001 of net tangible assets after giving effect to the Companys stockholder redemptions, if any; (c) the expiration or termination of the waiting period under the HSR Act; (d) the listing of the shares of the Companys Class A Stock to be issued in connection with the closing on the NYSE; and (e) the Company having at least $472,500,000 in available cash immediately prior to the effective time of the merger (after taking into account (i) payments required to satisfy the Companys stockholder redemptions and (ii) the net proceeds from the subscription agreements entered into with certain investors (pursuant to which such investors have committed to purchase an aggregate amount of at least $300,000,000 in shares of Company Class A Stock at a purchase price of $10.00 per share, substantially concurrent with, and contingent upon, the consummation of the Business Combination) (the Available Cash).
Each of the Company, Merger Sub and ATI have made representations, warranties and covenants that are customary for a transaction of this nature. The representations and warranties contained in the Merger Agreement terminate and are of no further force or effect as of the consummation of the Business Combination.
The Merger Agreement may be terminated under certain customary and limited circumstances prior to the consummation of the Business Combination, including (a) by mutual written consent of the parties, (b) by either ATI or the Company if (i) the consummation of the Business Combination has not occurred on or prior to August 23, 2021 (the Outside Date), (ii) a final and nonappealable order has been issued or governmental action permanently makes consummation of the transactions illegal or otherwise prevents or prohibits the Business Combination or (iii) the Companys stockholder approval is not obtained at the special meeting of the Companys stockholders, (c) by ATI (i) upon a breach by the Company or Merger Sub if such breach gives rise to a failure of a closing condition and has not been cured within 30 days notice by ATI or cannot be cured prior to the Outside Date, (ii) if the board of directors of the Company does not recommend in favor of the Business Combination in the Proxy Statement or makes any change in its recommendation or (iii) if the Available Cash is less than $472,500,000 and (d) by the Company upon a breach by ATI if such breach gives rise to a failure of a closing condition and has not been cured within 30 days notice by the Company or cannot be cured by the Outside Date.
Upon closing of the Business Combination, and subject to the terms of the Merger Agreement, ATI will become a wholly-owned subsidiary of the Company.
The foregoing description of the Merger Agreement and the Business Combination does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, a copy of which was filed as Exhibit 2.1 on our Current Report on Form 8-K filed with the SEC on February 22, 2021.
For more information about the Merger Agreement and the proposed Business Combination, please see our Current Report on Form 8-K filed with the SEC on February 22, 2021 and the proxy materials that we will file with the SEC. Unless specifically stated, this Annual Report does not give effect to the proposed Business Combination and does not contain the risks associated with the proposed Business Combination. Such risks and effects relating to the proposed Business Combination will be included in the proxy materials filed with the SEC.
### PART III.
Item10.
Joshua A. Pack serves as Chairman of the companys board of directors. Mr. Pack is a Managing Partner of the Credit Funds business at Fortress. Mr. Pack has 20 years of credit investment and workout experience through multiple credit cycles. He is based in Los Angeles and heads the illiquid credit investment strategies at Fortress, serves on the investment committee for the Credit Funds business at Fortress and is a member of the Management Committee of Fortress. Since joining the Credit Funds business at Fortress at its inception in 2002, Mr. Pack has analyzed, structured and negotiated hundreds of lending, structured equity and real estate transactions. Prior to joining Fortress, Mr. Pack was a Vice President with Wells Fargo & Co. in the capital markets group. Before that, Mr. Pack was a Vice President with American Commercial Capital, an independent specialty finance company focused on corporate and real estate lending to middle market businesses that was subsequently acquired by Wells Fargo & Co. in 2001. He serves as a director on multiple corporate Boards and is on the Board of the San Diego Zoo Global Foundation. Mr. Pack previously served on the board of directors of Mosaic from 2017 to 2020 and has also served as the Chairman of FVAC Is board of directors since April 2020 until consummation of its initial business combination in November 2020, the chairman of FVAC III's board of directors since January 2021 and serves as director of FVAC IV and will serve as Chief Executive Officer of FVAC IV. Mr. Pack attended the United States Air Force Academy and received a B.A. in Economics from California State University, San Marcos. Mr. Packs significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Andrew A. McKnight serves as a director and as the companys Chief Executive Officer. Mr. McKnight is a Managing Partner of the Credit Funds business at Fortress. Mr. McKnight is based in San Francisco and heads the liquid credit investment strategies at Fortress, serves on the investment committee for the Credit Funds business at Fortress and is a member of the Management Committee of Fortress. Mr. McKnight previously served on the board of directors of Mosaic from 2017 to 2020. Mr. McKnight has also served on the board of directors and as the Chief Executive Officer of FVAC I since its inception in January 2020 and continues to serve on the board of directors of MP Materials where he is a member of the Compensation Committee, director and Chief Executive Officer of FVAC III since its inception in August 2020 and Chairman of FVAC IV's board of directors. Prior to joining Fortress in February 2005, he was the trader for Fir Tree Partners where he was responsible for analyzing and trading high yield and convertible bonds, bank debt, derivatives and equities for the value-based hedge fund. Prior to Fir Tree, Mr. McKnight worked on Goldman, Sachs & Co.s distressed bank debt trading desk. Mr. McKnight received a B.A. in Economics from the University of Virginia. Mr. McKnights significant investment and financial expertise make him well qualified to serve as a member of our board of directors.
Daniel N. Bass serves as the companys Chief Financial Officer. Mr. Bass has served as Chief Financial Officer of Fortress since 2003, leading the firms finance, accounting, tax, corporate real estate, information technology, HR and corporate development functions. At Fortress, Mr. Bass supported the business growth in AUM from $3 billion to $80 billion. Mr. Bass was the Chief Financial Officer of Fortress for the entire time it was a public company (NYSE:FIG) (2007-2017). Mr. Bass also co-led the completed merger with SoftBank which closed in December 2017. Prior to joining Fortress, Mr. Bass was the Chief Financial Officer of the Corporate Investments division at Deutsche Bank. The division housed over $100 billion in firm assets worldwide. Also, while at Deutsche Bank, Mr. Bass was the global Business Area Controller of the Investment Banking division. In this capacity, he supported growth of the banks global investment banking division, including integration of the Bankers Trust accounting team upon acquisition. Prior to Deutsche Bank, Mr. Bass was with PricewaterhouseCoopers LLPs international tax practice where he advised multi-national & international banks on US & global tax matters. Mr. Bass is a board member of the Real Estate Center at Florida State University. Mr. Bass has also served as the Chief Financial Officer of FVAC I since its inception in January 2020 until the consummation of its business combination in November 2020, as the Chief Financial Officer of FVAC III since its inception in August 2020, as the Chief Financial Officer of FCAC since September 2020 and will serve as the Chief Financial Officer of FVAC IV. Mr. Bass received both a B.S. and a Masters in Accounting from Florida State University.
Micah B. Kaplan serves as the companys Chief Operating Officer. Mr. Kaplan is a Managing Director in the Corporate Debt and Securities Group at Fortress, where he is responsible for the sourcing, underwriting and execution of public and private debt and equity investments across a broad range of industries. Mr. Kaplan has also served as the Chief Operating Officer of FVAC I since its inception in January 2020 until the consummation of its business combination in November 2020, has served as the Chief Operating Officer of FVAC III since its inception in August 2020 and will serve as the Chief Operating Officer of FVAC IV. Prior to joining Fortress in July 2011, Mr. Kaplan was a research analyst at Bank of America Merrill Lynch, where he analyzed and published research on high yield issuers. Mr. Kaplan received a B.A. in Political Science from the University of Pennsylvania.
Alexander P. Gillette serves as the Companys General Counsel. Mr. Gillette is the Deputy General Counsel and a Managing Director of Fortress. He joined Fortress in 2008 after six years at Cleary Gottlieb Steen & Hamilton LLP, where he specialized in mergers and acquisitions, private equity, venture capital and other corporate transactions. Additionally, Mr. Gillette has served as the General Counsel of FVAC III since its inception in August 2020 and will serve as General Counsel of FVAC IV. Mr. Gillette received a B.A with high distinction in the distinguished major in political and social thought from the University of Virginia and | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
To our shareholders.
Since our formation, the Trust has been organized and has operated in such a manner as to qualify for taxation as a REIT under the U.S. federal income tax laws, and we intend to continue to operate in such a manner, but no assurances can be given that we will operate in a manner so as to qualify or remain qualified as a REIT.
Failure to qualify as a REIT, or failure to remain qualified as a REIT, would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distribution to our shareholders. If we fail to qualify as a REIT in any taxable year, we would face serious tax consequences that will substantially reduce the funds available for distribution to our shareholders because: we would not be allowed a deduction for dividends paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; we could possibly be subject to increased state and local taxes; and unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.
In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our shares of beneficial interest.
Failure to make required distributions would subject us to U.S. federal corporate income tax.
We intend to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to qualify as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our shareholders. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our shareholders in a calendar year is less than a minimum amount specified under the Code.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
To qualify as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our shareholders, and the ownership of our shares of beneficial interest. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.
In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities, and qualified real estate assets. The remainder of our investment in securities (other than government securities, securities of taxable REIT subsidiaries (TRS), and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities, securities of TRSs, and qualified real estate assets) can consist of the securities of any one issuer, and no more than 20% of the value of our total assets can be represented by the securities of one or more TRSs. Further, debt instruments that do not otherwise qualify as real estate assets (because they are not secured by interests in real property or in certain entities that directly or indirectly own real property or because they are not issued by other publicly offered REITs) will generally not be treated as securities for purposes of the asset test, but no more than 25% of the value of our total assets may be represented by such debt instruments. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.
The prohibited transactions tax may limit our ability to dispose of our properties.
A REITs net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transactions tax equal to 100% of net gain upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain sales of our properties or may conduct such sales through any TRS that we may form, which would be subject to federal and state income taxation.
Any ownership of a TRS will be subject to limitations and our transactions with a TRS will cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arms-length terms.
Overall, no more than 20% of the value of a REITs assets may consist of stock or securities of one or more TRSs. In addition, the Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arms-length basis. We will monitor the value of our respective investments in any TRS for the purpose of ensuring compliance with TRS ownership limitations and will structure our transactions with any TRS on terms that we believe are arms-length to avoid incurring a 100% excise tax on such transactions. There can be no assurance, however, that we will be able to comply with the 20% limitation or avoid application of the 100% excise tax.
If leases of our properties are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT and would be subject to higher taxes and have less cash available for distribution to our shareholders.
To qualify as a REIT, we must satisfy two gross income tests, under which specified percentages of our gross income must be derived from certain sources, such as rents from real property. Rents paid to the Operating Partnership by third party lessees and any TRS lessee pursuant to the leases of our properties will constitute substantially all of our gross income. In order for such rent to qualify as rents from real property for purposes of the gross income tests, the leases must be respected as true leases for federal income tax purposes and not be treated as service contracts, joint ventures, or some other type of arrangement. If our leases are not respected as true leases for federal income tax purposes, we would fail to qualify as a REIT.
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares.
At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation, or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation, or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our shareholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations, or administrative interpretations.
### ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
### Geographic Diversification/Concentration
The following table lists the states in which our consolidated properties are located and provides certain information regarding our consolidated portfolios geographic diversification/concentration as of December 31, 2020:
(1)
GLA means gross leasable area.
(2)
Annualized base rent is calculated by multiplying (a)base rental payments for the month ended December 31, 2020, by (b)12.
(3)
Excludes the Companys 108,843 square foot corporate office building.
### Scheduled Lease Expirations
The following table provides a summary of lease expirations for our consolidated properties owned as of December 31, 2020, for the periods indicated:
(1)
Excludes leases related to the Companys 108,843 square foot corporate office building.
(2)
Annualized base rent per leased square foot is calculated by dividing (a)annualized base rent as of December 31, 2020 by (b)square footage under executed leases as of December 31, 2020.
(3)
Includes 12 leases which expired on December 31, 2020, representing 0.2% of portfolio leasable square feet.
### Tenants
As of December 31, 2020, our consolidated properties were approximately 96% leased. No single tenant accounted for more than 5.6% of our total annualized base rent or 5.6% of total base revenue as of December 31, 2020; however, 16.7% of our total annualized base rent as of December 31, 2020 were from tenants affiliated with CommonSpirit.
The following table sets forth certain information about the 10 largest tenants in our consolidated portfolio based on total annualized base rent as of December 31, 2020:
Before entering into a lease and during the lease term, we seek to manage our exposure to significant tenant credit issues. In most instances, we seek to obtain tenant financial information, including credit reports, financial statements, and tax returns. Where appropriate, we seek to obtain financial commitments in the form of letters of credit, security deposits, or personal guarantees from tenants. On an ongoing basis, we monitor accounts receivable and payment history for both tenants and properties and seek to identify any credit concerns as quickly as possible. In addition, we keep in close contact with our tenants in an effort to identify and address negative changes to their businesses prior to such adverse changes affecting their ability to pay rent to us.
### Ground Leases
We lease the land upon which 81 of our consolidated properties are built, representing approximately 44.5% of our total leasable square feet and 42.8% of our annualized base revenue as of December 31, 2020. The ground leases subject these properties to certain restrictions. These restrictions may limit our ability to re-let such facilities to tenants not affiliated with the health care delivery system that owns the underlying land. Restrictions may also include rights of first offer and refusal with respect to sales of the properties and may limit the types of medical procedures that may be performed at the facilities.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we are party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings which, individually or in the aggregate, would be expected to have a material effect on our business, financial condition, or results of operations if determined adversely to us.
ITEM 4.
### MINE SAFETY DISCLOSURES
Not applicable.
PARTII
ITEM 5.
The Trusts common shares are traded on the NYSE under the symbol DOC. As of February 22, 2021, the Trust had 387 registered shareholders of record of the Trusts common shares.
It has been the Trusts policy to declare quarterly dividends to its shareholders so as to comply with applicable provisions of the Code governing REITs. The declaration and payment of quarterly dividends remains subject to the review and approval<|endoftext|>(3) The performance share units granted are subject to performance metrics defined in the 2018 Stock Plan, and cliff-vest on the third anniversary of March 1, 2020.
(4) Market value is based on the closing price of our common shares on the Nasdaq Global Select Market on December 31, 2020, which was $34.60.
We have used employment agreements as a means to attract and retain executive officers. These are more fully discussed below. We believe that these agreements provide our executive officers with the assurance that their employment is a long-term arrangement and provide us with the assurance that the officers services will be available to us for the foreseeable future.
### John F. Rathgeber
We previously entered into an employment agreement with our former Chief Executive Officer, John F. Rathgeber (the Rathgeber Employment Agreement). Mr. Rathgeber retired as our Chief Executive Officer on March 31, 2020. For 2020, Mr. Rathgebers 2020 annual base salary was $500,000 and his annual target annual bonus was 70% of his base salary. In connection with and following the completion of the direct listing of our common shares on the Nasdaq Global Select Market on March 28, 2019 (the Listing), and pursuant to the terms of the Rathgeber Employment Agreement, in May 2019, we granted restricted share units of our common shares to Mr. Rathgeber with a value of $1,500,000 (based on the average of the closing price of our common shares on the first 20 trading days of our common shares on the Nasdaq Global Select Market). The restricted share units were fully vested upon issuance. The common shares underlying the restricted share units were delivered to Mr. Rathgeber on April 26, 2020.
Jonathan D. Levy
We have entered into an employment agreement with our Chief Executive Officer, Jonathan D. Levy (the Levy Employment Agreement). Levy provide 90 days notice of non-renewal. For 2020, Mr. Levys annual base salary was $475,000 and his annual target annual bonus was 70% of his base salary. Pursuant to the terms of the Levy Employment Agreement, in March 2020, we granted restricted share units of our common shares to Mr. Levy with a value of $400,000 (based on the average of the closing price of our common shares on the 20 trading days of our common shares on the Nasdaq Global Select Market immediately prior to the grant date, which was $23.00). Upon vesting, Mr. Levy will receive a number of shares of common shares equal to the number of restricted share units that have vested. Levy restricted share units of our common shares with a target value of $300,000 based upon our compensation committees assessment of Mr. Levys performance, one-half of which will vest in equal annual installments on each of the first three anniversaries of the grant date and one-half of which will vest based on the achievement of performance goals established by our compensation committee. If we elect not to renew the term of the Levy Employment Agreement, if we terminate Mr. Levys employment without Cause or if Mr. Levy terminates his employment for Good Reason (as each term is defined in the Levy Employment Agreement), we will continue to pay Mr. Levy his base salary for 18 months (36 months if the termination follows a change in control of Watford Holdings Ltd.), pay him 150% of his target annual bonus (300% if the termination follows a change in control), and his outstanding unvested restricted share units will remain outstanding and continue to vest in accordance with their terms for 12 months (all unvested restricted share units will vest if the termination is following a change in control, with performance-vesting units vesting at target levels). Levy is conditioned on his compliance with the restrictive covenants set forth in the Levy Employment Agreement and his execution and non-revocation of a release of claims in favor of us. Mr. Levy is subject to a non-competition covenant for a period of six months following termination of employment and non-solicitation of employees and customers covenants for a period of 12 months following termination of employment. Levy is not paid severance, we must continue to pay Mr. Levy his base salary and provide medical insurance during the non-competition period, and pay him an amount equal to 25% of his target annual bonus. If
Mr. Levy remains employed by us or an affiliate of ours on the six-month anniversary of the Merger, he will receive a cash payment of $325,000 on the six-month anniversary of the Merger, unless he is terminated without Cause prior thereto, in which case such amount will be paid within five days of such termination. Levy is entitled to receive a cash payment on the closing date of the Merger of a pro-rata 2021 annual bonus based on the number of days elapsed in 2021 through the closing date of the Merger and Mr. Levy's 2020 target annual bonus level (with the equity component of such annual bonus being paid in cash in lieu of units or shares).
The Company and Mr.Levy have entered into an indemnification agreement pursuant to which the Company has agreed to indemnify Mr. Levy against certain liabilities and expenses arising from his being an officer. Levy against the cost of defense, settlement or payment of a judgment under certain circumstances that are permitted under the Bermuda Companies Act.
### Robert L. Hawley
We have entered into an employment agreement with our Chief Financial Officer, Robert L. Hawley (the Hawley Employment Agreement). Hawley provide 90 days notice of non-renewal. For 2020, Mr. Hawleys annual base salary was $335,000 and his annual target annual bonus was 50% of his base salary. In connection with and following the Listing, and pursuant to the terms of the Hawley Employment Agreement, in March 2020, we granted restricted share units of our common shares to Mr. Hawley with a value of $225,000 (based on the average of the closing price of our common shares on the 20 trading days of our common shares on the Nasdaq Global Select Market immediately prior to the grant date, which was $23.00). Upon vesting, Mr. Hawley will receive a number of common shares equal to the number of restricted share units that have vested. Hawley restricted share units of our common shares with a target value of $175,000 based upon our compensation committees assessment of Mr. Hawleys performance, one-half of which will vest in equal annual installments on each of the first three anniversaries of the grant date and one-half of which will vest based on the achievement of performance goals established by our compensation committee. If we elect not to renew the term of the Hawley Employment Agreement, if we terminate Mr. Hawleys employment without Cause or if Mr. Hawley terminates his employment for Good Reason (as each term is defined in the Hawley Employment Agreement), we will continue to pay Mr. Hawley his base salary for 12 months (24 months if the termination follows a change in control of Watford Holdings Ltd.), pay him 100% of his target annual bonus (200% if the termination follows a change in control), and his outstanding unvested restricted share units will remain outstanding and continue to vest in accordance with their terms for 12 months (all unvested restricted share units will vest if the termination is following a change in control, with performance-vesting units vesting at target levels). Hawley is conditioned on his compliance with the restrictive covenants set forth in the Hawley Employment Agreement and his execution and non-revocation of a release of claims in favor of us. Mr. Hawley is subject to a non-competition covenant for a period of three months following termination of employment and non-solicitation of employees and customers covenants for a period of 12 months following termination of employment. Hawley is not paid severance, we must continue to pay Mr. Hawley his base salary and provide medical insurance during the non-competition period, and pay him an amount equal to 25% of his target annual bonus. If Mr. Hawley remains employed by us or an affiliate of ours on the six-month anniversary of the Merger, he will receive a cash payment of $250,000 on the six-month anniversary of the Merger, unless he is terminated
21 without Cause prior thereto, in which case such amount will be paid within five days of such termination. Hawley is entitled to receive a cash payment on the closing date of the Merger of a pro-rata 2021 annual bonus based on the number of days elapsed in 2021 through the closing date of the Merger and Mr. Hawley's 2020 target annual bonus level (with the equity component of such annual bonus being paid in cash in lieu of units or shares).
The Company and Mr.Hawley have entered into an indemnification agreement pursuant to which the Company has agreed to indemnify Mr. Hawley against certain liabilities and expenses arising from his being an officer. Hawley against the cost of defense, settlement or payment of a judgment under certain circumstances that are permitted under the Bermuda Companies Act.
### Elizabeth A. Cunningham.
We have entered into an employment agreement with our Chief Risk Officer, Elizabeth A. Cunningham (the Cunningham Employment Agreement). The term of employment is three years commencing January 2, 2020, subject to automatic one-year extensions unless either we or Ms. Cunningham provide 90 days notice of non-renewal. For 2020, Ms. Cunninghams annual base salary was $310,000 and her annual target annual bonus was 50% of her base salary. Within 30 days of Ms. Cunningham's commencement date, we paid a lump sum signing bonus of $100,000, provided that Ms. Cunningham shall repay the full amount if, prior to the one-year anniversary of the commencement date, Ms. Cunningham terminates her employment without Good Reason or is terminated by us for Cause (as each term is defined in the Cunningham Employment Agreement). In connection with and following the Listing, and pursuant to the terms of the Cunningham Employment Agreement, in March 2020, we granted restricted share units of our common shares to Ms. Cunningham with a value of $150,000 (based on the average of the closing price of our common shares on the 20 trading days of our common shares on the Nasdaq Global Select Market immediately prior to the grant date, which was $23.00). Upon vesting, Ms. Cunningham will receive a number of common shares equal to the number of restricted share units that have vested. In addition, each calendar year beginning with 2020, we will grant to Ms. Cunningham restricted share units of our common shares with a target value of $150,000 based upon our compensation committees assessment of Ms. Cunninghams performance, one-half of which will vest in equal annual installments on each of the first three anniversaries of the grant date and one-half of which will vest based on the achievement of performance goals established by our compensation committee. If we elect not to renew the term of the Cunningham Employment Agreement, if we terminate Ms. Cunninghams employment without Cause or if Ms. Cunningham terminates her employment for Good Reason, we will continue to pay Ms. Cunningham her base salary for 12 months (24 months if the termination follows a change in control of Watford Holdings Ltd.), pay her 100% of her target annual bonus (200% if the termination follows a change in control), and her outstanding unvested restricted share units will remain outstanding and continue to vest in accordance with their terms for 12 months (all unvested restricted share units will vest if the termination is following a change in control, with performance-vesting units vesting at target levels). Our severance obligation to Ms. Cunningham is conditioned on her compliance with the restrictive covenants set forth in the Cunningham Employment Agreement and her execution and non-revocation of a release of claims in favor of us. Ms. Cunningham is subject to a non-competition covenant for a period of three months following termination of employment and non-solicitation of employees and customers covenants for a period of 12 months following termination of employment. If we elect to | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
To which non-employee directors are entitled to receive annual compensation having economic value of approximately $119,000, which includes a cash retainer of $59,000 and restricted stock grants with an economic value of approximately $60,000. The cash retainer may be paid, at each directors election, in cash or in restricted shares of our common stock. Each of Mr. Bjork and Ms. Srinivasan, as the Series A Directors, agreed to waive participation in the Companys non-employee director compensation program. Each of the non-employee directors, other than the Series A Directors, elected to be paid his retainer for 2020 in restricted shares of our common stock. With respect to restricted stock awards, the number of shares issuable was calculated based on the average of the reported closing price per share of our common stock on the Nasdaq Global Market over a twenty (20) consecutive trading day period prior to approval by the Board of such grants.
The Chairman of the Board and the chairperson of each of the committees of the Board are also entitled to a supplemental retainer, which may be paid, at each directors election, in cash or in restricted shares of our common stock. Specifically, the Chairman of the Board receives an additional $36,000 per year of service; the chairperson of the Audit Committee receives an additional $18,000 per year of service; the chairperson of the Compensation Committee receives an additional $12,000 per year of service; and the chairperson of the Nominating Committee receives an additional $10,000 per year of service. Each of the non-employee directors, other than the Series A Directors, elected to be paid his supplemental retainer in 2020 in restricted shares of our common stock.
Our non-employee directors are entitled to participate in the 2018 Plan. Non-employee directors are eligible to be awarded non-qualified stock options, shares of restricted stock, stock appreciation rights and other awards under the 2018 Plan. A recipient of restricted stock under the 2018 Plan is entitled to vote such shares and would be entitled to dividends, if any, paid on such shares, but is not entitled to dispose of such shares until they have vested in accordance with the terms of the applicable award.
During the fiscal year ended December 31, 2020, each of Michael Brodsky, Michael Casey, and Charles Frumberg was awarded an aggregate of 34,770, 28,842 and 25,053 in restricted shares of common stock, respectively, in consideration for his services as a director of the Company. All of these awards were made pursuant to the 2018 Plan. Each of such restricted stock awards were granted on July 10, 2020. All such restricted stock awards vest as to 100% of such shares on the first anniversary of the date of grant, provided that the non-employee director is then serving as a director of the Company. Each of Mr. Bjork and Ms. Srinivasan, as the Series A Directors, agreed to waive participation in the Companys 2018 Plan and did not receive any compensation for their service as directors during the fiscal year ended December 31, 2020. Mr. Mahlabs director compensation is included in the Summary Compensation Table above.
Our non-employee directors are not entitled to retirement, benefit or other perquisite programs.
The following table provides certain information with respect to the compensation paid to our non-employee directors during the fiscal year ended December 31, 2020.
(1)
The amount under this column with respect to each of Michael Brodsky, Michael Casey and Charles Frumberg reflects the dollar amount of fees for which such non-employee director elected to be paid in restricted shares of our common stock in lieu of cash, which shares were issued under the 2018 Plan on July 10, 2020. The number of restricted shares issued to each such non-employee director in lieu of cash was calculated based on the average of the reported closing price per share of our common stock on the Nasdaq Global Market over a twenty (20) consecutive trading day period prior to approval by the Board of such grants. Messrs. Brodsky, Casey and Frumberg were granted 22,138, 16,210 and 12,421 restricted shares of our common stock, respectively, in lieu of cash, the aggregate grant date fair value of which, computed in accordance with ASC 718, disregarding any service-based vesting conditions, is $95,636, $70,027 and $53,659, respectively.
(2)
The amounts under this column reflect the sum of the aggregate grant date fair value of 12,632 restricted shares of our common stock granted to each of Michael Brodsky, Michael Casey and Charles Frumberg under the 2018 Plan on July 10, 2020, each computed in accordance with ASC 718, disregarding any service-based vesting conditions. For a discussion of the assumptions we made in valuing the stock awards, see Note 2[Q] Summary of Significant Accounting Policies Stock-based compensation and Note 10 Stock-Based Compensation in the notes to our consolidated financial statements contained in the 2020 Annual Report. The amounts set forth under this column do not include the restricted shares of common stock granted in lieu of cash for fees set forth under the column Fees Earned or Paid in Cash.
(3)
Each of the restricted stock awards granted to Messrs. Brodsky, Casey and Frumberg will vest in full on July 10, 2021, provided that such non-employee director is then serving as a director of the Company on such date.
(4)
At December 31, 2020, Michael Brodsky held 34,770 shares of unvested restricted stock, Michael Casey held 28,842 shares of unvested restricted stock, Charles Frumberg held 25,053 shares of unvested restricted stock, and neither Anders Bjork nor Medhini Srinivasan held any shares of unvested restricted stock.
(5)
At December 31, 2020, Michael Brodsky held options to purchase 95,000 shares of our common stock and each of Michael Casey and Charles Frumberg held options to purchase 45,000 shares of our common stock. Neither Anders Bjork nor Medhini Srinivasan held any options to purchase shares of our common stock at December 31, 2020.
(6)
Anders Bjork and Medhini Srinivasan did not receive any compensation for their service as directors during the fiscal year ended December 31, 2020.
Item 12.
The following table sets forth information regarding ownership of shares of our common stock as of April 28, 2021 by: each stockholder known by us to own beneficially more than 5% of our outstanding common stock; each of our current directors;
To our knowledge, except as set forth in the footnotes to the table and subject to applicable community property laws, each person or entity named in the table has sole voting and disposition power with respect to the shares set forth opposite such persons or entitys name. The number of shares beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has the sole or shared voting power or investment power and any shares that the individual has the right to acquire within 60 days of April 28, 2021, through the exercise of stock options, warrants or other convertible securities or any other right. Shares of our common stock that a person has the right to acquire within 60 days of April 28, 2021 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights but are not deemed outstanding for purposes of computing the percentage ownership of any other person (except with respect to the percentage ownership of all directors and executive officers as a group). As used in this Amendment No. 1, voting power is the power to vote or direct the voting of shares and investment power includes the power to dispose or direct the disposition of shares.
The number and percentage of shares beneficially owned is computed on the basis of 35,985,274 shares of our common stock outstanding as of April 28, 2021. The information in the following table regarding the beneficial owners of more than 5% of our common stock is based upon information supplied by our principal stockholders or set forth in Schedules 13D and 13G filed with the SEC. The determination that there were no other persons, entities or groups known to the Company to beneficially own more than 5% of the Companys outstanding common stock was based on a review of all statements filed with the SEC with respect to the Company pursuant to Section 13(d) or 13(g) of the Exchange Act.
The address for those persons for which an address is not otherwise provided is c/o PowerFleet, Inc., 123 Tice Boulevard, Woodcliff Lake, New Jersey 07677.
* Represents less than 1% of the outstanding shares of our common stock.
(1)
Ownership percentages are based on 35,985,274 shares of common stock of the Company outstanding as of April 28, 2021.
(2)
3 to Schedule 13D filed with the SEC on February 11, 2021, ABRY Senior Equity Holdings V, LLC (ASEH) may be deemed to beneficially own an aggregate of 7,477,211 shares of the Companys common stock issuable upon conversion of shares of Series A Preferred Stock held directly by ASE and ASECF, with shared voting and dispositive power over such shares, and ASE beneficially owns an aggregate of 6,274,876 shares of the Companys common stock issuable upon conversion of shares of Series A Preferred Stock held directly by it, with shared voting and dispositive power over such shares.
(3)
Based on information contained in a Schedule 13G filed with the SEC on February 14, 2020, Cannell Capital LLC, a Wyoming limited liability company (Cannell Capital), and J. Carlo Cannell, a U.S. citizen who serves as the sole managing member of Cannell Capital, beneficially own an aggregate of 2,762,836 shares of the Companys common stock, with shared voting and dispositive power over these shares.
(4)
2 to Schedule 13G filed with the SEC on February 11, 2021, The Phoenix Holding Ltd. beneficially owns an aggregate of 2,252,347 shares of the Companys common stock, with shared voting and dispositive power over these shares.
(5) Based on information contained in a Schedule 13G filed with the SEC on February 2, 2021, BlackRock, Inc. beneficially owns an aggregate of 1,854,858 shares of the Companys common stock, with sole voting and dispositive power over these shares.
(6)
This number includes (i) 320,644 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60 days of April 28, 2021; (ii) 6,414 restricted shares of common stock, which shares vest on December 31, 2021, provided that Mr. (iii) 17,712 restricted shares of common stock, which shares vest on February 24, 2022, provided that Mr. (iv) 8,741 restricted shares of common stock, 50% of which shares vest on each of January 7, 2022 and January 7, 2023, provided that Mr. (v) 29,545 restricted shares of common stock, 33 1/3% of which shares vest on each of November 5, 2021, November 5, 2022 and November 5, 2023, provided that Mr. and (vi) 89,655 restricted shares of common stock, 25% of which shares vest on each of February 7, 2022, February 7, 2023, February 7, 2024 and February 7, 2025, provided that Mr. Wolfe is employed by the Company on each such date.
(7)
This number includes (i) 121,342 shares of our common stock issuable upon exercise of options which are currently exercisable or which will become exercisable within 60 days of April 28, 2021; (ii) 5,921 restricted shares of common stock, which shares vest on December 31, 2021, provided that Mr. (iii) 13,495 restricted shares of common stock, which shares vest on February 24, 2022, provided that Mr. (iv) 5,009 restricted shares of common stock, 50% of which shares vest on each of January 7, 2022 and January 7, 2023, provided that Mr. (v) 20,455 restricted shares of common stock, 33 1/3% of which shares vest on each of November 5, 2021, November 5, 2022 and November 5, 2023, provided that Mr. and (vi) 41,379 restricted shares of common stock, 25% of<|endoftext|>Regarding the beneficial ownership of our shares of common stock as of March 19, 2021 based on information obtained from the persons named below, with respect to the beneficial ownership of our shares of common stock, by: each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
In the table below, percentage ownership is based on 23,727,500 shares of Class A common stock (which includes shares of Class A common stock that are underlying the units) and 5,931,350 shares of Class B common stock outstanding as of March 19, 2021. The table below does not include the shares of Class A common stock underlying the private placement warrants held by our sponsor because these securities are not exercisable within 60 days of this Report.
*
Less than one percent.
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is 102 East Main Street, Second Story, Carnegie, Pennsylvania 15106.
(2)
The interests shown consist of founder shares and sponsor shares. The Class A Units of Opco (and corresponding shares of our Class B common stock) comprising such shares will be exchangeable for shares of our Class A common stock after the time of our initial business combination on a one-for-one basis, subject to adjustment, as described in the section entitled Description of Securities. Excludes forward purchase securities that will only be issued, if at all, at the time of our initial business combination.
(3)
Rice Acquisition Sponsor LLC is the record holder of the shares reported herein. Daniel Joseph Rice, IV and J. Kyle Derham are the managing members of Rice Acquisition Sponsor LLC.
(4)
Upon the closing of our initial public offering, our sponsor transferred 309,063 founder shares to Atlas Point Fund pursuant to the forward purchase agreement. Atlas Point Fund is the record holder of the shares reported herein. CIBC National Trust Company, a limited-purpose national trust bank, is the manager of Atlas Point Fund. The parent company of CIBC National Trust is CIBC Private Wealth Group, LLC, which in turn is an indirect, wholly owned subsidiary of Canadian Imperial Bank of Commerce (CIBC). Accordingly, CIBC may be deemed to have or share beneficial ownership of the common stock held directly by Atlas Point Fund. The business address for Atlas Point Energy Infrastructure Fund, LLC is: 3920 Northside Parkway, 7th Floor, Atlanta, Georgia 30327.
(5)
Based on a Schedule 13G/A filed on November 5, 2020 (the Adage 13G). According to the Adage 13G, Adage Capital Partners, L.P., a Delaware limited partnership (ACP is the direct owner of such Class A Common Stock. Adage Capital Partners GP, L.L.C., a limited liability company organized under the laws of the State of Delaware (ACPGP), is the general partner of ACP and therefore has beneficial ownership of the shares of Class A Common Stock directly owned by ACP. Adage Capital Advisors, L.L.C., a limited liability company organized under the laws of the State of Delaware (ACA), is the managing member of ACPGP, the general partner of ACP, and therefore has beneficial ownership of the shares of Class A Common Stock directly owned by ACP. Robert Atchinson (Mr. Atchinson) is the managing member of ACA, which is the managing member of ACPGP, which is the general partner of ACP and therefore Mr. Atchinson has beneficial ownership of the shares of Class A Common Stock directly owned by ACP. Phillip Gross (Mr. Gross) is the managing member of ACA, which is the managing member of ACPGP, which is the general partner of ACP and therefore Mr. Gross has beneficial ownership of the shares of Class A Common Stock directly owned by ACP.
(6)
The address of CIBC Private Wealth Group, LLC is 3290 Northside Parkway NW, 7th Flr, Atlanta, GA 30327. Based on a Schedule 13G/A filed on February 14, 2021.
(7)
The address of Goldman Sachs Asset Management is 200 West Street New York, NY 10282. Based on a Schedule 13G/A filed on December 16, 2020.
(8)
The address of Hartree Partners, LP is 1185 Avenue of the Americas New York, NY 10036. Based on a Schedule 13G/A filed on February 8, 2021.
(9)
The address of HITE Hedge Asset Management LLC is 300 Crown Colony Drive Suite 108 Quincy, MA 02169. Based on a Schedule 13G/A filed on February 17, 2021.
(10)
The address of Kensico Capital Management Corp. is 55 Railroad Avenue, 2nd Floor Greenwich, CT 06830. Based on a Schedule 13G/A filed on February 12, 2021.
### Changes in Control
None.
Item 13.
### Founder Shares
In September 2020, our sponsor received 5,750,000 Class B Units of Opco for no consideration and purchased 5,750,000 corresponding shares of our Class B common stock, 2,500 shares of our Class A common stock and 100 Class A Units of Opco and 100 corresponding shares of our Class B common stock for an aggregate of $26,000. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the total outstanding equity upon completion of our initial public offering (excluding the sponsor shares). In October, 2020 our sponsor forfeited 90,000 Class B Units of Opco, and 30,000 Class Units of Opco were issued to each of our independent directors. In October 2020, we effected a dividend, and Opco effected a distribution, resulting in our Sponsor owning 6,091,250 Class B Units and 6,091,250 shares of our Class B common stock that comprise the founder shares. Our sponsor transferred a corresponding number of shares of our Class B common stock to our independent directors. Following the closing of our initial public offering, our sponsor forfeited 309,063 Class B Units of Opco, and 309,063 Class B Units of Opco was issued to Atlas Point Fund. Our sponsor transferred a corresponding number of shares of our Class B common stock to Atlas Point Fund. Up to 806,250 founder shares were subject to forfeiture by our sponsor depending on the extent to which the underwriters over-allotment option was exercised. The founder shares (including the Class A common stock issuable upon exchange thereof) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder. On October 26, 2020, the underwriters partially exercised the over-allotment option to purchase an additional 2,225,000 Units; thus, only 250,000 founder shares remained subject to forfeiture to the extent the over-allotment option was exercised. On December 5, 2020, the remaining underwriters over-allotment option expired unexercised; thus, 250,000 founder shares held by our sponsor were forfeited for no consideration. As of December 31, 2020, there were 5,931,350 shares of Class B common stock issued and outstanding.
Private Placement Warrants
Our sponsor purchased from us an aggregate of 6,093,900 private placement warrants at a purchase price of $1.00 per warrant ($6,093,900 in the aggregate) in a private placement that occurred simultaneously with the closing of our initial public offering. Atlas Point Fund also purchased 677,100 private placement warrants at a purchase price of $1.00 per warrant ($677,100 in the aggregate).
We have entered into a forward purchase agreement pursuant to which we may elect, in our sole and absolute discretion, to offer Atlas Point Fund, which is a fund managed by CIBC National Trust Company the opportunity to purchase up to $75,000,000 of either (i) a number of forward purchase units for $10.00 per unit or (ii) a number of forward purchase shares for $9.67 per share in a private placement that will close simultaneously with the closing of our initial business combination. Each whole forward purchase warrant is exercisable to purchase one share of our Class A common stock at $11.50 per share. The forward purchase warrants will have the same terms as the public warrants and the forward purchase shares will be identical to the shares of Class A common stock included in the units being sold in our initial public offering, except the forward purchase shares and the forward purchase warrants will be subject to transfer restrictions and certain registration rights and the forward purchase units will consist of only one-third of one forward purchase warrant. The funds from the sale of the forward purchase securities may be used as part of the consideration to the sellers in the initial business combination, and any excess funds may be used for the working capital needs of the post-transaction company. This agreement is independent of the percentage of stockholders electing to redeem their public shares and may provide us with an increased minimum funding level for the initial business combination. The forward purchase agreement is subject to conditions, including Atlas Point Fund giving us its written consent to purchase the forward purchase securities no later than five days after we notify it of our intention to meet to consider entering into a definitive agreement for a proposed business combination. Atlas Point Fund may grant or withhold its consent to the purchase entirely within its sole discretion. Accordingly, if Atlas Point Fund does not consent to the purchase, it will not be obligated to purchase the forward purchase securities. Additionally, pursuant to the terms of the forward purchase agreement, we have granted Atlas Point Fund the right to appoint a single observer to our board of directors until the consummation of our initial business combination. Such observer will not have voting rights or otherwise have any of the powers of a member of our board of directors and Atlas Point Fund will not have the right to appoint such observer at any time that Atlas Point Fund or any of Atlas Point Funds affiliates has the right to designate a director or observer to the board of directors of a special purchase acquisition company that is focused on an industry similar to that which we are focused.
### Opco LLC Agreement
In connection with our initial public offering, we entered into the Amended and Restated Limited Liability Company Agreement of Opco (the Opco LLC Agreement). A form of the Opco LLC Agreement was filed as an exhibit to our Registration Statement on Form S-1 filed in connection with our initial public offering, and the following description of the Opco LLC Agreement is qualified in its entirety by reference thereto.
Conversion of Class B Units of Opco and Exchange Right
Our initial stockholders own all of the outstanding Class B Units of Opco. The Class B Units of Opco will convert into Class A Units of Opco in connection with the initial business combination on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like and subject to further adjustment as described below under Founder Shares Anti-Dilution.
In addition, following our initial business combination, holders of Class A Units of Opco (other than Rice Acquisition Corp.) will have the right (an exchange right), subject to certain limitations, to exchange Class A Units of Opco (and a corresponding number of shares of our Class B common stock) for, at our option, (i) shares of our Class A common stock on a one-for-one basis, subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, or (ii) a corresponding amount of cash. Our decision to make a cash payment upon an exercise of an exchange right will be made by our independent directors. We will determine whether to issue shares of our Class A common stock or pay cash based on facts in existence at the time of the decision, which we expect would include the relative value of the Class A common stock (including trading prices for the Class A common stock at the time), the cash purchase price, the availability of other sources of liquidity (such as an issuance of preferred stock) to acquire the Class A Units of Opco and alternative uses for such cash.
Holders of Class A Units of Opco (other than Rice Acquisition Corp.) will generally be permitted to exercise the exchange right on a quarterly basis, subject to certain de minimis allowances. In addition, additional exchanges may occur | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
$10.00 per share on the liquidation of our Trust Account (or less than $10.00 per share in certain circumstances where a third-party brings a claim against us that our Sponsor is unable to indemnify) and our warrants will expire worthless. See If third parties bring claims against us, the proceeds held in the trust account could be reduced and theper-shareredemption amount received by shareholders may be less than $10.00per share and other risk factors below.
Neither our Sponsor, members of our management team nor any of their affiliates are under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to us upon completion of our Business Combination. Prior to the completion of our Business Combination, we do not expect to seek loans from parties other than our Sponsor or an affiliate of our Sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account. If we are unable to obtain these loans, we may be unable to complete our Business Combination. If we do not complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Consequently, our public shareholders may only receive an estimated $10.00 per share, or possibly less, on our redemption of our public shares (or less than $10.00 per share on the redemption of their shares in certain circumstances where a third-party brings a claim against us that our Sponsor is unable to indemnify) and our warrants will expire worthless.
Subsequent to our completion of our Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our share price, which could cause you to lose some or all of your investment.
If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and theper-shareredemption amount received by shareholders may be less than $10.00 per share.
Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of our public shareholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third partys engagement would be significantly more beneficial to us than any alternative.
Upon redemption of our public shares, if we have not completed a Business Combination within 24 months from the IPO Closing Date, or upon the exercise of a redemption right in connection with our Business Combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the ten years following redemption. Pursuant to the letter agreement, our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below the lesser of (i) $10.00 per public share or (ii)the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our taxes if the funds in the Trust Account are held in an interest-bearing account, provided that such liability will not apply to any claims by a third party or prospective target business that executed a waiver of any and all rights to seek access to the Trust Account nor will it apply to any claims under our indemnity of the underwriter of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act. However, we have not asked our Sponsor to reserve for such indemnification obligations, nor have we independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations, and we believe that our Sponsors only assets are securities of the Company. As a result, if any such claims were successfully made against the Trust Account, the funds available for our Business Combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our Business Combination, and you would receive such lesser amount per share in connection with any redemption of your public shares.
Because we have net tangible assets in excess of $5,000,001 and timely filed a Current Report on
Moreover, if we were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the Trust Account to us unless and until the funds in the Trust Account were released to us in connection with our completion of a Business Combination.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per share and (ii)the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our taxes if the funds in the Trust Account are held in an interest-bearing account, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations.
Accordingly, any indemnification provided will be able to be satisfied by us only if (i)we have sufficient funds outside of the Trust Account or (ii)we complete a Business Combination.
If, after we distribute the proceeds in the Trust Account to our public shareholders, we file a bankruptcy orwinding-uppetition or an involuntary bankruptcy orwinding-uppetition is filed against us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of our Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our Board and us to claims of punitive damages.
In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public shareholders from the Trust Account prior to addressing the claims of creditors.
To this end, the proceeds will not be invested and will be held in anon-interestbearing
Trust Account. The Trust Account is intended as a holding place for funds pending the earliest to occur of: (a)the completion of our Business Combination; (b)the redemption of any public shares properly tendered in connection with a shareholder vote to amend our amended and restated memorandum and articles of associationto modify the substance or timing of our obligation to allow redemption in connection with our Business Combination or to redeem 100% of our public shares if we do not complete a Business Combination within 24 months from the IPO Closing Date; or (c)absent our completing a Business Combination within 24 months from the IPO Closing Date, our return of the funds held in the Trust Account to our public shareholders as part of our redemption of the public shares. If we do not complete our Business Combination, our public shareholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public shareholders (or less than $10.00 per share in certain circumstances), and our warrants will expire worthless.
Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, including our ability to negotiate and complete our Business Combination and results of operations.
We are subject to laws, regulations and rules enacted by national, regional and local governments, and Nasdaq.
In addition, a failure to comply with applicable laws, regulations or rules, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete our Business Combination, and results of operations.
In the event we elect to pursue an acquisition outside of the areas of our managements expertise, our managements expertise may not be directly applicable to its evaluation or operation, and the information contained in this Annual Report on
Form10-K/Aregarding the areas of our managements expertise would not be relevant to an understanding of the business that we elect to acquire. Accordingly, any shareholder who choose to remain shareholders following our Business Combination could suffer a reduction in the value of their shares.
Although we have identified general criteria and guidelines that we believe are important in evaluating prospective target businesses and our strategy will be to identify, acquire and build a company in the TMT sector, we may enter into our Business Combination with a target business that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our Business Combination may not have attributes entirely consistent with our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating prospective target businesses and our strategy will be to identify, acquire and build a company in the TMT sector, it is possible that a target business with which we enter into our Business Combination will not have all of these positive attributes. If we complete our Business Combination with a target business that does not meet some or all of these guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if shareholder approval of the transaction is required by law, or we decide to obtain shareholder approval for business or other legal reasons, it may be more difficult for us to attain shareholder approval of our Business Combination if the target business does not meet our general criteria and guidelines. If we do not complete our Business Combination, our public shareholders may only receive their pro rata portion of the funds in the Trust Account that are available for distribution to public shareholders, and our warrants will expire worthless.
Unless we complete our Business Combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm that the price we are paying is fair to our unaffiliated shareholders from a financial point of view. If no opinion is obtained, our shareholders will be relying on the judgment of our Board, who will determine fair market value based on standards generally accepted<|endoftext|>Founder shares held by the Companys initial shareholders or such affiliates, as applicable, prior to such issuance (the Newly Issued Price), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds (including from such issuances, the IPO and the sale of the forward purchase units), and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Companys Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the Market Value) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger prices described below under Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00 and Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00 will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described adjacent to the caption Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00 will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The warrants will become exercisable on the later of 12 months from the closing of the IPO or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Companys initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to Class A ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current. No warrant will be exercisable and the Company will not be obligated to issue a Class A ordinary share upon exercise of a warrant unless the Class A ordinary share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the Class A ordinary share underlying such unit.
upon a minimum of 30days prior written notice of redemption (the 30-day redemption period); and if, and only if, the closing price of the ClassA ordinary shares equals or exceeds $18.00 per share, subject to adjustment, for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
at a price of $0.10 per warrant; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares, based on the redemption date and the fair market value (as defined below) of ClassA ordinary shares except as otherwise described below; and if, and only if, the closing price of ClassA ordinary shares equals or exceeds $10.00 per share, subject to adjustment, for any 20trading days within the 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders; and if the closing price of the ClassA ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share, subject to adjustment, the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above.
In addition, if a registration statement covering the Class A ordinary shares issuable upon exercise of the warrants is not effective by the sixtieth (60th) business day after the closing of the initial Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a cashless basis in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if Class A ordinary shares are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a covered security under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering each such warrant for that number of shares of the Companys Class A ordinary shares equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of Class A ordinary shares underlying the warrants, multiplied the excess of the fair market value over the exercise price of the warrants by (y) the fair market value and (B) 0.361. The fair market value shall mean the average reported closing price of the Class A ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent.
### Note 5 Private Placement
Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 9,000,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $13,500,000, in a private placement. The proceeds from the Private Placement Warrants was added to the proceeds from the IPO held in the Trust Account.
The Private Placement warrants are identical to the warrants sold in the IPO, except that the Private Placement Warrants, so long as they are held by the Sponsor or its permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A ordinary shares issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Companys initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to certain registration rights.
The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the units being sold in the IPO.
The Sponsor has agreed to (i) waive its redemption rights with respect to its founder shares and public shares in connection with the completion of the initial Business Combination, (ii) waive its redemption rights with respect to its founder shares and public shares in connection with a shareholder vote to approve an amendment to the Companys amended and restated memorandum and articles of association (A) to modify the substance or timing of the Companys obligation to allow redemption in connection with the initial Business Combination or to redeem 100% of the Companys public shares if the Company has not consummated its initial Business Combination within the Combination Period or (B) with respect to any other material provisions relating to shareholders rights or pre-initial Business Combination activity, (iii) waive its rights to liquidating distributions from the Trust Account with respect to its founder shares if the Company fails to complete its initial Business Combination within the Combination Period, and (iv) vote any founder shares held by the Sponsor and any public shares purchased during or after the IPO (including in open market and privately-negotiated transactions) in favor of the initial Business Combination.
Founder Shares
On October 7, 2020, the Sponsor paid $25,000, or approximately $0.002 per share, to cover certain offering costs in consideration for 14,375,000 Class B ordinary shares, par value $0.0001 (the founder Shares).
The initial shareholders have agreed not to transfer, assign or sell any of their founder shares and any Class A ordinary shares issuable upon conversion thereof until the earlier to occur of: (i) one year after the completion of the initial Business Combination, or (ii) the date on which the Company completes a liquidation, merger, share exchange or other similar transaction after the initial Business Combination that results in all of the Companys shareholders having the right to exchange their Class A ordinary shares for cash, securities or other property; Notwithstanding the foregoing, if (1) the closing price of Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (2) if the Company consummates a transaction after the initial Business Combination which results in the Companys shareholders having the right to exchange their shares for cash, securities or other property, the founder shares will be released from the lock-up.
On October 9, 2020, the Sponsor agreed to loan the Company up to $300,000 to be used for a portion of the expenses of the IPO. These loans are non-interest bearing, unsecured and are due at the earlier of December 31, 2021 or the closing of the IPO. The loan will be repaid upon the closing of the IPO out of the $1,000,000 of offering proceeds that has been allocated to the payment of offering expenses As of December 21, 2020, the Company had borrowed $222,583 under the promissory note.
Due to Related Parties
The balance of $5,162 represents the amount accrued for the administrative support services provided by Sponsor.
### Related Party Loans
In order to finance transaction costs in connection with an intended Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Companys officers and directors may, but are not obligated to, loan the Company funds as may be required (Working Capital Loans). If the Company completes the initial Business Combination, the Company would repay the Working Capital Loans. In the event that the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to repay the Working Capital Loans but no proceeds from the Trust Account would be used to repay the Working Capital Loans. Up to $1,500,000 of such Working Capital Loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender.
Administrative Service Fee
Commencing on the Effective Date of the registration statement, the Company has agreed to pay the Sponsor $10,000 per month for office space, utilities, secretarial and administrative support services provided to members of the Companys management team.
On December 16, 2020, the Company entered into a forward purchase agreement pursuant to | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
1,643 of these RSUs represent a contingent right to receive one Common Share per vested RSU upon Mr. Conforti leaving the Board and the remaining 41,420 vested RSUs will be settled for Common Shares on a one-for-one basis by or before March 15, 2022. Excluded from the total are 110,918 unvested RSUs of which 9,258 RSUs will vest in February 2022, 46,104 RSUs will vest in installments in February 2022 and February 2023, and 55,556 RSUs shall vest in one-third installments in August 2022, 2023 and 2024; Also excludes 152,491 unearned and unvested PSUs. These PSUs shall be earned based upon the satisfaction of certain TSR criteria with the number of PSUs Mr. Conforti can earn varying based on the Companys TSR performance over a three-year performance period established at the time the respective PSU is allocated; Confortis continued employment on the date the respective security vests or is earned. None of Mr. Confortis holdings are pledged as collateral or security.
(6)
Represents 37,781 Common Shares held directly by Mr. Yale and 8,358 vested RSUs which are to be settled for Common Shares on a one-for-one basis by or before March 15, 2022. Excluded from the total are: (i) 11,146 unvested RSUs of which 1,925 RSUs will vest in February 2022 and 9,221 RSUs which shall vest in installments in February 2022 and 2023; Yale is in continued compliance with certain covenants in the Yale Agreement and subject to certain provisions of such agreement relating to a change in control of the Company, and (ii) 19,609 unearned and unvested PSUs which shall be earned based upon the satisfaction of certain relative TSR criteria with the number of earned PSUs ranging from 0% to 150% of the allocated amount awarded to Mr. Yale based on the Companys TSR performance over the three-year performance period established at the time the respective PSU is allocated; Yale is in continued compliance with certain covenants in the Yale Agreement and subject to certain provisions of such agreement relating to a change in control of the Company. Yales continued employment on the date the respective security vests or is earned. None of Mr. Yales holdings are pledged as collateral or security.
(7)
Represents 16,660 unrestricted Common Shares held directly by Mr. Demchak and 6,965 vested RSUs of which are to be settled for Common Shares on a one-for-one basis by or before March 15, 2022. Excluded from the total are: (i) 9,289 unvested RSUs of which 1,605 RSUs will vest in February 2022 and (ii) 7,684 RSUs shall vest in installments in February 2022 and 2023; Also excludes 16,341 unearned and unvested PSUs which shall be earned based upon the satisfaction of certain relative TSR criteria with the number of earned PSUs ranging from 0% to 150% of the allocated amount awarded to Mr. Demchak based on the Companys TSR performance over the three-year performance period established at the time the respective PSU is allocated; Demchaks continued employment on the date the respective security vests or is earned. None of Mr. Demchaks holdings are pledged as collateral or security.
(8)
Includes 3,145 unrestricted Common Shares held directly by Mr. Birge as well as 25,244 RSUs that are vested or will vest within sixty (60) days of April 29, 2021. Upon Mr. Birge leaving the Board, he will receive one Common Share for each vested RSU that he holds. None of Mr. Birges holdings are pledged as collateral or security.
(9)
Represents 17,590 RSUs that are vested or will vest within sixty (60) days of April 29, 2021. Upon Mr. Dillon leaving the Board, he will receive one Common Share for each vested RSU that he holds. None of Mr. Dillons holdings are pledged as collateral or security.
(10)
Includes 32,323 unrestricted Common Shares held directly by Mr. Laikin, 24,634 Common Shares held indirectly through Mr. Laikins retirement account and 23,798 RSUs that are vested or will vest within sixty (60) days of April 29, 2021. Upon Mr. Laikin leaving the Board, he will receive one Common Share for each vested RSU that he holds. None of Mr. Laikins holdings are pledged as collateral or security.
(11)
Includes 1,645 unrestricted Common Shares held directly by Mr. Levy as well as 17,590 RSUs that are vested or will vest within sixty (60) days of April 29, 2021. Upon Mr. Levy leaving the Board, he will receive one Common Share for each vested RSU that he holds. None of Mr. Levys holdings are pledged as collateral or security.
(12)
Includes 2,778 unrestricted Common Shares held directly by Ms. von Blucher as well as 17,301 RSUs that are vested or will vest within sixty (60) days of April 29, 2021. Upon Ms. von Blucher leaving the Board, she will receive one Common Share for each vested RSU that she holds. None of Ms. von Bluchers holdings are pledged as collateral or security.
(13)
Based solely upon information contained in a Schedule 13G/A filed with the SEC on February 10, 2021 in which The Vanguard Group, filing as The Vanguard Group Inc. (Vanguard), reported that it had sole dispositive power over 1,888,153 of the Common Shares reported in the table above, shared dispositive power over 10,319 of the Common Shares reported in the table above, sole voting power over none of the Common Shares reported in the table above, and shared voting power over 4,013 of the Common Shares reported in the table above. The address of Vanguard reported in the Schedule 13G/A is 100 Vanguard Blvd., Malvern, PA 19355.
(14)
Based solely upon information contained in a Schedule 13G filed with the SEC on February 16, 2021 in which Charles Schwab Investment Management, Inc. (Charles Schwab) reported that it had sole voting power and sole dispositive power over all of the Common Shares reported in the table above. Charles Schwab is included in the table because its beneficial ownership of Common Shares as reported in its Schedule 13G exceeded five percent. The address of Charles Schwab reported in the Schedule 13G is 211 Main Street, San Francisco, CA 94105.
(15)
Includes the beneficially owned amounts reported in the table for each Named Executive and all members of the Board plus 13,972 Common Shares, 10,646 vested RSUs which are to be settled for Common Shares on a one-for-one basis by or before March 15, 2022 subject to certain conditions, and 7,840 vested stock options held by three (3) other Senior Executives. Excludes certain unvested RSUs as well as unearned and unvested PSUs held by these particular executive officers.
Information about our existing equity compensation plans as of December31, 2020 is as follows:
(1)
Includes 54,935 outstanding inducement equity awards issued in 2014 and 2015, a total of 452,075 outstanding RSUs, 35,286 RSU dividend equivalents estimated at historical dividend rates in place as of December 31, 2020, 34,549 LTIP Units, 479,152 Common Shares reserved for payment of PSUs allocated as part of the 2018, 2019, and 2020 Annual Awards and the CEO Special Award (all estimated at maximum), 218,471 PSU dividend equivalents estimated at maximum payout at historical dividend rates in place as of December 31, 2020, and a total of 63,443 stock options of which 37,561 stock options were issued from the 2014 Plan and 25,882 stock options were issued from either the Glimcher Realty Trust Amended and Restated 2004 Incentive Compensation Plan and the Glimcher Realty Trust 2012 Incentive Compensation Plan.
(2)
The weighted-average exercise price is only applicable to outstanding stock options.
Item
13.
### Hannah Laikin
During fiscal year 2020, an affiliate of WPG employed Mrs. Hannah Laikin, the daughter-in-law of our Chairman of the Board, Robert J. Laikin, in a non-executive role as Director, Special Projects. Mrs. Laikin compensation and benefits for the 2020 fiscal year was approximately $170,490. Mrs. Laikin is not an executive officer of the Company or any of its affiliates, but she is included in the Companys count of its full-time employees as of the end of fiscal year 2020. Mrs. Laikins place of employment is the Companys Indianapolis, IN corporate office in the Leasing Department. Mrs. Laikin has no direct reports and reports to the CEO. Mrs. Laikin is an at-will employee. Mrs. Laikins employment with the Company was approved by the Boards Audit Committee after review of her relationship to our Chairman of the Board. Our Audit Committee does not expect this relationship to impair Mr. Laikins independence status because Mrs. Laikin is not an executive officer of the Company.
During fiscal year 2020, WPG (via one of its affiliates) paid an unaffiliated real estate brokerage firm (the Firm) a total of $163,702 (the Payment) in commissions for commercial leasing transactions involving certain of WPGs enclosed shopping centers. Mr. Cooper Laikin, the son of Robert J. Laikin, the incumbent Chairman of the Board is employed as a broker for the Firm and received a percentage of the Payment as compensation for real estate and leasing brokerage services provided to WPG (or certain affiliates) during 2020 (or a prior year). Also, Mr. C. Laikin also entered into a real estate brokerage transaction involving the Companys The Outlet CollectionSeattle property in which Mr. C. Laikin was to receive a commission of $15,000. The transaction was not consummated in 2020 and no commission was paid. Our Audit Committee has reviewed the aforementioned transactions as codified in the policies and procedures of our code of conduct.
Item
14.
Independent Registered Public Accounting Firm s Fees
We have incurred fees for the services of Ernst& YoungLLP (EY), our independent registered public accounting firm, as shown below. EY has advised us that it has billed or will bill us the amounts shown below for the related categories of services for the years ended December31, 2020 and 2019, respectively:
(1)
Audit Fees include fees for: (i) the audit of the annual financial statements and the effectiveness of internal control over financial reporting of WPG and, our operating partnership, WPG L.P., (ii) the review of financial statements included in our Quarterly Reports on Form 10Q, and (iii) other services provided in connection with other regulatory filings and out-of-pocket expenses.
(2)
AuditRelated Fees include fees for stand-alone audits of the annual financial statements for certain consolidated entities with mortgage debt and joint venture entities and out-of-pocket expenses.
Pre
### Approval of Audit and Non
Audit Services
As provided in the Audit Committees Charter, the Audit Committee preapproves all auditing services and permitted nonaudit services, including the terms thereof, to be performed for us by our independent public accounting firm, subject to the de minimus exceptions for nonaudit services described in the Exchange Act which are approved by the Audit Committee prior to completion of the audit. The Audit Committee may form and delegate authority to a subcommittee consisting of one or more members of the Audit Committee to grant preapprovals of audit and permitted nonaudit services. However, any preapproval decisions made by such a subcommittee must be presented to the full Audit Committee at its next scheduled meeting.
Part
IV
Item
15.
31.1
Certification by the Chief Executive Officer pursuant to rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group Inc.*
31.2
Certification by the Chief Financial Officer pursuant to rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group Inc.*
31.3
Certification by the Chief Executive Officer pursuant to rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group, L.P.*
31.4
Certification by the Chief Financial Officer pursuant to rule13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section302 of the Sarbanes-Oxley Act of 2002 for Washington Prime Group, L.P.*
* Filed electronically herewith.<|endoftext|>Impact of COVID-19, the Board terminated and cancelled the Original Bonus Options and approved the following grants to replace the Original Bonus Options: (i) options to purchase 350,000 shares of the Companys common stock to Mr. Mavrommatis (the New Signing Options), which options are subject to the terms of the 2018 Plan, have an exercise price of $6.28 per share, and will vest and become exercisable in full on December 31, 2022 if the volume weighted average price of the Companys common stock during a consecutive 30 trading day period (the 30 Day VWAP) reaches $12.00 at any point prior to December 31, 2022, and (ii) options to purchase 350,000 shares of the Companys common stock to Mr. Mavrommatis (the New Closing Options), which options are subject to the terms of the 2018 Plan, have an exercise price of $6.00 per share, and will vest and become exercisable immediately upon the Company achieving a 30 Day VWAP of $10.00.
(5)
Calculated based on the closing price of our common stock, as reported on the Nasdaq Global Market on the date of grant.
(6)
Represents restricted shares and options to purchase shares of our common stock issued under the 2018 Plan to Ms. Elkins. 25% of the restricted shares and the options vest on each of the first, second, third and fourth anniversaries of the date of grant, provided that Ms. Elkins is an employee of the Company on each such date.
Stock Option Exercises and Vesting of Restricted Stock Awards
The following table provides certain information with respect to options that were exercised and shares of restricted stock that vested for each of our Named Executive Officers during the fiscal year ended December 31, 2020.
(1)
Represents the difference between the market price of the underlying securities at exercise of the option and the exercise price of the option.
(2)
Represents the aggregate dollar value of the shares on the vesting date.
The following table provides certain information concerning outstanding equity awards held by each of our Named Executive Officers at December 31, 2020.
(1)
Represents restricted shares issued under the 2007 Equity Compensation Plan, the 2015 Equity Compensation Plan and the 2018 Plan.
(2)
Calculated based on $7.43 per share, the closing price per share of our common stock, as reported on the Nasdaq Global Market, on December 31, 2020.
(3)
These option awards vest over a four-year period, such that twenty five (25%) of the award vests each year on the anniversary of the grant date, provided that the holder is employed by the Company on such date.
(4)
These option awards will vest and become exercisable in full on December 31, 2022, provided that the holder is employed by the Company on such date, if at any point prior to such date the volume weighted average price of our common stock during a consecutive 30 trading day period (the 30 Day VWAP) reaches $12.00
(5)
These option awards will vest and become exercisable in full immediately upon the 30 Day VWAP reaching $10.00, provided that the holder is employed by the Company on such date.
(6)
One hundred percent (100%) of these option awards vested on the third anniversary of the grant date.
under Severance Arrangements
As described above under the caption Severance Arrangements, the Company has entered into severance agreements with Messrs. Wolfe and Mavrommatis. These severance agreements provide for severance payments or other compensation upon the termination of such executives employment or a change in control with respect to the Company. In addition, on December 11, 2019, the Company entered into the Termination Agreement with Mr. Mahlab which provides for certain payments and other benefits Mr. Mahlab received in connection with his retirement effective as of January 31, 2020. Further, Ms. Elkins is also entitled to certain severance payments pursuant to the terms of her employment offer letter with the Company.
Our 2007 Plan provides that, in the event of a consolidation or merger in which, after completion of any such transaction, our prior stockholders own less than 50% of the voting shares of the continuing or surviving entity, or in the event of the sale or transfer of substantially all of our assets, all outstanding options will become exercisable and all restrictions and/or forfeitures with respect to restricted stock awards and restricted stock units will lapse.
Our 2015 Plan provides that the Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee, or (iv) such other modification or adjustment to an award as the Compensation Committee deems appropriate to maintain and protect the rights and interests of participants upon or following a change in control. (d) cancel any award of restricted stock, stock units, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or stock appreciation right in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control, and cancel any option or stock appreciation right without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; (g) cancel any stock unit or performance units held by a participant affected by the change in control in exchange for cash and/or other substitute consideration with a value equal to the fair market value per share of common stock on the date of the change in control, or (h) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate.
For purposes of the 2015 Plan, a change in control means the occurrence of any of the following events: (i) any person or group (as such terms are used in Section 13(d) and 14(d) of the Exchange Act, but excluding the Company, its affiliates and any person holding securities under employee benefit plan or trust of the Company) is or becomes the beneficial owner of securities of the Company representing 50% or more of either the combined voting power of the Companys then outstanding securities or the then outstanding shares of our common stock; (ii) any consolidation or merger of the Company where stockholders of the Company, immediately prior to such consolidation or merger, would not, immediately after such consolidation or merger, beneficially own shares representing in the aggregate 50% of more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger; or (iii) any sale, lease, exchange or other transfer of all or substantially all of the Companys assets, other than a sale or disposition by the Company of all or substantially all of the Companys assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by persons in substantially the same proportion as their ownership of the Company immediately prior to such sale; (iv) the approval by stockholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; or (v) the members of the Board at the beginning of any consecutive 24-calendar-month period (the Incumbent Directors) cease for any reason other than due to death to constitute at least a majority of the members of the Board; provided that any member of the Board whose election, or nomination for election by the Companys stockholders, was approved or ratified by a vote of at least a majority of the members of the Board then still in office who were members of the Board at the beginning of such 24-calendar-month period, shall be deemed to be an Incumbent Director.
Our 2018 Plan provides that, unless the Compensation Committee provides otherwise in advance of the grant, in the event of a change in control, if the employee or service provider is terminated other than for cause (as defined in the 2018 Plan) within one year of such change in control or leaves for good reason (as defined in the 2018 Plan), options and restricted stock (including restricted stock units) shall vest. In addition, unless otherwise determined by the Compensation Committee, the payout of performance stock units and performance shares shall be determined exclusively by the attainment of the performance goals established by the Compensation Committee, which may not be modified after the change in control, and the Company will not have the right to reduce the awards for any other reason.
For purposes of the 2018 Plan, a change in control means the occurrence of any of the following events: (i) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Companys then outstanding voting securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the board of directors of the Company and any new director whose election by the board of directors or nomination for election by the Companys stockholders was approved by a vote of a majority 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 a majority thereof; (iii) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Companys assets.
Estimated Payments Upon Termination or Change in Control
The following table shows potential payments to the Companys Named Executive Officers under existing severance agreements, plans or arrangements in connection with a termination of employment or change in control with respect to the Company. The following table assumes a December 31, 2020 termination or change in control date and uses the closing price of the Companys common stock on the Nasdaq Global Market on December 31, 2020, $7.43. The disclosed amounts are estimates only and do not necessarily reflect the actual amounts that would be paid to the Named Executive Officer. These actual amounts would only be known at the time the Named Executive Officers become eligible for payment and would only be payable upon the termination of employment or change in control.
(1)
Pursuant to the option award agreements entered into between the Company and each of Messrs. Wolfe and Mavrommatis, options that have vested as of the date of termination of employment generally are exercisable for a period of three months following the date of termination (or 365 days, in the case of | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Tax Reform
). The 2017 Tax Reform significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate income tax rates and implementing a territorial tax system. The Company has reasonably estimated the effects of the 2017 Tax Reform and recorded provisional amounts in the consolidated financial statements as of March 31, 2018. This amount is primarily comprised of the re-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21%, from 34%. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the IRS, and other standard-setting bodies, so we may make adjustments to the provisional amounts (if any). However, managements opinion is that future adjustments due to the 2017 Tax Reform should not have a material impact on the Companys provision for income taxes.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (
### CARES ACT
). The CARES Act, among other things, includes provisions relating to net operating loss (
NOL
) carryback periods. The Company is evaluating the impact, if any, that the CARES Act may have on the Companys future operations, financial position, and liquidity in fiscal year 2021. At this time, the Company does not expect to realize the benefits of the NOL carryback provisions.
The Company files income tax returns for federal and state purposes. Management believes that with few exceptions, the Company is not subject to examination by United States tax authorities for periods prior to 2016.
### NOTE 15 STOCKHOLDERS EQUITY
Common Stock
On April 20, 2018, Discover was issued 5 shares of common stock as a result of true-ups in connection with the August 23, 2017 conversion of $35,000 of the principal amount of the debenture held by Discover.
During the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1 share (with a fair value of $15,625 based on the share price at September 30, 2018) of the Companys common stock. Due to the fact that the Company is in a retained deficit position, the Company recognized a charge to additional paid in-capital of $882 and stock dividends distributable but not issued based on the par value of the common stock issued. During the quarter ended September 30, 2018, the Company issued 1 share to settle a stock dividend accrued on Series B Preferred Stock.
On November 15, 2018, the Company entered into a consulting agreement with Regal Consulting (
### Regal
), an investor relations firm, pursuant to which the firm agreed to provide the Company investor relations and consulting services for a period of six months, for monthly consideration of $28,000 and 7 restricted shares of the Companys common stock. In January 2019, the Company issued 13 shares of restricted common stock to Regal Consulting for the months of November and December 2018, which shares were issued during the year ended March 31, 2019. On February 13, 2019, and effective on January 31, 2019, the Company entered into a First Amendment to the Consulting Agreement previously entered into with Regal Consulting. Pursuant to the First Amendment, the parties agreed to expand the investor relations services required to be provided by Regal Consulting under the agreement in consideration for $50,000 per month and 40 restricted shares of common stock per month (the
Regal Shares
)(which are fully-earned upon issuance) during the term of the agreement, and agreed to extend the term of the agreement until October 1, 2019 (unless the Company completes an acquisition or combination prior to such date). All of the Regal Shares had been earned and issued to Regal as of September 30, 2019. On October 15, 2019, the Company entered into a Settlement and Mutual Release Agreement (the
### Release
) with Regal, pursuant to which it agreed to settle and terminate the consulting agreement with Regal. Pursuant to the Release, the Company agreed to issue Regal 1,514 shares of the Companys restricted common stock and to pay Regal $17,500 in consideration for agreeing to terminate the agreement. The Company and Regal also provided each other mutual releases in connection with the Release. The 1,514 shares of common stock were issued to Regal on June 1, 2020.
On February 13, 2019, the Company entered into a letter agreement with SylvaCap Media (
### SylvaCap
), pursuant to which SylvaCap agreed to act as the Companys non-exclusive digital marketing service provider in consideration for an aggregate of 480 shares of restricted common stock (the
SylvaCap Shares
), which are fully-earned upon their issuance, and $50,000 per month during the term of the agreement, which ends on November 12, 2019 (unless the Company completes an acquisition or combination prior to such date) or upon termination by either party for cause. The Company also agreed to provide SylvaCap piggy-back registration rights in connection with the SylvaCap Shares and to pay SylvaCap $6,250 every three months as an expense reimbursement. The total value of the restricted shares of common stock due of $261,540 was accrued in common stock payable as of March 31, 2019. The 480 SylvaCap shares were issued in May 2019 and there are no shares due as of March 31, 2020.
During the year ended March 31, 2020, Discover and Discover Growth, which purchased shares of Series C Preferred Stock from the Company in December 2018, and which subsequently transferred all of its shares of Series C Preferred Stock to Discover, converted 11 shares of the Series C Preferred Stock with a face value of $110,000, and a total of 4,899,442 shares of common stock were issued, which includes additional shares for conversion premiums and true ups in connection with those conversions through March 31, 2020.
From April 1, 2019 to March 31, 2020, Discover was issued 29,073 shares of common stock as true-ups in connection with the October 31, 2018 conversion of the $495,000 remaining balance of principal owed under the terms of a convertible debenture.
### Series A Convertible Preferred Stock
As of March 31, 2020 and 2019, the Company had no Series A Convertible Preferred Stock issued or outstanding.
Series B Redeemable Convertible Preferred Stock
As of March 31, 2020 and 2019, there were 0 and 44,000 shares of Series B Preferred Stock outstanding, respectively, which have the following features: a liquidation preference senior to all of the Companys common stock; a dividend, payable quarterly, at an annual rate of six percent (6%) of the original issue price until such Series B Preferred Stock is no longer outstanding either due to conversion, redemption or otherwise; and voting rights on all matters, with each share having 1/781,250 of one vote.
During the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1 share of the Companys common stock as described above.
On May 15, 2019, the Company entered into a conversion agreement with the then holder of all 44,000 shares of the Companys then outstanding Series B Preferred Stock. Pursuant to the Conversion Agreement, all of the Series B Preferred Stock was converted into 1 share of the Companys common stock pursuant to the stated terms of such Series B Preferred Stock, in consideration for $25,000 in cash due at the time of the parties entry into the agreement, which payment was made during the three months ended September 30, 2019. The holder also provided the Company a release in connection with certain of his rights under the Series B Preferred Stock (including any and all accrued and unpaid dividends) and certain other matters.
Effective on May 15, 2020, due to the fact that no shares of Series B Preferred Stock were outstanding, the Board of Directors approved, and the Company filed, a Certificate of Withdrawal of Certificate of Designation relating to such series of preferred stock with the Secretary of State of Nevada and terminated the designation of its Series B Preferred Stock effective as of the same date.
During the year ended March 31, 2020, the Company sold 525 shares of Series C Preferred Stock for total proceeds of $5 million. In the event the Merger Agreement entered into with Viking in February 2020 is terminated for any reason, we (until June 22, 2020, when such terms were amended) were required to redeem the 525 shares of Series C Preferred Stock which we sold during the year ended March 31, 2020, at a 110% premium, in an aggregate amount equal to $5,775,000. In addition, certain provisions of the Series C Preferred Stock may require the Company to redeem the stock, including the requirement to redeem 525 shares of Series C Preferred Stock in the event the Merger Agreement is terminated, are outside the control of the Company, the Series C Preferred Stock is classified as temporary. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable.
During the year ended March 31, 2019, the Company sold and issued 1,577 shares of Series C Preferred Stock pursuant to the terms of a October 2017 Stock Purchase Agreement, October 2018 Stock Purchase Agreement and November 2018 Stock Purchase Agreement, for total consideration of $15 million. As of March 31, 2020 and 2019, there were 2,819 and 2,305 shares of Series C Preferred Stock outstanding, respectively.
During the year ended March 31, 2019, Discover and Discover Growth converted 404 shares of the Series C Preferred Stock with a face value of $4.04 million, and a total of 3,794 shares of common stock were issued, which includes additional shares for conversion premiums and true ups in connection with those conversions through March 31, 2019.
During the year ended March 31, 2020, Discover and Discover Growth converted 11 shares of the Series C Preferred Stock with a face value of $110,000, and a total of 4,899,442 shares of common stock were issued, which includes additional shares for conversion premiums and true ups in connection with those conversions through March 31, 2020.
Under certain circumstances, the Company may be required to issue additional common shares after the Series C Preferred Stock has been converted. The Company records an estimate of the obligation to issue additional shares as a derivative liability.
As of March 31, 2020 and March 31, 2019, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 34.95% premium dividend rate. The Company recognized a total charge to additional paid-in capital and stock dividends distributable but not issued of $7,737,086 and $5,676,715 related to the stock dividend declared but not issued for the years ended March 31, 2020 and 2019, respectively.
The Securities Purchase Agreements (SPAs) between the Company and the Investors regarding the purchase and sale of the Series C Preferred Shares require the Company to, among other things, timely file all reports required to be filed by Company pursuant to requirements of the SEC, and to maintain sufficient reserves from its duly authorized Common Stock for issuance of all Conversion Shares. On October 6, 2021, the Company received notice from the Investors that they believed the Company breached the SPAs for failing to comply with the foregoing two items, and the Notes contain a provision stating a breach by the Company of any terms within the SPA or COD is also a breach under the Notes, which would result in an immediate acceleration of the Notes at the holders option.
On October 9, 2021 the Company entered into agreements (the October Agreements) with each of the First Series C Preferred Stock investors, pursuant to which the investors agreed to refrain from declaring defaults or bringing a breach of contract action under the SPAs, and one investor, a noteholder, agreed to refrain from declaring defaults or bringing a breach of contract action under the Notes, in each<|endoftext|>Employment agreement for good reason and Mr. Maggio may terminate his employment agreement for good cause if:
We reduce his base salary without his consent and fail to restore it to its previous level within 30 days after notice from the executive;
or
We breach any other term of the employment agreement, unless we correct such failure or breach within thirty days after written notice from him.
Termination Payments under Mr. Greenbergs Transition Agreement
If Mr. Greenberg is terminated for any reason, then the Company will continue to pay Mr. Greenberg (or after Mr. Greenbergs death, his surviving spouse or estate, if there is no surviving spouse) the annual salary and continued benefits for the remainder of the three-year term of the agreement. In addition, if Mr. Greenbergs employment is terminated by the Company without Cause (as defined above), by Mr. Greenberg for Good Reason (as defined above), or due to Mr. Greenbergs death or illness/disability, then (1) the grant of time-based RSUs made to Mr. Greenberg on April 1, 2020 will become 100% vested and (2) the grants of awards made to Mr. Greenberg on July 21, 2020 (the New Award) will vest as follows. The one-third of the New Award that would vest on July 21, 2021 would vest 100% if not vested previously and (ii) the two-thirds of the New Award that would vest based on achievement of VWAP related performance measures, if not vested previously, will remain outstanding and eligible to vest based on achievement of the applicable stock price increase until July 21, 2023 (or, if earlier, upon a sale of the Company). As of the dated of this report, these VWAP objectives have been achieved and these portions of the New Award have vested. This accelerated vesting is subject to Mr. Greenbergs execution of a release of employment-related claims in favor of the Company.
Termination Provisions of Employments Agreement with Messrs. Stedham, Duquette Becker and Maggio
If during the term of Messrs. Stedham, Duquettes Becker's or Maggio's employment agreements we terminate his employment without cause or any of them terminates his employment for good reason, good cause or just cause (depending on the agreement) and he is in full compliance with his obligations under the employment agreement (which include non-competition and non-solicitation obligations for 6 and 12 months after termination, respectively, for Mssrs. Stedham and Becker and 6 months after termination for Messrs. Duquette and Maggio, and continuing confidentiality obligations), we are obligated to pay the executive his base annual salary at the rate in effect on the date of such termination, and the executive will continue to be eligible to receive such benefits as he would have been entitled to had his employment not terminated, for a period of time after termination equal to the length of the required notice.
The employment agreements of Mssrs. Becker, Maggio, and Stedham provide that the executive must provide the Company with a general release of claims before receiving any post-termination payments.
The amounts shown in the table below assume that the noted triggering events occurred on December31, 2020 with respect to the Named Executive Officers. Other relevant assumptions and explanations are provided in the footnotes following the table. The amounts shown reflect only the additional payments or benefits that a Named Executive Officer would have received upon the occurrence of the respective triggering events listed below; they do not include the value of payments or benefits that would have been earned, or any amounts associated with equity awards that would have vested absent the triggering event. As discussed above, none of the Named Executive Officers receive additional compensation in the event of voluntary or involuntary termination for cause or in the event of disability.
### Vesting of Restricted Stock Units
The terms with respect to the vesting of the performance-vesting and time-vesting RSUs granted to the Named Executive Officers have provisions relating to accelerated or continued vesting of the units in connection with terminations of employment under various circumstances and the change of control of the Company or the Sale of the Company (as defined below). These terms are set forth in the respective grant agreements, the LTIP or the 2011 Plan.
Vesting on Terminations
The performance-based grants made under the Companys LTIP in 2019 vest on termination of employment as follows:
Upon termination due to death, disability or retirement these RSUs will become vested and nonforfeitable on a pro rata basis based on actual performance through the end of the Performance Period; and
Upon any other termination these RSUs will be forfeited on the date employment is terminated.
The performance-based grants made in lieu of LTIP grants in July of 2020 and under the new LTIP in January of 2021 vest as follows in connection with any termination of employment other than a termination by the Company for cause or voluntary departure (in which case all grants are forfeit):
These RSUs will become vested and nonforfeitable on a pro rata basis based on actual performance through the last day of employment (in the case of the July 2020 grants) and through the 90th day after termination of employment (in the case of the January 2021 grants).
The time-based grants made on April 1, 2020 and January 4, 2021 vest on termination of employment as follows:
Upon termination for any reason, these RSUs are forfeit as of the termination date except that if the recipient is receiving severance payments from the Company, they will continue to vest through the end of the severance period.
Mr. Stedhams July 21, 2020 Grant provides that if his employment is terminated before July 21, 2023:
For cause by the Company or by Mr. Stedham for other than good reason, the grant is forfeit;
For good reason by the employee or other than cause by the Company, the grant will vest pro rata based on his termination date.
Vesting on Change of Control or Sale of the Company
Under our 2011 Plan, Change in Control is defined as: the acquisition (other than from the Company) in one or more transactions by any Person, as defined in this Section 2(e), of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of 50% or more of (A) the then outstanding shares of the securities of the Company, or (B) the combined voting power of the then outstanding securities of the Company entitled to vote generally in the election of directors (the Company Voting Stock); the closing of a sale or other conveyance of all or substantially all of the assets of the Company; or the effective time of any merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the Company Voting Stock; provided, however, that a Change in Control shall not include any transaction effected exclusively to change the domicile of the Company, and that for purposes of any Award or subplan that constitutes a nonqualified deferred compensation plan, within the meaning of Code section 409A, the Administrator, in its discretion, may specify a different definition of Change in Control in order to comply with the provisions of Code section 409A.
Under our LTIP and certain of our RSU grants, Sale of the Company is defined as: the closing of a sale or other conveyance of all or substantially all of the assets of the Company; or the effective time of the acquisition of the Company through a merger, share exchange, consolidation, or other business combination involving the Company if immediately after such transaction persons who hold a majority of the outstanding voting securities entitled to vote generally in the election of directors of the surviving entity (or the entity owning 100% of such surviving entity) are not persons who, immediately prior to such transaction, held the outstanding securities of the Company entitled to vote generally in the election of directors.
The performance-based grants made under the Companys LTIP in 2019 vest on a Change in Control or a Sale of the Company as follows:
Upon a Change in Control that is not also a Sale of the Company, these RSUs will become vested and nonforfeitable on the date of the Change in Control based on achievement of the pro rata portion of the Performance Measure relating to the portion of the Performance Period completed as of the date of the Change in Control;
Upon a Sale of the Company, 100% of these RSUs will vest.
The performance-based grants made in lieu of LTIP grants in July of 2020 and under the new LTIP in January of 2021 vest on a Change in Control or a Sale of the Company as follows:
Upon a Sale of the Company, RSUs will become vested and nonforfeitable on the date of the Sale of the Company based on the higher of the VWAP level achieved before the Sale of the Company and the price received by shareholders in the Sale of the Company.
The time-based grants made on April 1, 2020 and January 4, 2021 vest on a Change in Control or a Sale of the Company as follows:
Mr. Stedhams July 21, 2020 Grant vests on a Change in Control or a Sale of the Company as follows:
Upon a Change in Control that is not also a Sale of the Company, any grants will terminate upon the effective time of such Change in Control unless the Compensation Committee provides for the continuation or assumption of such grants by, or for the substitution of the equivalent awards of the surviving or successor entity or a parent thereof, in connection with the Change in Control.
Potential Post-Employment Payments
____________________
(1)
Represents eighteen months of current salary as of December 31, 2020.
(2)
Represents the value of the number of time-based RSUs and performance-based RSUs that would have vested if the event occurred based on the closing price of our common stock on December 31, 2020 of $11.86.
(3)
Represents the value of the number of time-based RSUs that would have vested if the event occurred based on the closing price of our common stock on December 31, 2020 of $11.86.
(4)
Represents the value of all outstanding time-based RSUs and performance-based RSUs calculated on equity value per share based on the closing price of our common stock on December 31, 2020 of $11.86.
(5)
Represents an estimate of the incremental cost to the Company for benefits continuation for eighteen months subsequent to termination date.
(6)
Represents the payments for the remaining thirty months of his transition agreement.
(7)
Represents the value of all outstanding time-based RSUs and performance-based RSUs based on the closing price of our common stock on December 31, 2020 of $11.86.
(8)
Represents an estimate of the incremental cost to the Company for benefits continuation for the remaining term of his transition agreement.
(9)
Represents six months of severance and continued benefits based on the Company's severance policy for terminations typically offered to vice presidents.
(10)
Represents two full calendar months of current salary as of December 31, 2020.
(11)
Represents current salary and an estimate of the incremental cost to the Company for benefits continuation for one year subsequent to the termination date.
(12)
Represents current salary and an estimate of the incremental cost to the Company for benefits continuation for six months subsequent to the termination date.
### CEO Pay Ratio
In this section, we are providing required disclosure regarding the total compensation of the CEO to the total compensation of our median employee. We selected October 1, 2020 as the date on which to determine our median employee. As of that date, we had 4,465 full time and part time employees. Our entire employee population, which consisted of 2,078 employees in | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Use the remaining proceeds for working capital and general corporate purposes.
Pursuant to that certain Form of Secured Convertible Note entered into in connection with the Purchase Agreement (the Form of Note), interest on such Notes accrues at a rates of ten percent (10%) per annum and is payable either in cash or in shares of the Companys common stock at conversion price of $3.20 (following and subject to adjustment for stock splits, combinations or similar events and anti-dilution provisions, among other adjustments) on each of the six and twelve month anniversary of the issuance date and on the maturity dates of November 15, 2021, December 22, 2021 and December 30, 2021.
All amounts of principal and interest due under the Notes are convertible at any time after the issuance date, in whole or in part (subject to rounding for fractional shares), at the option of the holders, into the Companys common stock at a fixed conversion price of $3.20, which is subject to adjustment as described above.
Upon any issuance by the Company of any of its equity securities, including common stock, for cash consideration, indebtedness or a combination thereof after the date hereof (a Subsequent Equity Financing), each holder of a Note will have the option to convert the outstanding principal and accrued but unpaid interest of its Note into the number of fully paid and non-assessable shares of common stock issued in the Subsequent Equity Financing (Conversion Securities) equal to the product of unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder multiplied by 1.1, divided by the price per share paid by the investors for the Conversion Securities.
The Company may prepay the Notes at any time in whole or in part by paying an amount equal to 100% of the principal amount to be redeemed, together with accrued and unpaid interest plus a prepayment fee equal to one percent (1%) of the principal amount to be repaid.
If an event of default occurs, each holder may require the Company to redeem all or any portion of the Notes (including all accrued and unpaid interest thereon), in cash.
The Notes are secured by the proceeds from the $3,000,000 milestone payment pursuant to Section 7.2(b) of the Distribution Agreement dated November 12, 2018 between the Obligor and Ferring International Center S.A., after such proceeds are actually received by the Company from Ferring, all pursuant to the terms of a Security Agreement entered into between the Company and the noteholders under the Purchase Agreements.
Of the $3,494,840 in net proceeds received in the offering, $1,048,904 million was allocated to the unit purchase options issued to investors based on their relative fair value and $ 2,062,586 of beneficial conversion feature based on their relative fair value. This amount represented a discount on the debt and additional paid-in-capital at the date of issuance.
In November 2020, $1,319,840 of principal elected to convert as part of the public underwritten offering.
The remaining principal balances of the 2020 Convertible Notes were as follows:
Interest expense on the 2020 Convertible Note was $194,631 and $0 for the years ended December 31, 2020 and 2019, respectively.
Amortization of options discount on the 2020 Convertible note was $300,365 and $0 for the years ended December 31, 2020 and 2019, respectively.
Amortization of warrant discount on the 2020 Convertible Note was $301,228 and $0 for the years ended December 31, 2020 and 2019, respectively.
Amortization of beneficial conversion feature on the 2020 Convertible Note was $1,670,135 and $0 for the years ended December 31, 2020 and 2019, respectively.
Amortization of issuance costs on the 2020 Convertible Note was $222,508 and $0 for the years December 31, 2020 and 2019, respectively.
On July 1, 2020, the Company received a loan in the principal amount of $157,620 relating to the U.S. Small Business Administrations Paycheck Protection Program. The loan will mature 18 months from the date of funding is payable over 18 equal monthly installments, and bears interest at a rate of 1% per annum. The loan is forgivable up to 100% of the principal balance based upon satisfaction of certain criteria under the Paycheck Protection Program. The Company has applied for full forgiveness.
NOTE 8
On March 5, 2009, the Company entered into a related party transaction with Kathleen Karloff, the former Chief Executive Officer and a former Director of the Company. During the twelve months ended December 31, 2019, the Company paid the remaining balance due Ms. Karloff in the amount of $62,743 along with $55,000 of accrued interest.
In April 2011, the Company issued a new short-term convertible note (Q211 Note) payable to James Bowdring in the amount of $50,000. The Note carries a 10% interest rate. The Company paid $25,000 of the Note in 2011 in cash. The Q211 Note is convertible into common stock of the Company at a conversion price of $0.96 per share, subject to adjustments. During the years ended December 31, 2020 and December 31, 2019, the Company accrued interest in the amount of $0 and $1,493 on the Q211 Note, respectively.
In November 2011, the Company issued a new convertible note (Q411 Note) payable to James Bowdring in the amount of $10,000. The Q411 Note carries a 10% interest rate. The Q411 Note was converted into common stock of the Company at a conversion price of $0.32 per share, subject to adjustments. In addition, $0 and $597 of interest was accrued in the years ended December 31, 2020 and 2019, respectively.
On August 7, 2019, the Company sent James Bowdring, a related party, a check in the amount of $65,197 as full payment of the foregoing promissory notes. On August 8, 2019, Mr. Bowdrings legal counsel returned this check with a letter stating that the check did not properly account for the compound interest identified in such notes. In addition, the letter stated Mr. Bowdrings desire to convert these promissory notes into shares of the Companys common stock in lieu of any cash payment. Bowdring has the right to convert such notes upon receiving payment of such notes and intends to vigorously contest any conversion of these notes.
In May 2018, James Bowdring and his children participated in the 2018 Convertible Notes offerings in the aggregate principal amount of $40,000. The 2018 Convertible Notes accrue interest at the rate of 9% per annum which is paid in stock. These Notes are due on March 31, 2021. The notes are convertible into shares of common stock at a price of $6.40 per share, provided, that if the Company completes a subsequent equity financing, the holders of the 2018 Convertible Notes can elect to convert the notes in shares of our common stock at a price equal to 75% of the price paid per share in such subsequent equity financing. In addition, $1,380 and $3,599 of interest was accrued in the twelve months ended December 31, 2020 and 2019, respectively.
Accounts payable and accrued liabilities balances include accrued directors fees, expenses reports for management and employees for expenses they paid for personally related to travel or normal business expenses.
Mr.
NOTE 9
STOCKHOLDERS
### EQUITY
Reverse Stock Splits
On December 16, 2019, the Companys stockholders approved a reverse stock split at a ratio of between 1-for 5 and 1-for-25, with discretion for the exact ratio to be approved by the Companys board of directors. On February 19, 2020, the Companys board of directors approved a reverse stock split of the Companys common stock at a ratio of 1-for-20. On May 21, 2020, the Company filed a certificate of change (with an effective date of May 26, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 1-for-20 reverse stock split of its outstanding common stock. The reverse split took effect at the open of business on May 26, 2020.
On October 22, 2020 the Companys board of directors approved a reverse stock split of the Companys common stock at a ratio of 5-for-8 and also approved a proportionate decrease in the Companys authorized common stock to 125,000,000 shares from 200,000,000. On November 5, 2020, the Company filed a certificate of change (with an effective date of November 9, 2020) with the Nevada Secretary of State pursuant to Nevada Revised Statutes 78.209 to effectuate a 5-for-8 reverse stock split of its outstanding common stock. As a result of the reverse stock split, 133 shares were issued in lieu of fractional shares. On November 6, 2020, the Company received notice from FINRA/OTC Corporate Actions that the reverse split would take effect at the open of business on November 9, 2020 and the reverse stock split took effect on that date. The consolidated financial statement presented reflect the reverse splits.
### Public offering
On November 12, 2020, the Company entered into an underwriting agreement (the Underwriting Agreement) with Roth Capital Partners, LLC, as representative of the several underwriters (the Underwriters), in connection with the Companys public offering (the Offering) of 3,625,000 shares of common stock, at a public offering price of $3.20 per share.
During the year ended December 31, 2020 the Company incurred $1,816,948 of offering costs related to issuance of common stock.
In January 2020, the Company issued 31,250 shares of common stock under its 2019 Stock Incentive Plan with a fair value of $221,400 to an officer.
In February 2020, the Company issued 3,125 shares of common stock under its 2019 Stock Incentive Plan with a fair value of $24,750 to an employee of which $20,626 was amortized in the twelve months ended December 31, 2020.
In February 2020, the Company issued 1,875 shares of common stock under its 2019 Stock Incentive Plan with a fair value of $15,000 for services.
In February 2020, pursuant to Section 4(a)(2) of the Securities Act of 1933 as amended (the Securities Act), the Company issued 1,563 shares of common stock with a fair value of $11,500 in consideration of consulting services rendered.
In March 2020, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 1,563 shares of common stock with a fair value of $11,500 in consideration of consulting services rendered.
In May 2020, pursuant to Section 3(a)(9) of the Securities Act, the Company issued 24 shares of common stock as the result of the rounding on the reverse stock split.
In May 2020, the Company issued 3,438 shares of common stock under its 2019 Stock Incentive Plan with a fair value of $25,930 to employees of which $19,287 was amortized in the twelve months ended December 31, 2020.
In June 2020, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 3,750 shares of common stock with a fair value of $22,800 in consideration of consulting services rendered.
In August 2020, the Company issued 12,500 shares of restricted stock under its 2019 Stock Incentive Plan with a fair value of $72,200 to an employee of which $30,083 was amortized in the twelve months ended December 31, 2020.
In August 2020, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 3,750 shares of common stock with a fair value of $19,500 in consideration of consulting services rendered.
In November 2020, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 109 shares of common stock in consideration of consulting services rendered.
In November 2020, the Company issued 4,153,750 shares of common stock for cash proceeds of $13,292,000.
In November 2020, pursuant to Section 3(a)(9) of the Securities Act, the Company issued 453,699 shares of common stock with fair value of $1,451,824 are the result of the conversion of notes payables and accrued interest. No gain or loss was recorded on conversion, as the issuance of common stock was pursuant to the terms of a prior agreement.
In November 2020, pursuant to Section 4(a)(2) of the Securities Act, the Company issued 22,250 shares of common stock with a fair value of $70,562 in consideration of consulting services rendered.
In November 2020, the Company issued 5,793 shares<|endoftext|>Of financing to fund its business needs, including convertible notes and warrants and other instruments not indexed to our stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815. The Companys only asset or liability measured at fair value on a recurring basis is its derivative liability associated with warrants to purchase common stock and convertible notes.
Level 1
### Level 2
Level 3
The carrying amount of our notes payable at December 31, 2019, approximates their fair values based on comparable borrowing rates available to the company.
There have been no changes in Level 1, Level 2, and Level 3 categorizations and no changes in valuation techniques for these assets or liabilities for the year ended December 31, 2019. No derivatives pre acquisition.
### SUMMARY OF DERIVATIVE LIABILITIES
Income Taxes
### We follow the provisions of ASC 740,
Income Taxes
The U.S.
On December 22, 2017, the U.S. U.S. corporate tax rate to
21 percent, changes in incentives, provisions to prevent U.S. tax. The enactment of U.S.
### Net Loss Per Share
Earnings per Share
Concentration of Credit Risk
The accounts receivable balance was $
39,480 as of December 31, 2020 and $
0 as of December 31, 2019. In 2020,
% of accounts receivable consisted of one customer. In 2020,
% of the net revenues generated with two customers. In 2019,
% of net revenues generated were the result of transactions with one customer.
###
Not Yet Adopted
(ASU 2018-13). ASU 2018-13 is effective for the Company for annual and interim reporting periods beginning July 1, 2020.
### Adopted
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, which supersedes existing guidance on accounting for leases in Leases (Topic 840) and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach.
### In March 2016, the FASB issued ASU 2016-09,
Improvements to Employee Share-Based Payment Accounting
This ASU affects entities that issue share-based payment awards to their employees. The ASU is designed to simplify several aspects of accounting for share-based payment award transactions which include the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. ASU 2016-09 became effective for the Company in the first quarter of 2018.
### In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date
(ASU 2015-14)
, which defers the effective date of ASU 2014-09 for one year and permits early adoption as early as the original effective date of ASU 2014-09. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. In 2016, the FASB issued additional guidance to clarify the implementation guidance (ASU 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations
; ASU 2016-10,
Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
; and ASU 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients
). ASU 2015-14 became effective for the Company in the first quarter of 2018 and had no impact on the financial statements.
3.
### INCOME TAXES
The Company has generated losses before income tax of approximately $
4,057,000 and $
4,609,000 as of December 31, 2020 and 2019, respectively. The company recognized a deferred tax asset of approximately $
257,100 and $
442,500 for the related NOL carry forward as of December 31, 2020 and 2019, respectively. The Company operates in the cannabis industry, which incurs regulatory taxes in addition to comparable taxes of other industries.
On December 22, 2017, the legislation commonly referred to as the , which contains significant changes to U.S. tax law and was leveraged in our tax provision process.
The Companys effective income tax differs from the statutory federal income tax as follows:
SUMMARY OF EFFECTIVE RECONCILIATION OF PROVISION FOR INCOME TAXES
In 2020, the net operating loss led to a deferred tax asset of approximately $
257,100 and a deferred tax liability of $
32,700 related to property and equipment. In 2019, the net operating loss led to a deferred tax asset of approximately $
442,500 and includes a deferred tax asset of $
58,000 related to the impairment loss of LVCA and a deferred tax liability of $
59,800 related to property and equipment. On December 31, 2020 and 2019, based on the guidance in ASC 740-10-45-10A, we provided an allowance of $
224,400 and $
, respectively, related to these tax benefits given the uncertainty of utilizing the asset.
4.
### NOTES PAYABLE
In October 2017, in connection with our purchase of two acres of fully entitled cannabis real property located in the Coachillin Industrial Cultivation and Ancillary Canna-Business Park, the Company issued a first and second trust deed note in the amounts of $
700,000 and $
, respectively. The first and second trust deed notes are long-term notes and are interest only notes, at
13.0
%, and mature in
### August 2022
, with the principal payment due at maturity. For the $
700,000 loan, the monthly payment is approximately $
### For the $
200,000 loan, the monthly payment is approximately $
The 1st and 2nd trust deeds are secured by the land as well as property owned by two officers of the company and three other related parties. Also, each party has personally guaranteed or pledged additional collateral. The notes include a debt discount as of December 31, 2020 of $
### In April 2018, the Company issued a note due
60 days after funding with a principal amount of $
250,000 and interest totalling $1
As of September 30, 2019, the note has not been repaid and was amended to add an interest rate of
% of the total balance due, which is included in our current liabilities.
The note is past due. Two officers of the Company have personally guaranteed the loan.
In September 2019, the Company issued another note of $
102,569 to an unrelated party with
% interest, which was repaid in full on
October 20, 2020
5.
NOTES PAYABLE, RELATED PARTY PAYABLES, AND OPERATING LEASE RELATED PARTY
SCHEDULE OF NOTES PAYABLE TO OFFICERS AND DIRECTORS
### Related party notes payable bear interest at
%.
The monthly payments are $
1,055 and $
, for the duration of the lease terms of four and five years, respectively.
Included in related party payable as of December 31, 2020, there is $
240,000 of related party expenses. The expenses bear a
% annual interest rate consistent with the other related party notes.
6.
### LEGAL SETTLEMENTS
As of December 31, 2020, legal settlements consist of a $
73,966 balance and $
673,021 balance bearing interest at
% and
%, respectively. (Note 12 Commitments and contingencies).
7.
In August 2020,
During 2019, debt and accrued interest in the amount of $
429,843 were converted to
9,947,843 shares of common stock. As a result of these conversions, the Company recognized approximately $
77 as a gain on extinguishment of debt.
Amortization of note discounts, which is included in interest expense, amounted to $
1,425,224 during the year ended December 31, 2020 and $
278,209 for the year ended December 31, 2019.
Grapefruit acquired convertible notes in its acquisition of Imaging3, Inc. on July 10, 2019. (See Note 15.) On May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $
the second tranche of $
the third tranche of $
### The Notes have a two
-year term and will bear interest at
%.
On April 15, 2021, the company renegotiated the debt agreement related to these notes modifying the convertible notes conversion price from a variable rate to a fixed rate conversion price with an effective date of December 31, 2020. As a result of the agreement, the Company recorded a noncash expense for the change in the value of derivative instruments of $
, which was simultaneously offset by a noncash gain of $
39,640,477 from the extinguishment of debt, resulting a net loss of $
753,699 from the renegotiation of the debt.
On February 26, 2021, the company issued a convertible note for $
(Note 14 Subsequent Events).
In addition, the Company has eleven other convertible notes comprising $
296,000 outstanding and they are currently in default. The interest on these notes varies from
-
%. As of March 12, 2021, we are in the process of converting eight of the notes amounting to $
8.
### GOING CONCERN
During the year ended December 31, 2020, we incurred a net loss of $
, had a working capital deficit of $
3,430,719 and had an accumulated deficit of $
11,321,494 at December 31, 2020.
and Imaging3, Inc. Under the terms of the SEA executed on May 31, 2019 IGNG became obligated to issue to Grapefruits existing shareholders that number of newly issued restricted IGNG common shares such that the former Grapefruit shareholders (now new IGNG shareholders) own approximately
and the current IGNG shareholders retain approximately
In connection with and dependent upon the successful consummation of the above transaction, on May 31, 2019, the Company executed the SPA with Auctus pursuant to the terms of which the Company agreed to sell $
the second tranche of $
the third tranche of $
2,000,000 warrants at $
125 in relation to the SPA. In addition, the company issued a $
% interest and
-year maturity date.
(Item 14. Subsequent Events)
9.
### STOCKHOLDERS EQUITY
Preferred Stock
The Company has authorized
1,000,000 shares of $
0.0001 par value preferred stock. As of December 31, 2020, and 2019, there are no shares of preferred stock outstanding.
### Common Stock
The Company is authorized to issue
1,000,000,000 shares of $
0.0001 par value common stock.
During the year ended December 31, 2020 a total of
1,150,000 shares were issued for services rendered valued at $
;
915,795 shares were issued upon receiving a loan valued at $
;
; and
7,213,933 shares were issued related to for a settlement valued at $
### In 2021,
1,000,000 shares were issued for a licensing agreement valued at $
38,700 put into effect in 2020.
During the year ended December 31, 2019 the Company issued a total of
470,000 shares of common stock for cash in the amount of $
;
4,500,000 shares were issued for services rendered valued at $
382,500 of which $
127,500 has been expensed; and
9,947,842 shares were issued related to conversion of notes payable. As a result of the acquisition,
460,702,487 shares were issued to Grapefruit shareholders and other parties involved with the acquisition.
As of December 31, 2020, there were approximately 614 record holders of our common stock, not including shares held in street name in brokerage accounts which is unknown. As of December 31, 2019, there were
504,700,437 shares of our common stock outstanding on record.
### Stock Compensation for Non-employee
In August 2019, the Company issued
4,500,000 shares of common stock to a cannabis specialist to sit on an advisory board. The value of the shares totaled $
382,500 and is to be expensed over a twelve-month period. As of December 31, 2020, the full amount has been expense.
### Stock Option Plan
During 2014, the Board of Directors adopted, and the shareholders approved, the 2014 Stock Option Plan under which a total of
1,811,401 shares of common stock had been reserved for issuance.
### Stock Options
As of December 31, 2020, employees of the Company hold options to purchase
250,000 shares of common stock at an exercise price of $ | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
### EXPLANATORY NOTE
1 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2020 of Infinite Group, Inc. (the Company) filed with the Securities and Exchange Commission on March 30, 2021 (the Form 10-Q) is to include Exhibit 101 to the Form 10-Q, which contains the XBRL (eXtensible Business Reporting Language) Interactive Data File for the financial statements and notes.
This Amendment No.
INFINITE GROUP, INC.
Form 10-K
### PART IV
Item 15.
Exhibits
Signatures
### FORWARD LOOKING STATEMENT INFORMATION
Certain statements made in this Annual Report on Form 10-K are forward-looking statements regarding the plans and objectives of management for future operations and market trends and expectations. Such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Our plans and objectives are based, in part, on assumptions involving the expansion of our business. Although we believe that our assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that our objectives and plans will be achieved. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, the factors set forth herein under the headings Business, Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations. The terms we, our, us, or any derivative thereof, as used herein refer to Infinite Group, Inc., a Delaware corporation.
Item 15.
(a)
(1) Financial Statements See the Index to the financial statements on page F-1.
(b)
### Exhibits:
Exhibit
No. Description
3.1
Certificate of Incorporation of the Company dated April 29, 1993. (1)
3.2
Certificate of Amendment of Certificate of Incorporation dated December 31, 1997. (3)
3.3
Certificate of Amendment of Certificate of Incorporation dated February 3, 1999. (4)
3.4
Certificate of Amendment of Certificate of Incorporation dated February 28, 2006. (6)
3.5
By-Laws of the Company. (1)
4.1
Specimen Stock Certificate. (1)
10.3
Form of Stock Option Agreement. (1)
10.4
Promissory Note dated August 13, 2003 in favor of Carle C. Conway. (5)
10.5
Promissory Note dated January 16, 2004 in favor of Carle C. Conway. (5)
10.6
Promissory Note dated March 11, 2004 in favor of Carle C. Conway. (5)
10.7
Promissory Note dated December 31, 2003 in favor of Northwest Hampton Holdings, LLC. (5)
10.8
Modification Agreement No. 3 to Promissory Notes between Northwest Hampton Holdings, LLC and the Company dated October 1, 2005. (6)
10.9
Modification Agreement No. 3 to Promissory Notes between Allan Robbins and the Company dated October 1, 2005. (6)
10.10
Conway dated December 31, 2005. (6)
10.11
Modification Agreement to Promissory Note between Northwest Hampton Holdings, LLC and the Company dated December 6, 2005. (6)
10.12
Collateral Security Agreement between the Company and Northwest Hampton Holdings, LLC dated February 15, 2006. (6)
10.13
Collateral Security Agreement between the Company and Allan Robbins dated February 15, 2006. (6)
10.14
Purchase and Sale Agreement between the Company and Amerisource Funding, Inc. dated May 21, 2004. (7)
10.15
Account Modification Agreement between the Company and Amerisource Funding, Inc. dated August 5, 2005. (7)
10.16
Promissory Note dated June 13, 2008 in favor of Dan Cappa. (9)
10.17
Promissory Note between Northwest Hampton Holdings, LLC and the Company dated September 30, 2009. (10)
10.18
Conway dated December 31, 2009. (10)
10.19
Demand Promissory Note between Allan M. Robbins and the Company dated August 13, 2010. (12)
10.20
Settlement Agreement between the Company and the PBGC, effective as of September 1, 2011. (14)
10.21
Agreement for Appointment of Trustee and Termination of Plan between the Company and the PBGC, effective as of November 1, 2011. (15)
10.22
Promissory Note in favor of the PBGC dated October 17, 2011. (15)
10.23
Conway dated December 31, 2012. (16)
10.24
Line of Credit Note Agreement between the Company and Donald W. Reeve dated December 1, 2014. (17)
10.25
Reeve dated September 5, 2013.
(18)
10.26
Reeve dated December 1, 2014. (17)
10.27
Software Assets Purchase Agreement between the Company and
UberScan, LLC and Christopher B. Karr and Duane Pfeiffer.
(18) #
10.28
Promissory Note and Security Agreement between the Company and UberScan, LLC.
(18)
10.29
Conway dated December 31, 2014. (18)
10.30
Promissory Note between Andrew Hoyen and the Company dated February 12, 2015. (18)
10.31
Amendment to Promissory Note between the Company and Dan Cappa dated August 24, 2015. (19)
10.32
Amendment to Promissory Note between the Company and UberScan, LLC dated October 6, 2015. (19)
10.33
Amendment to Promissory Note between the Company and Allan Robbins dated December 31, 2015 (23)
10.34
Amendment to Promissory Note between the Company and Northwest Hampton Holdings, LLC dated December 31, 2015 (23)
10.35
### Promissory
Note between the Company and James Leonardo Managing Member of a Limited Liability Corporation to be formed dated March 14, 2016 (23)
10.36
Modification Agreement to Line of Credit Agreement between the Company and Donald W. Reeve dated September 30,2016 (20)
10.37
Reeve dated September 30, 2016. (20)
10.38
Line of Credit and Note Agreement between the Company and Andrew Hoyen dated July 18, 2017 (21)
10.39
Stock option agreement between the Company and Andrew Hoyen dated July 18, 2017 for 400,000 common shares (21)
10.40
Stock option agreement between the Company and Andrew Hoyen dated July 18, 2017 for 100,000 common shares (21)
10.41
Line of Credit and Note Agreement between the Company and Harry Hoyen dated September 21, 2017 (22)
10.42
Amendment to Promissory Note between the Company and Allan Robbins dated November 30, 2016
(23)
10.43
Amendment to Promissory Note between the Company and Northwest Hampton Holdings, LLC dated December 8, 2016.
(23)
10.44
Modification #1 to Line of Credit Note and Agreement between Harry Hoyen and the Company dated December 28, 2017. (23)
10.45
Stock option agreement between the Company and Harry Hoyen dated December 28, 2017 for 400,000 common shares. (23)
10.46
Note Payable Agreement between the Company and Harry A. Hoyen III IRA dated May 7, 2019 (24)
10.47
Stock option agreement between the Company and Harry A. Hoyen III dated May 14, 2019(24)
10.48
**2019 Stock Option Plan (25)
10.49
Stock option agreement between the Company and Andrew Hoyen dated December 10, 2019. (26)
10.50
Reeve dated December 23, 2019. (26)
10.51
Stock Option Agreement between the Company and James Villa dated December 23, 2019. (26)
10.52
Stock option agreement between the Company and Andrew Hoyen dated December 23, 2019. (26)
10.53
Small Business Administration Note Payable Agreement with Upstate Bank (27)
10.54
**2020 Stock Option Plan (27)
10.55
Amendment to Promissory Note between the Company and Northwest Hampton Holdings, LLC dated November 17, 2020. *
10.56
Promissory Note between Donald Reeve and the Company dated December 30, 2020. *
31.1
Chief Executive Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
31.2
Chief Financial Officer Certification pursuant to section 302 of the Sarbanes-Oxley Act of 2002. *
32.1
Chief Executive Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
32.2
Chief Financial Officer Certification pursuant to section 906 of the Sarbanes-Oxley Act of 2002. *
101.INS XBRL Instance Document. *
101.SCH
*
101.CAL
*
101.LAB
*
101.PRE
*
101.DEF
*
* Filed as an exhibit hereto.
**Management contract or compensatory plan or arrangement.
# Portions of this exhibit have been omitted pursuant to a request for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934, as amended. Omitted portions have been filed separately with the SEC.
(1) Previously filed as an exhibit to the Company's Registration Statement on Form S-1 (File #33- 61856) and incorporated herein by reference.
(2) Incorporated by reference to Appendix II of the Company's DEF14A filed on February 1, 2006.
(3) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997.
(4) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998.
(5) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2002.
(6) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.
(7) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006.
(8) Incorporated by reference to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2007.
(9) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
(10) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
(11) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended June 30, 2010.
(12) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended September 30, 2010.
(13) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010.
(14) Incorporated by reference to the Company's Current Report on Form 8-K filed on September 12, 2011.
(15) Incorporated by reference to the Company's Current Report on Form 8-K filed on November 7, 2011.
(16) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2012.
(17) Incorporated by reference to the Company's Current Report on Form 8-K filed on December 4, 2014.
(18) Incorporated by reference to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.
(19) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended September 30, 2015.
(20) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended September 30, 2016.
(21) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended June 30, 2017.
(22) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended September 30, 2017.
(23) Incorporated by reference to the Company's Current report on Form 10-K for the fiscal year ended December 31, 2017.
(24) Incorporated by reference to the Company's Current Report on Form 8-K filed on May 16, 2019.
(25) Incorporated by reference to the Company's Current Report on Form 8-K filed on August 22, 2019.
(26) Incorporated by reference to the Company's Current report on Form 10-K for the fiscal year ended December 31, 2019.
(27) Incorporated by reference to the Company's Quarter Report on Form 10-Q for the quarterly period ended March 31, 2020.
Information required by schedules called for under Regulation S-X is either not applicable or is included in the financial statements or notes thereto.<|endoftext|>Is also one of our Named Executive Officers. His non-director compensation ($0) is set forth in the Summary Compensation Table.
### Executive Compensation
Overview
The 2020 salaries for Messrs. Pinkston, Merrill, and Schell ($887,500, $545,000, and $492,000 per year, respectively) were set by the members of the company's pre-bankruptcy compensation committee and approved by the company's pre-bankruptcy board in December 2019. Due to the financial conditions of the company at that time, salaries were not increased from 2019 levels. Mr. Smith's appointment as CEO in October 2020 was made by the company's post-bankruptcy board of directors without any provision for salary at that time. The board of Superior Pipeline Company ("SPC"), based on the recommendation of its governance and compensation committee (the "SPC GC Committee"), set Mr. Hicks' 2020 salary, making no change to it from his 2019 year-end level ($305,000 per year) until the time of his April 1, 2020 promotion, when his salary was increased to $330,000. The 2020 salary amounts for Messrs. Merrill and Schell also reflect a 15% salary reduction implemented as part of the cost savings measures undertaken at the corporate level in May 2020. When Mr. Schell was promoted to Executive Vice President, he resumed his original 2020 salary rate of $492,000 annually, as provided in his employment contract.
Due to the company's continuing efforts to reduce costs post-bankruptcy, no 2020 bonuses were awarded to corporate NEOs (or any employees of the company or any of its subsidiaries that were subject to the bankruptcy). Mr. Hicks received a 2020 bonus based on the determination by the SPC GC Committee and the SPC board that a bonus was warranted in view of SPC's 2020 performance. SPC was not included in the company' bankruptcy filings.
No company stock awards were granted as 2020 compensation.
### Summary Compensation Table For 2020
The following table sets forth information regarding the compensation paid, distributed, or earned by or for our NEOs for the stated fiscal years.
1.
Mr. Pinkston served as CEO and President during 2019 and from January 1, 2020 to March 31, 2020. Mr. Merrill served as Chief Operating Officer during 2019 and until April 1, 2020, when his title changed to CEO and President. Effective October 22, 2020, Mr. Smith replaced Mr. Merrill as President and CEO, but he received no compensation during 2020 other than for director fees, as set forth in the Director Compensation Table. Mr. Schell served as Senior Vice President, Secretary and General Counsel during 2019 and until September 3, 2020, when his title changed to Executive Vice President, Secretary and General Counsel. Effective October 27, 2020, Mr. Schells title was changed to Executive Vice President and Chief Strategy Officer. Mr. Schell stepped down from the company effective March 31, 2021. Mr. Hicks was Senior Vice President of Operations and Engineering for SPC from January 1, 2019 to June 1, 2019, when he became Chief Operating Officer. Mr. Hicks served as SPC's COO until April 1, 2020, when he became President.
2.
Compensation deferred at the election of an executive is included in the year earned.
3.
Amounts in bonus column reflect the bonus amount earned in the year without regard to when those amounts were actually paid , and do not include amounts, if any, earned in prior years but paid in the stated year. All amounts listed were awarded and paid during the subsequent fiscal year, but are compensation for the year listed.
4.
### For 2019
, the amounts included in the Stock Awards column for the performance-based awards ($1,323,260 for Mr. Pinkston, $668,321 for Mr. Merrill, $603,380 for Mr. Schell,) are the aggregate grant date fair value of these awards based on a probability analysis projecting a 28% payout on the TSR award for performance at the 17.90 percentile of the peer group and 100% payout on the CFTA award for performance at the 60th percentile of the peer group, as computed in accordance with FASB ASC Topic 718 Stock Compensation, which excludes the effect of estimated forfeitures. For a discussion of the valuation assumptions used in calculating these values for 2019, see Notes 2 and 12 to our Consolidated Financial Statements included in our annual report on Form 10-K for the year ended December 31, 2019. The amount shown does not represent amounts paid to the NEOs. If performance had been at its highest level, the award payout for the performance-based component of the restricted stock awards included in the Stock Awards column would be at 200%, and would be as follows:
5.
Reflects component of cash bonuses paid based on objective performance metrics set in advance by the compensation committee.
6.
The table below shows the components of this column for the last fiscal year: a.Reflects amounts paid under companys severance agreement for those NEOs who terminated employment before the end of 2020.
### b. Match was made in cash
Outstanding Equity Awards at End of 2020
The company's pre-bankruptcy outstanding stock was canceled effective with its September 3, 2020 emergence from bankruptcy. No equity awards were held by any NEO at December 31, 2020.
Item12.
This table shows the number of shares of our common stock beneficially owned by each current director, each NEO, and all current directors and executive officers as a group as of April 9, 2021, with all shares directly owned unless otherwise noted:
1.
As of April 9, 2020, none of our officers or directors own shares of the Company's common stock directly.
Mr. Frohlich manages Prescott Group Capital Management, which owns 2,931,684 shares, as set forth in the table that follows.
Stockholders Owning More Than 5% of Our Common Stock
This table sets forth information about the beneficial ownership of our common stock by the only stockholders we know of who own over five percent of our common stock. Holders of more than five percent of our common stock have not been required to file ownership reports with the SEC.
1.
Beneficial ownership for Prescott Group Capital Management, LLC and RBC Global Asset Management Inc. is based on the Non-objecting Beneficial Owners Report as of April 9, 2020, and as subsequently confirmed by the stockholder. Beneficial ownership for Guggenheim Partners Capital Management, LLC is as confirmed by the stockholder on April 26, 2021, and is held in varying amounts across numerous funds.
Beneficial ownership for Newtyn Management is estimated based on the value of their bonds held at the time of our September 3, 2020 emergence from bankruptcy and has not been confirmed by Newtyn Management. Beneficial ownership may under certain circumstances include both voting power and investment power. Information is provided for reporting purposes only and should not be construed as an admission of actual beneficial ownership.
2.
Based on the number of issued and outstanding shares of our common stock as of
### April 9, 2021
Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2020
1.
Our Long Term Incentive Plan was approved by the requisite creditors as part of our plan of reorganization, which was confirmed by order of the U.S. Bankruptcy Court on August 6, 2020.
2.
Represents shares available for issuance under our Long Term Incentive Plan.
### Material Terms of Long Term Incentive Plan
Overview
Our Long Term Incentive Plan ("LTIP") was adopted in connection with our reorganization and became effective as of September 3, 2020. The following is a summary of the material terms of the LTIP. This summary is not complete. For more information concerning the LTIP, we refer you to the full text of the plan, which was filed as an exhibit to our Current Report on Form 8-K filed September 10, 2020.
The purpose of the LTIP is to attract, retain and motivate employees, officers, directors, consultants, and other service providers of the company and its affiliates. The LTIP provides for the grant, from time to time, at the discretion of the board or a board committee, of Options, SARs, Restricted Stock, Restricted Stock Units, Stock Awards, Dividend Equivalents, Other Stock-Based Awards, Cash Awards, Performance Awards, Substitute Awards, or any combination of those awards.
Subject to adjustment in the event of certain transactions or changes of capitalization in accordance with the LTIP, 903,226 shares of the new common stock of the reorganized company, par value $0.01 per share ("stock") have been reserved for issuance by awards to be issued under the LTIP. Shares available to be delivered under the LTIP will be made available from (i) authorized but unissued shares of stock; (ii) stock held in the treasury of the company; or (iii) previously-issued shares of stock reacquired by the company. Stock subject to an award that expires or is canceled, forfeited, exchanged, settled in cash or otherwise terminated without delivery of shares and shares withheld to pay the exercise price of, or to satisfy the withholding obligations with respect to, an award will again be available for delivery by issuance of other awards under the LTIP.
Eligible recipients of awards under the LTIP include any individual who, as of the date of grant, is an officer or employee of the company or its affiliates and any other individual who provides services to the company or its affiliates, including one of its directors. An employee on leave from the company is considered eligible for awards under the LTIP.
### Administration
The LTIP is administered by our compensation committe e, which has discretion to determine the individuals to whom awards may be granted under the plan, the number of shares of our stock or the amount of cash subject to each award, the type of award, the manner in which such awards will vest and the other conditions applicable to awards. The compensation committee is empowered to clarify, construe or resolve any ambiguity in any provision of the LTIP or any award agreement and adopt such rules, forms, instruments and guidelines for administering the LTIP as it deems necessary or proper. The committee may delegate its powers to a subcommittee, a director, or an officer, if the delegation does not violate any applicable law.
### Agreements
Awards granted under the LTIP will be evidenced by award agreements that provide additional terms and conditions associated with such awards, as determined by the compensation committee in its discretion. In the event of any conflict between the provisions of the LTIP and any such award agreement, the provisions of the LTIP will control.
Award Types
Types of awards available under the LTIP, which may be granted either alone, in addition to, or in tandem with any other award, include:
Options - These include Incentive Stock Options ("ISO"s), which are intended to meet the ISO definition of Section 422 of the Internal Revenue Code, as well as Nonstatutory Options, which are any option that is not an ISO. Net settlement and cashless exercise are available methods of payment. No option may be exercisable for more than ten years following the grant date or, for persons owning stock with more than 10% of the total combined voting power of all classes of stock of the company or its subsidiaries, five years from the grant date.
Stock Appreciation Rights ("SAR"s) - A SAR is the right to receive, on exercise, an amount equal to the product of the excess of the fair market value of a share of stock on the date of exercise over the grant price of the SAR and the number of shares of stock subject to the exercise of the SAR. No SAR may be exercisable for more than ten years following the grant date.
Restricted Stock - Restricted Stock is stock granted subject to certain restrictions and a risk of forfeiture. During the period of restriction, the stock may not be transferred, sold, pledge, hedged, hypothecated, margined or otherwise encumbered by the recipient.
Restricted Stock Units ("RSU"s) - An RSU is a grant to receive stock, cash, or a combination of stock and cash at the end of a specified period, and may include any restrictions imposed by | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
And directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i)to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by December 11, 2021 (or up to June 11, 2022 if we extend the period of time to consummate a business combination) or (ii)with respect to any other provision relating to stockholders rights or pre-initialbusiness combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of ClassA common stock upon approval of any such amendment at a per-shareprice, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes divided by the number of then outstanding public shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $500,000 of proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any franchise and income tax obligations we may owe. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes on interest income earned on the trust account balance, we may request the trustee to release to us an additional amount of up to $50,000 of such accrued interest to pay those costs and expenses.
Although we will seek to have all vendors, service providers, prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. Marcum, our independent registered public accounting firm, and the underwriters of our initial public offering, did not execute agreements with us waiving such claims to the monies held in the trust account.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.10 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.10 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the trust account are reduced below (i) $10.10 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-shareredemption price will not be less than $10.10 per public share.
We have access to up to approximately $406,380.90 from the proceeds held outside of the trust account (as of December 31, 2020) with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $50,000). Because the offering expenses were less than our estimate of $700,000, the amount of funds we hold outside the trust account has increased by a corresponding amount.
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination) may be considered a liquidating distribution under Delaware law.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination), is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our initial business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination), we will: (i)cease all operations except for the purpose of winding up, (ii)as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-shareprice, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes (less up to $50,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following December 11, 2021 (or up to the 21 st month following our IPO) and, therefore, we do not intend to comply with those procedures.
Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.10 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes and will not be liable as to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.10 per share to our public stockholders.
Our public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i)the completion of our initial business combination, (ii)the redemption of any public shares properly tendered in connection with a stockholder vote to amend any provisions of our amended and restated certificate of incorporation (A)to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination) or (B)with respect to any other provision relating to stockholders rights or pre-initialbusiness combination activity, and (iii)the redemption of all of our public shares if we are unable to complete our business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination), subject to applicable law.
### Competition
In identifying, evaluating and selecting a target business for our initial business combination, we have encountered, and may continue to encounter, intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic business combinations. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding rights, warrants and unit purchase option, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses.
Employees
These individuals are not obligated to devote any specific number of hours to our matters but they devote as much of their time as they deem necessary to our affairs and they intend to continue doing so until we have completed our initial business combination.
These financial statement requirements may limit the pool of potential targets we may conduct an initial business combination with because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination by December 11, 2021 (or by June 11, 2022, if we extend in full the period of time to consummate a business combination).
We are required to evaluate and report on our internal control procedures for the fiscal year ending December31, 2021 as required by the Sarbanes-OxleyAct.
We will remain an emerging growth company until the earlier of (1)the last day of the fiscal year (a) following September 11, 2025, (b)in which we have total annual gross revenue of at least $1.07billion, or (c)in which we are deemed to be a large accelerated filer, which means the market value of our shares of ClassA common stock that are held by non-affiliatesexceeds $700million as of the prior June 30 th
### BUSINESS
Item 1A.
Risk Factors
and
For risk factors related to Arbe, see the registration statement that will be filed on Form S-4 by Arbe and the Company.
For the complete list of risks relating to our operations, see the section titled Risk Factors contained in our prospectus dated September 8, 2020, and filed with the SEC on September 10, 2020. For risk factors related to Arbe and our business combination with Arbe, see the Proxy Statement we<|endoftext|>Outstanding commitments as at December 31, 2020.
### Litigation
From time to time, the Company may be subject to legal proceedings and claims which arise in the ordinary course of business. As of December 31, 2020, there are no legal proceedings.
10. RELATED PARTY TRANSACTIONS
In support of the Companys efforts and cash requirements, it may rely on advances from stockholders until such time as the Company can support its operations through revenue generation or attain adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by stockholders.
On June 26, 2019, the Company signed an amended credit agreement where BIG cancelled $115,250 amount owed by the Company. On December 1, 2019, the agreement was amended to pay $1 a month as of December 1, 2019. As of December 31, 2020, the Company had trade and other payables owing to this related party of $102,267 (December 31, 2019 - $6,301). The Company also terminated the rental agreement as at December 31, 2019 with BIG with a monthly rental expense of $16,500 that was due to expire on February 28, 2020.
CurrencyWorks Inc.
December 31, 2020 and 2019
10.
On February 7, 2020, we entered into an amendment to the loan agreement and termination of business services agreement (the Agreement) with Ryde GmbH (Borrower) and Ryde Holding Inc. (Customer).
In addition, under the Agreement, Borrower agreed to pay us $125,000 on or before February 7, 2020 as payment in full of all interest accrued under the loan agreement through December 31, 2019 and commencing on March 31, 2020, Borrower agreed to make quarterly interest only payments on or before the last day of each calendar quarter until such time as the loan is repaid in full.
In addition, under the Agreement, Borrower paid us $150,000 on February 7, 2020, which reduced the outstanding principal balance of the loan by $150,000. Borrower agreed that the remaining unpaid principal balance of the loan and all accrued and unpaid interest, will be due and paid in full on or before the earlier of (a) December 31, 2021, and (b) March 31, 2021, provided, Borrower has Earnings Before Interest, Taxes, Depreciation and Amortization or EBITDA as defined under United States GAAP of more than $5,000,000, for the 12 month period ending December 31, 2020, as certified by an independent auditor appointed by Borrower. If Borrower does not provide such certified financial statements on or before March 31, 2021, Borrower agreed that the remaining unpaid principal balance of the loan and all accrued and unpaid interest, will be immediately due and paid in full.
On February 7, 2020, Borrower paid us a total of $27,500 for expense reimbursement.
In addition, we terminated the Business Services Agreement (BSA) with Ryde Holding Inc. (Customer) dated December 29, 2017, as amended on March 15, 2018, July 9, 2018 and October 29, 2018. Customer agreed to issue to us 10 million KodakOne Tokens after their issuance. As per the BSA we had agreed to provide consulting of corporate development and governance, business development and technical services, business awareness services, financial and administrative services and media management services. In addition, we agreed to provide to Customer the monthly services from January 1, 2020 to December 31, 2020 consisting of board and corporate strategy management and board and corporate governance management. Customer has since acquired internal resources to provide the services as anticipated under the BSA and hence both the parties had mutually agreed to terminate the BSA in exchange for 10 million KodakOne Tokens which are to be issued after their issuance.
(please see note 17) which owns 10% of the common stock of Ryde Holding Inc., the parent company of Ryde GmbH and he is also a director, officer and indirect shareholder of Blockchain Merchant Group, Inc. which owns 2.5% of the common stock of Ryde Holding Inc. Mr. Chell has also been a director and secretary of Ryde Holding Inc. from December 2017 and chairman of Ryde Holding Inc. from February 2018. From December 2017 to February 2018, our president, Bruce Elliott, served as the chief marketing officer of Ryde Holding Inc. Our chief financial officer, Swapan Kakumanu has also been the chief financial officer of Ryde Holding Inc. from October 2018 to September 2019.
CurrencyWorks Inc.
December 31, 2020 and 2019
10.
On December 4, 2018, the Company appointed Swapan Kakumanu as Chief Financial Officer. Previously, on October 9, 2017, the Company had signed an agreement with a company owned by Swapan Kakumanu to complete the accounting functions of the Company. On June 26, 2019, Red to Black credited the Company $25,000 in amounts owing. As of December 31, 2020, the Company had trade and other payables owing to this related party of $10,013 (December 2019 - $31,688)
As at December 31, 2020, the Company had outstanding accounts receivable from a related party of $0 compared to $15,000 as at December 31, 2019.
11. REVENUE
The Company had 100% of its concentrated revenue streams in 2020 related to two customer for consulting services provided.
12. SHARE CAPITAL
On May 16, 2019, the Company completed a private placement where 1,000,000 shares were issued at a price of $0.40 (Canadian dollars (CAD)) for total gross proceeds of $400,000 CAD or $295,565 less share issue costs of $1,836.
On October 19, 2019, the Company issued 333,333 common shares to Tryton Financial Corporation by way of a debt settlement for $100,000 at a deemed price of US$0.30 per share.
On November 7, 2019, the Company issued 93,226 common shares to Uptick Capital LLC for services rendered for $15,000.
On June 12, 2020, the Company completed a non-brokered private placement consisting of the issuance of 11,170,000 units (each, a Unit) at a price of USD$0.04 per unit. Each unit consisted of one share of common stock and one warrant with an exercise price of CAD $0.10 per warrant share for a period of 2 years from the date of closing. The Company received aggregate gross proceeds of USD$410,783 (the Offering) of which $278,332 is allocated to common shares and $132,451 is allocated to the warrants. See Note 4 and Note 5 for calculations. The warrants issued by the Company are denominated in CAD at issuance. The Companys functional currency is the USD. Under U.S. GAAP, where the strike price of warrants is denominated in a currency other than an entitys functional currency the warrants would not be considered indexed to the entitys own stock and would consequently be considered to be a derivative liability. Therefore, the value of the warrants needs to be included as a derivative liability.
In connection with the offering, the Company has agreed to issue 80,000 brokers warrants to the Finders. Each broker warrant entitles the holder to purchase one Unit (each, a Broker Unit) at a price of $0.05 per Broker Unit, with each Broker Unit consisting of one Share and one share purchase warrant entitling the holder to purchase an additional share at a price of $0.10 for a period of two years.
On December 31, 2020, there were 500,000 warrants exercised for common shares.
CurrencyWorks Inc.
December 31, 2020 and 2019
13. STOCK-BASED COMPENSATION
The Company has adopted the 2017 Equity Incentive Plan (the Plan) under which non-transferable options to purchase common shares of the Company may be granted to directors, officers, employees, or consultants of the Company. The terms of the Plan provide that our board of directors may grant options to acquire common shares of the Company at not less than 100% of the greater of: (i) the fair market value of the shares underlying the options on the grant date and (ii) the fair market value of the shares underlying the options on the date preceding the grant date at terms of up to ten years. No amounts are paid or payable by the recipient on receipt of the options. On December 7, 2020, the maximum number of options available for grant was increased to 6,985,207 shares. As of December 31, 2020, there are 3,500,000 stock options issued (December 31, 2019 2,900,000) and 3,485,207 stock options unissued (December 31, 2019 100,000).
The Company has also granted stock options to non-employees. These stock options were granted to consultants who have provided their services for cash compensation below cost, with the stock options providing additional compensation in lieu of cash.
On February 13, 2019, the Company granted a total of 100,000 stock options to a consultant. The stock options have a fair value of $0.2480 and are exercisable as follows:
(i)
1/3 on the first anniversary date;
(ii)
1/3 on the second anniversary date; and
(iii)
1/3 on the third anniversary date.
Stock-based compensation expense recognized for the years ended December 31, 2020 and 2019 were $20,517 and $116,755, respectively. Stock options granted are valued at the fair value calculation based off the Black-Scholes valuation model. The weighted average assumptions used in the calculation are as follows:
CurrencyWorks Inc.
December 31, 2020 and 2019
13. STOCK-BASED COMPENSATION (CONTD)
Cathio, Inc. (Cathio), a subsidiary of the Company, has issued nonvested shares to the management team of Cathio.
On March 5, 2019, Cathio granted a total of 16,000,000 nonvested shares to two officers of Cathio. These nonvested shares vest based upon various milestones, have no exercise price, exercise immediately upon vesting, and do not expire except upon resignation of the employee or by a resolution by the Board of Directors.
As vesting conditions are not wholly dependent on the employee and there is no timeline for them, for accounting purposes, the fair value will be calculated and the expense will be recognized upon the achievement of the milestones. sBetOne, Inc. (sBetOne), a subsidiary of the Company, has issued nonvested shares to a member of the Board of Directors of sBetOne.
On March 22, 2019, sBetOne granted a total of 150,000 nonvested shares to a member of the Board of Directors of sBetOne. These nonvested shares vest 1/36 starting April 1, 2019 and at the beginning of the month for the following 35 months, have no exercise price, exercise immediately upon vesting, and do not expire except upon resignation of the employee or by a resolution by the Board of Directors.
On June 12, 2019, June 27, 2019, and June 28, 2019, sBetOne granted a total of 150,000 stock options to three advisors. The stock options are exercisable at the price of $0.01 per share for a period of ten years from the date of grant. The fair values of the stock options were $0.7880, $0.7380, and $0.7680, respectively. The stock options are exercisable as follows:
(i)
1/2 upon the date of grant; and
(ii)
1/2 on the first anniversary date.
14. INCOME TAXES
For the fiscal years 2020 and 2019, there was no provision for income taxes and deferred tax assets have been entirely offset by valuation allowances.
As of December 31, 2020 and 2019, the Company had net operating loss carry forwards of approximately $12,970,232 and $8,957,633 , respectively. The carry forwards expire through the year 2040. The Companys net operating loss carry forwards may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code.
The Tax Cuts and Jobs Act was enacted on December 22, 2017 which reduced the U.S. corporate statutory tax rate from 35% to 21% beginning on January 1, 2018. We used 21% as an effective rate. The Companys tax expense differs from the expected tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 21% to loss before taxes (2018 21%)), as follows:
CurrencyWorks Inc.
December 31, 2020 and 2019
14. INCOME TAXES (CONTD)
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities. The tax effect of significant components of the Companys deferred tax assets at December 31, | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
### EXPLANATORY NOTE
HighPoint Resources Corporation (the Company, we, our or us) is filing this Amendment No. 1) to amend our Annual Report on Form 10-K for the year ended December 31, 2020, originally filed with the Securities and Exchange Commission (the SEC) on February 24, 2021 (the Original Filing), to include the information required by Items 10 through 14 of Part III of Form 10-K. This Amendment No. 1 consists solely of the preceding cover page, this explanatory note, the information required by Part III, Items 10, 11, 12, 13, and 14 of Form 10-K, a signature page and certifications required to be filed as exhibits.
The reference on the cover of the Original Filing to the incorporation by reference of portions of our definitive proxy statement into Part III of the Original Filing is hereby deleted. In addition, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), Part III, including Items 10 through 14 of the Original Filing, is hereby amended and restated in its entirety.
This Amendment No. 1 does not reflect events occurring after the filing of the Original Filing, and, except as described above, does not modify or update any other disclosures.
The section of this Amendment No. 1 entitled Report of the Compensation Committee is not deemed to be soliciting material or to be filed with the SEC under or pursuant to Section 18 of the Exchange Act or subject to Regulation 14A thereunder, and shall not be incorporated by reference or deemed to be incorporated by reference into any filing by the Company under either the Securities Act of 1933, as amended, or the Exchange Act, unless otherwise specifically provided for in such filing.
PART III
ITEM 10.
The following tables set forth the names of our directors and our executive officers, their respective positions and ages, and the year in which each director was initially elected. All directors stand for election annually. Additional information concerning each of these individuals follows the table.
(1)
(2)
(3)
Member of the Reserves and EHS Committee.
(4)
Member of the Audit Committee.
### Jim W. Mogg
Mr. Mogg has served as a director of the Company since May 2007, as Lead Director from February 2010 until January 2013, and as Chair since January 2013. Mr. Mogg has served as a director of Matrix Service Company, a publicly traded engineering and construction company, since August 2013, and was elected as Chairman in October of 2018. Mr. Mogg has served as a director of ONEOK, Inc., a publicly traded diversified energy company, since July 2007. Mr. Mogg served as a director of ONEOK Partners, L.P. from August 2009 until it was merged into an affiliate in July 2017 and ceased to be publicly traded. From 2005 to 2007, Mr. Mogg served as Chairman of DCP Midstream GP, LLC, the general partner of DCP Midstream Partners, L.P., and from 2004 through 2006, Mr. Mogg was Group Vice President and Chief Development Officer for Duke Energy Corporation. Mr. Mogg is currently on the Audit Committee and Nominating and Corporate Governance Committee at ONEOK Inc. Mr. Mogg served as President and Chief Executive Officer of DCP Midstream, LLC from December 1994 to March 2000, and as Chairman, President and Chief Executive Officer from April 2000 through December 2003. DCP Midstream, LLC was the general partner of TEPPCO Partners, LP and Mr. Mogg was Vice Chairman of TEPPCO Partners from April 2000 to May 2002 and Chairman from May 2002 to February 2005. In addition, Mr. Mogg held various executive and senior management positions at Duke Energy and Pan Energy over a 27 year period. Mr. Mogg has a Bachelor of Science in Mathematics from Southwestern Oklahoma State University and completed the Advanced Management Program at Harvard University. Mogg is qualified to serve as a director due to his extensive oil and gas industry executive management experience, including serving as chief executive officer, in addition to extensive experience as a public company director.
Scott A. Gieselman.
Mr. Gieselman has served as a director of the Company since March 2018. Mr. Gieselman has served as a Partner at NGP Energy Capital Management, L.L.C. since April 2007. Prior to joining NGP, Mr. Gieselman worked in various positions in the investment banking energy group of Goldman, Sachs & Co., where he became a partner in 2002. Gieselman served on the board of Vantage Energy Acquisition Corp. He served as a Director of WildHorse Resources II, LLC, a private independent energy company, and WildHorse Resource Development Corporation, a Houston-based independent oil and natural gas company, from September 2016 until its merger with Chesapeake Energy in February 2019. Mr. Gieselman served as a member of the board of directors of Rice Energy, Inc. from January 2014 until April 2017, and was a member of the board of directors of Memorial Resource Development Corp. In addition, Mr. Gieselman served as a member of the board of directors of Memorial Production Partners GP LLC from December 2011 until March 2016. Mr. Gieselman received a B.S. in 1985 and an M.B.A. in 1988 from Boston College. Gieselman is qualified to serve as a director due to his extensive banking and strategic advisory experience.
### Craig S. Glick.
Mr. Glick has served as a director of the Company since March 2018. Mr. Glick has over 35 years of legal and financial experience. He joined NGP Energy Capital Management, L.L.C. in 2006, serves as Partner of the NGP Funds, and sits on the Firms Executive Committee. Previously, Mr. Glick served as Managing Director and General Counsel for NGP Midstream & Resources from 2006 to 2008. Glick served on the board of Vantage Energy Acquisition Corp.. He was a founding partner of Kosmos Energy Holdings and served as Senior Vice President, General Counsel and Corporate Secretary from 2003 to 2006. His previous tenures also include Hunt Resources and Hunt Oil Company (1999 to 2003), Gulf Canada Resources, Limited (1994 to 1999), and Torch Energy Advisors (1994). Mr. Glick was a Partner in the law firm Vinson & Elkins from 1985 to 1994, and has been a director of Northern Blizzard Resources, Inc., Parallel Energy Trust, Westside Energy, Inc. and Gulf Indonesia Resources. Mr. Glick received a B.A. in Political Science, cum laude, in 1982 from Tulane University and earned a J.D. in 1985 from the University of Texas School of Law, where he was a member of the Texas Law Review. Glick is qualified to serve as a director because he is an attorney with a strong oil and gas industry background, and has served as a director of numerous public and private oil and gas companies.
Andrew C. Kidd.
Mr. Kidd has served as a director of the Company since June 2020, and previously from March 2018 through April 2020. Since September 2020, Mr. Kidd has served as a director of all of the subsidiaries of Gulfport Energy Corporation. Since June 2020, Mr. Kidd has served as a director of a privately held oil and gas company with operations in Pennsylvania and as a Director of a privately owned financial services company based in New York. Mr. Kidd has also served on the boards of Sheridan Production Partners I, LLC and its affiliated entities as an Independent Director between February, 2019 and March, 2020 and as an Independent director on a privately held oil and gas company with operations in Louisiana between June, 2020 and December, 2020. Mr. Kidd also served as Senior Vice President and General Counsel at Ultra Petroleum from November 2018 until March 2019. From May 2017 to November 2018, Mr. Kidd served as an Independent Manager for GenOn Americas Generation, Inc. in connection with the GenOn bankruptcy. Mr. Kidd served as the Chief Executive Officer, President and General Counsel of Samson Investment Company and Samson Resources Corporation from February 2016 through March 2017, and served on the Company's Executive Team as Senior Vice President and General Counsel from September 2013 through January 2016. From October 2011 to August 2013, he served as Partner and General Counsel of Anthem Energy, a private investment manager that develops and operates energy investments. Prior to joining Anthem, Mr. Kidd was Senior Vice President and General Counsel of Quantum Utility Generation, LLC, a power generation asset operator. From August 2004 to December 2008, Mr. Kidd was with Constellation Energy Group, Inc. (CEG), serving in various positions, including Deputy General Counsel of CEG, General Counsel of Constellation Energy Resources, the business organization representing CEG's customer supply, global commodities and portfolio management activities, and a member of the Board of Managers of Constellation Energy Partners LLC, a publicly traded exploration and production company that was previously sponsored by CEG. Earlier in his career, he served as Senior Vice President and Deputy General Counsel of El Paso Corporation and held various officer level positions at Covanta Energy, Inc. Mr. Kidd began his law career as an associate at DLA Piper in Baltimore, Maryland. Mr. Kidd received his Bachelor of Arts degree from Dartmouth College and his Juris Doctorate degree, with honors, from the University of Maryland School of Law, where he was an editor of the University of Maryland Law Review. Kidd is qualified to serve as a director because he is an attorney with significant legal and executive management experience in the oil and gas industry.
### Lori A. Lancaster.
Ms. Lancaster has served as a director of the Company since December 2018. Ms. Lancaster has extensive experience in the oil and gas sector and is a former Managing Director of the Global Energy Group at UBS Securities, a position she held from December 2013 to August 2016. Prior to UBS she was a Managing Director in the Global Natural Resources groups at Goldman, Sachs & Co. from July 1999 to July 2008 and Nomura Securities from June 2010 to September 2013. During her 18-year tenure in investment banking, she led or was a key member of the execution team on more than $60 billion of announced energy M&A deals and led the structuring and execution of numerous capital markets transactions. In November 2020, Ms. Lancaster became a director at Laredo Petroleum, Inc., an oil and gas exploration and development company focused on the Permian Basin, and she currently serves on Laredos Audit and Compensation Committees. She also previously served as an independent director on Energen Corporations Board of Directors. Ms. Lancaster earned a bachelors degree from Texas Christian University and a Master of Business Administration degree from the University of Chicagos Booth School of Business. The Board has concluded that Ms. Lancaster is qualified to serve as a director due to her extensive finance and investment banking experience, including capital markets and M&A experience focused on the oil and gas industry.
Edmund P. Segner, III
Mr. Segner has served as a director of the Company since August 2009. Mr. Segner is a professor in the practice of engineering management in the Department of Civil and Environmental Engineering at Rice University in Houston, Texas, a position he has held since July 2006. In 2008, Mr. Segner retired from EOG Resources, Inc. (EOG), a publicly traded independent oil and gas exploration and production company. Among the positions he held at EOG were President, Chief of Staff, and Director from 1999 to 2007. From March 2003 through June 2007, he also served as the principal financial officer of EOG. Mr. Segner has served as a director of Archrock, Inc., anatural gas contract compression servicescompany, since July of 2018, and Laredo Petroleum, Inc., an oil and gas exploration and development company focused on the Permian Basin, since August of 2011. He previously served as a director of Archrock GP LLC (formerly
Exterran GP LLC) from May 2009 until April 2018, and Midcoast Energy Partners, L.P., a master limited partnership engaged in the natural gas and natural gas liquids midstream business primarily in Texas and Oklahoma, from February 2014 until April 2017. He also served as a director of Seahawk Drilling,<|endoftext|>B Preferred shares for $68,000 under the same terms as their initial purchase on January 31, 2018.
- In June 2018, Dominic DAlleva joined the advisory board. In conjunction with his advisory board position, 12 ReTech issued 3,125,000 shares to him on July 19, 2018.
- On July 2, 2018, the Company entered in an Equity Line of Credit agreement with Oasis Capital, LLC (Oasis Agreement), and as a part of that Agreement the Company was obligated to create a subset Series D-1 Preferred Stock from the authorized Series D Preferred Stock having special rights and privileges. The total number of shares of Series D-1 Preferred Stock issued was 311,250 shares, with a par value of $0.00001 per share and a stated value of $2.00 per share (the Stated Value). The Series D Preferred Stock as a whole, of which Series D-1 is a subset, has such powers, preferences, rights and restrictions which shall be determined by the Companys Board of Directors in its sole discretion, and which designations and issuances shall not require the approval of the shareholders of the Company
- On July 2, 2018, the Company reserved 100,000,000 shares of our common stock for Oasis Capital under the Equity Purchase Agreement. In connection with the Equity Purchase Agreement, Oasis Capital was issued 311,250 shares of the Companys Series D-1 Preferred Stock which is convertible, at the option of Oasis Capital, into shares of our common stock, subject to a beneficial ownership limitation of 4.99% of the then outstanding shares of common stock. Other than these Commitment Shares, the amount and percentage of shares of our common stock that will be beneficially owned by the selling stockholder after completion of the offering assume that they will sell all shares of our common stock being offered pursuant to this prospectus.
- On July 5, 2018, the Company filed a certificate of designation to create a subset of the Series D Preferred Stock, designated Series D-1.
-On July 13, 2018, the Company increased its authorized Series D Preferred Stock from one million to ten million (10,000,000) authorized shares of stock from the 50 million total authorized preferred shares. These shares are designated as Blank Check Preferred, allowing the Board of Directors to set the rights, privileges, and voting as determined by the Board of Directors as well as dividing this Series into other series as the need may arise.
- On August 6, 2018, the Board of Directors of 12 ReTech Corporation authorized the issuance of one (1) share of our Series C Preferred Shares to the founder, Angelo Ponzetta, effective August 14, 2018. The Series C Preferred Shares have no equity value, no preference in liquidation, and are not convertible into common shares, but authorizes the holder to vote one billion (1,000,000,000) votes on any matter that shareholders are entitled to vote for under our Bylaws at a face value of $1.00 per share. The Board believes that this was necessary so that the Company maintains a consistent vision going forward that can only be achieved if the Founders vision is maintained. This vision is the same vision that all current shareholders bought into as evidenced by their investment into the Company. To ensure that the founders vision is maintained, it is necessary that no outsider person or group can gain voting control from the founder as the Company.
- On September 29, 2018, the Company issued a total of 54,840 shares of our Series D-3 Preferred Shares to a related party at a price of $5 par value in exchange for various considerations as discussed in the Notes section of this filing.
-On January 9, 2019, the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-5 Convertible Preferred Stock with par value $0.00001 and stated value of $4.00 per share.
-On January 9, 2019, the Company filed a Certificate of Designation to create One Million (1,000,000) Series D-6 Convertible Preferred Stock with par value $0.00001 and stated value of $5.00 per share.
-On January 11, 2019, the Company filed an amendment to Series C Preferred shares where each issued and outstanding shares of Series C Preferred Stock shall be entitled to Eight Billion (8,000,000,000) votes at each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration (by vote or written consent).
-On January 14, 2019, the Company acquired Red Wire Group, LLC a Utah limited liability Company (Red Wire) pursuant to an Exchange of Equity Agreement (the Exchange Agreement) with the members of Red Wire (the Members) in exchange for (i) 75% of the membership interests of Red Wire in exchange for 54,000 shares of the Corporations Series D-6 Preferred Stock and (ii) the remaining 25% of the membership interests of Red Wire in exchange for 37,500 shares of the Corporations Series D-5 Preferred Stock.
-On February 19, 2019, the Company acquired 92.5% of the membership interest Rune NYC, LLC, a New York limited liability Company (Rune) in exchange for 82,588 shares of the Corporations Series D-5 Preferred Stock pursuant to an Exchange of Equity Agreement.
- On March 8, 2019, the Company increased its authorized shares of common stock from 1 billion (1,000,000,000) shares to 8 billion (8,000,000,000) shares pursuant to the effectiveness of its filed Form 14C.
- On March 14, 2019, the Company entered into a PIPE Equity Purchase Agreement whereby an institutional investor agreed to purchase up to $500,000 worth of the Companys D-2 Preferred Shares with a $2.00 face value and purchase at a discount to face value. In the first tranche, the Company sold 103,500 D-2 Preferred Shares and received net proceeds after expenses of $100,000. The D-2 Preferred Shares are convertible to common shares after a 6 month or longer holding period at market price. Concurrent with the execution of the PIPE Equity Purchase Agreement, the Company executed an Exchange Agreement with the same institution investor allowing that investor to exchange all its Series D-1 Preferred Shares for newly issued Series D-2 Preferred Shares. The Company then filed with the State of Nevada a new Certificate of Designation authorizing 2.5 million Series D-2 Preferred Shares from their blank check Preferred Shares.
- On August 20, 2019, the Company had successfully discharged all of its debts associated with 12 Europe A.G., as part of the completion of the 12 Europe A.G., bankruptcy filing except for certain social benefit payments still owed of approximately $35K by the Company.
- Beginning in the third quarter 2019 continuing in 2020, the Company began to consolidate and streamline its operations. The first step, on September 30, 2019, the Company foreclosed on its liens on E-motion Apparel Inc., taking possession of assets and brands and returning E-motion Apparel, Inc. equity to the Seller. This action resulted in the Company recognized other income of $511,489 which is discussed in further detail in the Notes of this filing.
- On October 1, 2019, the Company acquired 51% of Bluwire Group, LLC a Florida limited liability company, a retailer with 11 airport terminal locations and one casino location under an equity exchange agreement. The Company issued 500,000 of its Series A Preferred Shares to the sellers, who retained 30% of Bluwire. Nineteen percent (19%) is reserved for 12 months for potential equity investors into Bluwire. Any of the equity not used to raise capital for Bluwire over that period would be divided equally between the Company and the Sellers. The Sellers will continue with Bluwire under consulting agreements.
- On October 18, 2019, the Company successfully completed its reverse stock split and reduced its common stock outstanding by a ratio of one hundred for one. While the board of directors and a majority of the voting interests of the Company had also approved an increase in the authorized common shares in an amount up to 20 billion common shares within 12 months of July 18, 2019, at this time management has elected to keep the authorized stock at 8 billion common shares.
- On November 20, 2019, the Company acquired 100% of equity of Social Decay, LLC dba Social Sunday (Social Sunday), a New Jersey limited liability company for 30,000 of the Companys Series D-6 Preferred Shares. An additional 12,000 Series D-6 Preferred Shares were issued to the Seller (but held in escrow for performance-based award) on same day.
- On January 16, 2020, Geneva Roth agreed to purchase an additional 53,000 Series B Preferred shares for $53,000 under the same terms as their prior purchases.
- On March 16, 2020, as part of the Companys streamlining operations and partially because of COVID-19, the Company filed a Chapter 11 Reorganization of Red Wire Group, LLC.
- On March 16, 2020, the President of the United States of America issued a stay-at-home instructions and business closure directive in response to COVID-19 pandemic. The Companys landlords and Libertas, Vox and Reliant have all agreed to collections deferment of an indeterminant duration. (see note above regarding individual agreements.
-
The Federal Government of the United States of America on March 27, 2020, passed the Cares Act allowing companies access to quality SBA Payroll Protection Loans (PPP).
- Management has used these funds to retain key personnel, pay regulatory fees, rent, began work on a new website for Bluwire, make progress on their retail app, and acquire product to re-open one of its Bluwire Stores.
-
-
### ITEM 1A. RISK FACTORS
An investment in our common stock involves a high degree of risk and should not be made by anyone who cannot afford to lose their entire investment. You should consider carefully the risks set forth in this section, together with the other information contained in this report, before making a decision to invest in our common stock. Our business, operating results, and financial condition could be seriously harmed, and you could lose your entire investment if any of the following risks were to occur. This document is not intended to be an offer of any securities nor a solicitation of any offer to buy or sell.
Risks Related to Our Business
Until the acquisition of our brands, we are a Company with limited operating history, little revenue and still have to rely on our ability to raise capital to fund operations and there can be no assurance we will ever reach profitability or be able to continue to raise capital to fund operations.
The Company commenced limited operations in June of 2017, with the acquisition of 12 Hong Kong, Ltd. The Company then acquired 12 Japan, Ltd in August 2017, followed by 12 Europe A.G. in October 2017. 12 Japan, Ltd brought a small portion of revenue, insufficient to fund operations, while 12 Europe A.G. brought no revenue and was subsequently closed on August 20, 2019. Throughout 2019, we made four acquisitions including Red Wire Group, Rune, Bluwire, and Social Sunday, which together brought significant revenue but not enough profit to offset the costs of being public and developing and launching our core technology initiative. Therefore, we have limited operating history on which to make an investment decision. Accordingly, the Company has a limited operating history and the business strategy while promising may not be successful. Failure to implement the business strategy could materially adversely affect our business, financial condition, and results of operations. Through December 31, 2019, the Companys business has not shown a profit in operations and has generated little revenues. There can be no assurance we will achieve or attain profitability or be able to raise sufficient capital to stay in business. If we cannot achieve operating profitability or raise capital, we may not be able to meet our working capital requirements, which could have a material adverse effect on our business operating results and financial condition resulting in the loss of an investors entire investment in us.
We need substantial additional capital to grow and fund our present and planned business and business strategy. Until we have made | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Of certain specified significant corporate transactions as defined in the 2020 Plan, including a change in ownership or effective control of the Company or a change in the ownership of a substantial part of the assets of the Company as defined within the meaning of Section 409A of the Code, the 2020 Plan administrator has the discretion to take any of the following actions with respect to stock awards: arrange for the assumption, continuation, or substitution of a stock award by a surviving or acquiring entity or parent company; arrange for the assignment of any reacquisition or repurchase rights held by us to the surviving or acquiring entity or parent company; accelerate the vesting of the stock award and provide for its termination prior to the effective time of the corporate transaction; arrange for the lapse of any reacquisition or repurchase right held by us; cancel or arrange for the cancellation of the stock award in exchange for such cash consideration, if any, as the Board may deem appropriate; or make a payment equal to the excess of (1)the value of the property the participant would have received upon exercise of the stock award over (2)the exercise price or strike price otherwise payable in connection with the stock award. The 2020 Plan administrator is not obligated to treat all stock awards, even those that are of the same type, in the same manner. The 2020 Plan administrator may provide, in an individual award agreement or in any other written agreement between a participant and us, that the stock award will be subject to additional acceleration of vesting and exercisability or settlement in the event of a corporate transaction. Except as may otherwise be stated in a particular award agreement, in the event of a corporate transaction, the vesting and exercisability provisions of stock awards will be accelerated in full, and if the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such stock awards, then such awards will be terminated if not exercised prior to the effective date of the corporate transaction. Under the 2020 Plan, a corporate transaction is defined generally as (1)the acquisition by any person or company of more than 50% of the combined voting power of our then outstanding stock, (2)a merger, consolidation or similar transaction in which our stockholders immediately before the transaction do not own, directly or indirectly, more than 50% of the combined voting power of the surviving entity (or the parent of the surviving entity) in substantially the same proportions as their ownership immediately prior to such transaction, (3)a sale or other disposition of all or substantially all of our assets other than to an entity more than 50% of the combined voting power of which is owned by our stockholders in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction, or (4)when a majority of our board of directors becomes comprised of individuals who were not serving on the Board on the date the 2020 Plan was adopted (the incumbent board ), or whose nomination, appointment, or election was not approved by a majority of the incumbent Board still in office.
### Outstanding Equity Awards at Year-End
The following table provides a summary of equity awards outstanding at December 31, 2020, for each of our named executive officers:
(1)
Does not include restricted stock units granted.
(2)
The options vest with respect to 1/36 of the shares subject to the option on each monthly anniversary of the grant date, and have a term of ten years (subject to earlier termination upon the events described in the Plan such as termination of employment).
(3)
The options vest with respect to one-third of the shares immediately and monthly thereafter with respect to 1/24 of the shares subject to the option, and have a term of ten years (subject to earlier termination upon the events described in the Plan such as termination of employment).
(4)
The options vest with respect to one-sixth of the shares subject to the option on the six-month anniversary of the grant date and monthly thereafter with respect to 1/36 of the shares subject to the option, and have a term of ten years (subject to earlier termination upon the events described in the Plan such as termination of employment).
(5)
The options are fully vested and have a term of ten years (subject to earlier termination upon the events described in the Plan such as termination of employment).
(6)
The restricted stock unit awards will fully vest on the seventh anniversary of the date of grant if the recipient has provided continuous service to the Company until such date, and upon change of control or upon death or disability.
(7)
The restricted stock unit awards will equally vest on each yearly anniversary of the date of grant if the recipient has provided continuous service to the Company until such date, and upon change of control or upon death or disability.
(8)
The restricted stock unit awards willvest ratably approximately quarterly over a period of three years if the recipient has provided continuous service or upon change of control or upon death or disability.
### Compensation of Directors
The following table shows amounts earned by each director for 2020, other than Dr. Carlo and Mr. Marguglio, who are executive officers and received no additional compensation for their services as a director.
(1)
Reflects the amount of fees earned during 2020.
Ingeneral, under the Companys policies concerning fees for non-employee directors, non-employee directors of the Company were entitled during 2020 to receive the following amounts of cash compensation for service as a director: each non-employee director was entitled to receive an annual fee of $64,000 per year, paid quarterly in arrears; and the Chairman of the Board was entitled to receive an annual fee of $128,000 per year, or twice the non-employee director annual fee, paid quarterly in arrears. Each director is also entitled to reimbursement of reasonable expenses incurred in connection with board-related activities. In addition, to the extent that awards may be granted pursuant to the terms of the 2020 Plan, upon joining the Board a non-employee director is entitled to receive an initial director option under the 2020 Plan to purchase 50,000 shares of Common Stock, vesting monthly over a period of 36 months from the grant date, and each non-employee director is also entitled to receive under the 2020 Plan a succeeding annual grant, on the first business day after the date of the annual meeting of stockholders, to purchase 30,000 shares of Common Stock, with the annual grant vesting and becoming exercisable as to 1/12 of the shares subject to the option on each monthly anniversary of the grant date. The initial director options and any annual options have a term of 10 years and will have an exercise price equal to the fair market value of the Common Stock on the grant date.
ITEM 12:
The following table sets forth information, as of the March 31, 2021 (the Table Date), regarding beneficial ownership of all classes of our voting securities, to the extent known to us, by (i)each person who is a director or a nominee for director; (ii)each named executive officer in the Summary Compensation Table; (iii)all directors and executive officers as a group; and (iv) each person who is known by us to be the beneficial owner of 5% or more of any class of our voting securities. Except as otherwise noted, each person has sole voting and investment power as to his or her shares. As of the Table Date, the applicable share numbers and percentages are based on 148,886,141 shares of Common Stock issued and outstanding.
*
Less than 1%.
(1)
Based upon information supplied by officers, directors and principal stockholders. Beneficial ownership is determined in accordance with rules of the SEC that deem shares to be beneficially owned by any person who has or shares voting or investment power with respect to such shares. Unless otherwise indicated, the persons named in this table have sole voting and sole investing power with respect to all shares shown as beneficially owned, subject to community property laws where applicable. Shares of Common Stock subject to an option or similar right that is currently exercisable or exercisable within 60 days of the date of the table are deemed to be outstanding and to be beneficially owned by the person holding such option or right for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as otherwise indicated, the address of each of the persons in this table is as follows: c/o Adamis Pharmaceuticals Corporation, 11682 El Camino Real, Suite 300, San Diego, California 92130.
(2)
Includes 322,415 shares of Common Stock owned of record, 5,883 shares of Common Stock held of record by a family member and beneficially owned by Dr. Carlo; 1,489,818 shares of Common Stock underlying optionsand 85,695 restricted stock units which were exercisable or vested as of the Table Date or 60 days after such date. Excludes 336,826 restricted stock units which become exercisable or vest over time after such period.
(3)
Includes 171,505 shares of Common Stock owned of record, 5,884 shares of Common Stock held of record by a family member and beneficially owned by Mr. Marguglio; 603,103 shares of Common Stock underlying options and 68,556 restricted stock units which were exercisable or vested as of the Table Date or 60 days after such date.
(4)
Includes 89,918 shares of Common Stock owned of record and 210,000 shares of Common Stock subject to options which were exercisable as of the Table Date or 60 days after such date. Excludes 150,000 restricted stock units which become exercisable or vest over time after such period.
(5)
Includes 58,824 shares that are issuable upon the exercise of a warrant that is exercisable as of and within 60 days after the Table Date.
(6)
Includes 139,050 shares of Common Stock owned of record; 432,133 shares of Common Stock subject to options and 68,556 restricted stock units which were exercisable or vested as of the Table Date or 60 days after such date.
(7)
Includes 115,993 shares of Common Stock owned of record; 293,467 shares of Common Stock subject to options and 60,209 restricted stock units which were exercisable or vested as of the Table Date or 60 days after such date. Excludes 69,461 restricted stock units which become exercisable or vest over time after such period.
(8)
The number of shares indicated in the table under the heading Preferred Stock includes shares of the Companys Series A-2 Preferred Stock that are issuable upon the exercise of warrants held by each of the following securityholders, which are exercisable as of or within 60 days after the Table Date, to purchase the following number of shares of Series A-2 Preferred and/or Common Stock: Walleye Trading LLC (Walleye), 172,414 shares; and Philco Investments, Ltd., 20,000 shares. The business address of Walleye is 2800 Niagara Lane, Plymouth, Minnesota 55447. Andrew Carney, the Chief Executive Officer of Walleye, has voting and investment control over the securities beneficially owned by Walleye.Mr. Carney disclaims beneficial ownership over the securities held by Walleye, except to the extent of its or his pecuniary interest therein.The business address of Philco Investments, Ltd, (Philco) is 4500 Cooper Road, Suite 301, Cincinnati, Ohio 45242.
Under the Certificate of Designation relating to the Series A-2 Preferred, each share of Series A-2 Preferred is convertible into Common Stock at an initial conversion rate of 1-for-1. Except as provided in the Certificate of Designation or as otherwise required by law,the holders of Series A-2 Preferred are entitled to vote with the holders of outstanding shares of Common Stock, voting together as a single class, with respect to all matters presented to the stockholders for their action or consideration. In any such vote, each<|endoftext|>Ampersand Fund for 27,000 newly created shares of Series B Preferred Stock. The Company and the Series B Investors amended and restated that certain Investor Rights Agreement, dated as of July 15, 2019 (the Amended and Restated Investor Rights Agreement), among the Company and Ampersand Fund. Each Series B Investor also agreed to vote in favor of the election of then incumbent directors Jack Stover, Dr. Joseph Keegan and Stephen J. Sullivan to the Board at the 2020 Annual Meeting and in favor of any nominee of the Nominating Committee at the 2020 Annual Meeting and future annual meetings.
The Certificate of Designation of Series B Preferred Stock provides that, for so long as Ampersand Fund or 1315 Capital Fund holds at least sixty percent (60%) of the Series B Preferred Stock issued to it on the Issuance Date (as defined therein), such Series B Investor will be entitled to elect two directors to the Board, provided that one of the directors qualifies as an independent director under Rule 5605(a)(2) of the listing rules of Nasdaq (or any successor rule or similar rule promulgated by another exchange on which our securities are then listed or designated). However, if at any time such Series B Investor holds less than sixty percent (60%), but at least forty percent (40%), of the Series B Preferred Stock issued to them on the Issuance Date, such Series B Investor would only be entitled to elect one director to the Board. Any director elected pursuant to the terms of the Certificate of Designation of Series B Preferred Stock may be removed without cause by, and only by, the affirmative vote of the holders of Series B Preferred Stock. A vacancy in any directorship filled by the holders of Series B Preferred Stock may be filled only by vote or written consent in lieu of a meeting of such holders of Series B Preferred Stock or by any remaining director or directors elected by such holders of Series B Preferred Stock. Moreover, on any matter presented to holders of Common Stock for their action or consideration at any meeting of our stockholders (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of our Series B Preferred Stock will be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Series B Preferred Stock held by such holder are convertible and, except as provided by law or by our Certificate of Incorporation (which includes the Certificate of Designation of Series B Preferred Stock), will vote together with the holders of Common Stock as a single class, on an as-converted to Common Stock basis.
Concurrently with the closing on January 15, 2020, Mr. McCarthy resigned as director and, pursuant to the Series B Investors rights as holder of Series B Preferred Stock, Ampersand Fund re-designated Mr. Lev and Mr. Gorman and 1315 Capital Fund initially designated Edward Chan, who were thereby appointed and elected to the Board. Mr. Lev is a general partner of the general partner of Ampersand Fund, Ampersand Capital Partners. Mr. Chan is an employee of an entity related to 1315 Capital Fund, 1315 Capital Management, LLC. On January 22, 2020, 1315 Capital Fund designated Fortunato Ron Rocca who was thereby appointed and elected to the Board. Burnell and Mr. As of the date of this Proxy Statement, the Series B Investors and their affiliates control, on an as-converted basis, an aggregate of sixty-six percent (66%) of our outstanding shares of common stock through their holdings of the Series B Preferred Stock.
In April 2020, the Company entered into Support Agreements with each of the Series B Investors, pursuant to which Ampersand Fund and 1315 Capital Fund, respectively, consented to, and agreed to vote (by proxy or otherwise), all shares of Series B Preferred Stock registered in its name or beneficially owned by it and/or over which it exercises voting control as of the date of the Support Agreement and any other shares of Series B Preferred Stock legally or beneficially held or acquired by such Series B Investor after the date of the Support Agreement or over which it exercises voting control, in favor of any Fundamental Action desired to be taken by the Company as determined by the Board. For purposes of each Support Agreement, Fundamental Action means any action proposed to be taken by the Company and set forth in Section 4(d)(i), 4(d)(ii), 4(d)(v), 4(d)(vi), 4(d)(viii) or 4(d)(ix) of the Certificate of Designation of Series B Preferred Stock or Section 8.5.1.1, 8.5.1.2, 8.5.1.5, 8.5.1.6, 8.5.1.8 or 8.5.1.9 of the Amended and Restated Investor Rights Agreement. The Support Agreement with Ampersand Fund was terminated on September 30, 2020 pursuant to a termination agreement, dated July 9, 2020, between the Company and Ampersand Fund.
On January 7, 2021, the Company entered into promissory notes with Ampersand Fund, in the amount of $3 million, and 1315 Capital Fund, in the amount of $2 million, respectively (together, the Notes) and a related security agreement (the Security Agreement).
Ampersand Fund holds 28,000 shares of the Companys Series B Convertible Preferred Stock, which are convertible from time to time into an aggregate of 4,666,666 shares of our Common Stock, and 1315 Capital Fund holds 19,000 shares of the Company Series B Convertible Preferred Stock, which are convertible from time to time into an aggregate of 3,166,666 shares of our Common Stock. On an as-converted basis, such shares would represent approximately 39.1% and 26.5% of our fully-diluted shares of Common Stock, respectively. In addition, pursuant to the terms of the Series B Convertible Preferred Stock certificate of designation and an amended and restated investor rights agreement among the Company and Ampersand Fund and 1315 Capital Fund, they each have the right to (1) approve certain of our actions, including our borrowing of money and (2) designate two directors to our Board of Directors; provided that certain of such rights held by 1315 Capital Fund have been delegated pursuant to the related Support Agreement. As a result, the Company considers the Notes and Security Agreement to be a related party transaction.
The rate of interest on the Notes is equal to eight percent (8.0%) per annum and their maturity date is the earlier of (a) June 30, 2021 and (b) the date on which all amounts become due upon the occurrence of any event of default as defined in the Notes. No interest payments are due on the Notes until their maturity date. All payments on the Notes are pari passu.
In connection with the Security Agreement, the Notes are secured by a first priority lien and security interest on substantially all of the assets of the Company. Additionally, if a change of control of the Company occurs (as defined in the Notes) the Company is required to make a prepayment of the Notes in an amount equal to the unpaid principal amount, all accrued and unpaid interest, and all other amounts payable under the Notes out of the net cash proceeds received by the Company from the consummation of the transactions related to such change of control. The Company may prepay the Notes in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. No prepaid amount may be re-borrowed.
The Notes contain certain negative covenants which prevent the Company from issuing any debt securities pursuant to which the Company issues shares, warrants or any other convertible security in the same transaction or a series of related transactions, except that Company may incur or enter into any capitalized and operating leases in the ordinary course of business consistent with past practice, or borrowed money or funded debt in an amount not to exceed $4.5 million (the Debt Threshold) that is subordinated to the Notes on terms acceptable to Ampersand Fund and 1315 Capital Fund; provided, that if the aggregate consolidated revenue recognized by the Company as reported on Form 10-K as filed with the SEC for any fiscal year ending after January 10, 2020 exceeds $45 million dollars, the Debt Threshold for the following fiscal year shall increase to an amount equal to: (x) ten percent (10%); multiplied by (y) the consolidated revenue as reported by the Company on Form 10-K as filed with the SEC for the previous fiscal year.
Other than as set forth in the section Information About Our Executive Compensation, and as disclosed in this section Certain Relationships and Related Party Transactions, we are not a party to a current transaction with a related person, have not been a party to such a transaction since January 1, 2020, and no transaction is currently proposed, in which the amount of the transaction exceeds $120,000 and in which a related person had or will have a direct or indirect material interest.
### Director Independence
Burnell and Mr.
ITEM 14.
BDO USA LLP (BDO), an independent registered public accounting firm, has served as our independent accountants beginning in 2012. Fees for services provided by BDO for the past two completed years ended December 31 were as follows:
(1)
Audit fees include the audit of our consolidated financial statements.
(2)
Included within audit fees for the year ended December 31, 2019 are those fees totaling $81,000 associated with our public offerings in 2019.
(3)
Audit-related fees in 2019 include fees incurred for the historical audit of CGI required for the acquisition.
(4)
Tax fees include the aggregate fees billed in each of the last two fiscal years for professional services rendered by BDO for tax compliance, tax advice, and tax planning.
(5)
There were no fees billed by BDO USA, LLP for products and services other than the services described in the paragraphs captioned Audit Fees, Audit-Related Fees and Tax Fees above for 2019. In 2020, BDO USA, LLP billed an aggregate of $5,482 for reimbursement of legal fees.
Under its charter, the Audit Committee must pre-approve all engagements of our independent registered public accounting firm unless an exception to such pre-approval exists under the Exchange Act or the rules of the SEC. Each year, the independent registered public accounting firms retention to audit our financial statements and permissible non-audit services, including the associated fees, is approved by the Audit Committee. At the beginning of each fiscal year, the Audit Committee evaluates other known potential engagements of the independent registered public accounting firm, in light of the scope of the work proposed to be performed and the proposed fees, and approves or rejects each service, taking into account whether the services are permissible under applicable law and the possible impact of each non-audit service on the independent registered public accounting firms independence. At subsequent Audit Committee meetings, the Audit Committee receives updates on the services actually provided by the independent registered public accounting firm, and management may present additional services for approval. Typically, these would be services, such as due diligence for an acquisition, that were not known at the beginning of the year. The Audit Committee has delegated to the Chairperson of the Audit Committee the authority to evaluate and approve engagements on behalf of the Audit Committee in the event that a need arises for pre-approval between committee meetings. If the Chairperson so approves any such engagements, he will report that approval to the full Audit Committee at the next Audit Committee meeting. All of the services and corresponding fees described above were approved by the Audit Committee.
PART IV
ITEM 15.
The following documents are filed as part of this Form 10-K/A, as previously listed on Form 10-K, filed April 1, 2021:
Exhibits
Exhibit No.
Description
2.1
Asset Purchase Agreement, dated August 13, 2014, by and between Interpace Diagnostics, LLC and Asuragen, Inc., incorporated by reference to Exhibit 2.2 of the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, filed | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The consideration and recommendation of director nominees.
We may not have a compensation committee in place prior to the completion of our initial business combination. Any executive compensation matters that arise prior to the time we have a compensation committee in place will be determined by our independent directors. None of our directors who currently serve as members of our compensation committee is, or has at any time in the past been, one of our officers or employees. None of our executive officers currently serves, or in the past year has served, as a member of the compensation committee of any other entity that has one or more executive officers serving on our board of directors. None of our executive officers currently serves, or in the past year has served, as a member of the board of directors of any other entity that has one or more executive officers serving on our compensation committee.
### Code of Ethics
We adopted a code of ethics that applies to all of our executive officers, directors and employees.
Conflicts of Interest
Unless we consummate our initial business combination, our officers, directors and insiders will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account.
Additionally, if we are unable to complete an initial business combination within the required time frame, our officers and directors will not be entitled to receive any amounts held in the trust account with respect to any of their insider shares or private units. Furthermore, our insiders (and/or their designees) have agreed that the private units will not be sold or transferred by them until after we have completed our initial business combination.
In order to minimize potential conflicts of interest which may arise from multiple affiliations, our officers and directors (other than our independent directors) have agreed to present to us for our consideration, prior to presentation to any other person or entity, any suitable opportunity to acquire a target business, until the earlier of: (1) our consummation of an initial business combination or (2) December 1, 2021.
The following table summarizes the current material pre-existing fiduciary or contractual obligations of our officers, directors and director nominees:
Our insiders, officers and directors, have agreed to vote any shares of common stock held by them in favor of our initial business combination. In addition, they have agreed to waive their respective rights to receive any amounts held in the trust account with respect to their insider shares and private shares if we are unable to complete our initial business combination within the required time frame. If they purchase shares of common stock in the open market, however, they would be entitled to receive their pro rata share of the amounts held in the trust account if we are unable to complete our initial business combination within the required time frame, but have agreed not to convert such shares in connection with the consummation of our initial business combination.
To further minimize conflicts of interest, we have agreed not to consummate our initial business combination with an entity that is affiliated with any of our officers, directors or insiders, unless we have obtained (i) an opinion from an independent investment banking firm that the business combination is fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of our disinterested and independent directors (if we have any at that time). In no event will our insiders or any of the members of our management team be paid any finders fee, consulting fee or other similar compensation prior to, or for any services they render in order to effectuate, the consummation of our initial business combination (regardless of the type of transaction that it is).
Notwithstanding the foregoing, as set forth in our amended and restated certificate of incorporation, such indemnification will not extend to any claims our insiders may make to us to cover any loss that they may sustain as a result of their agreement to pay debts and obligations to target businesses or vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us.
Item 11. Executive Compensation.
### Employment Agreements
Executive Officers and Director Compensation
### Executive Compensation
No executive officer or director has received any cash compensation for services rendered to us. Beginning at the closing of our initial public offering through the completion of our initial business combination with a target business, we will pay to VK Consulting, Inc., a company owned by Vadim Komissarov, one of our officers, a fee of $7,500 per month for providing us with office space and certain office and secretarial services. Other than the $7,500 per month administrative fee, no compensation or fees of any kind, including finders fees, consulting fees and other similar fees, will be paid to our insiders or any of the members of our management team, for services rendered prior to or in connection with the consummation of our initial business combination (regardless of the type of transaction that it is).
Item 12.
The following table sets forth as of March 22, 2021 the number of shares of common stock beneficially owned by (i) each person who is known by us to be the beneficial owner of more than five percent of our issued and outstanding common stock (ii) each of our officers and directors; As of March 22, 2021, we had 11,967,720 shares of common stock issued and outstanding.
The following table does not reflect record of beneficial ownership of any shares of common stock issuable upon exercise of the warrants or conversion of rights, as the warrants are not exercisable within 60 days of March 22, 2021 and the rights are not convertible within 60 days of March 22, 2021.
*
Less than 1%.
(1)
Unless otherwise indicated, the business address of each of the individuals is 77 Water St, 8th Floor, New York, NY 10005.
(2)
Includes the 100,000 shares underlying the private units held by Woodborough Investments, Ltd., over which Vadim Komissarov has voting and dispositive power.
(3)
Represents shares owned by Eastpower O and Fivestar O. Ilya Ponomarev is the sole director of both Eastpower O and Fivestar O.
(4)
Represents 1,520,000 shares of common stock and 500,000 shares of common stock underlying private units held by BGV Group Limited, over which Gennadii Butkevych has voting and dispositive power.
(5)
Gennadii Butkevych has voting and dispositive power over such shares.
(6)
The reporting person has a business address of 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H 2Y4, Canada.
(7)
The reporting person has a business address of 222 Berkeley St., 16th floor, Boston, Massachusetts 02116. Weiss Asset Management is the sole investment manager to a private investment partnership (the Partnership) of which BIP GP is the sole general partner. Andrew Weiss is the managing member of WAM GP and BIP GP. Shares reported for WAM GP, Andrew Weiss and Weiss Asset Management include shares beneficially owned by the Partnership. Each of WAM GP, Weiss Asset Management, and Andrew Weiss disclaims beneficial ownership of the shares reported herein as beneficially owned by each except to the extent of their respective pecuniary interest therein.
(8)
The reporting person has a business address of 777 Third Avenue, 30th Floor, New York, NY 10017. Hudson Bay Capital Management LP serves as the investment manager to Hudson Bay Master Fund Ltd., in whose name the shares of Common Stock reported herein are held. As such, the Investment Manager may be deemed to be the beneficial owner of all shares of Common Stock held by Hudson Bay Master Fund Ltd. Mr. Mr.
All of the insider shares outstanding prior to the date of our initial public offering were placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) transfers among the insiders, to our officers, directors, advisors and employees, (2) transfers to an insiders affiliates or its members upon its liquidation, (3) transfers to relatives and trusts for estate planning purposes, (4) transfers by virtue of the laws of descent and distribution upon death, (5) transfers pursuant to a qualified domestic relations order, (6) private sales made at prices no greater than the price at which the securities were originally purchased or (7) transfers to us for cancellation in connection with the consummation of an initial business combination, in each case (except for clause 7) where the transferee agrees to the terms of the escrow agreement and forfeiture, as the case may be, as well as the other applicable restrictions and agreements of the holders of the insider shares.
Item 13.
In March 2016, we sold an aggregate of 3,737,500 shares of our common stock for $25,000, or approximately $0.007 per share, to VK Consulting, Inc., which is controlled by Vadim Komissarov. On April 11, 2016, VK Consulting, Inc.
On March 1, 2017, VK Consulting, Inc.
On March 1, 2017, Ilya Ponomarev
On March 1, 2017, Timur Alasaniya
On March 1, 2017, Vadim Komissarov
On February 15, 2018, we sold an additional 1,293,750 shares of our common stock for $8,653.85, or approximately $.007 per share, to Eastpower O, which is controlled by Ilya Ponomarev.
On February 15, 2018, Eastpower O
On February 15, 2018, Fivestar O
On May 7, 2018, Viktor Topolov sold 3,000 shares of our common stock to Eastpower O at a price of $0.007 per share.
On May 15, 2020, Eastpower O
On October 26, 2020, Eastpower O sold 330,000 shares of common stock to BGV Group Limited at a price of $0.007 per share.
Channingwick Limited, BGV Croup Limited. Lake Street Fund L.P., Mount Wilson Global Fund L.P., and FLOCO Ventures LLC, certain of our stockholders, purchased, pursuant to written purchase agreements with us, 1,150,000 private units for a total purchase price of $11,500,000, from us. The private units are identical to the units sold in our initial public offering. However, the holders have agreed (A) to vote their private shares and any public shares acquired in favor of any proposed business combination, (B) not to propose, or vote in favor of, an amendment to our amended and restated certificate of incorporation that would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by December 1, 2021, unless we provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, (C) not to convert any shares (including the private shares) into the right to receive cash from the trust account in connection with a stockholder vote to approve our proposed initial business combination (or sell any shares they hold to us in a tender offer in connection with a proposed initial business combination) or a vote to amend the provisions of our amended and restated certificate of incorporation relating to the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial business combination by December 1, 2021 and (D) that the private shares shall not be entitled to be redeemed for a pro rata portion of the funds held in the trust account if a business combination is not consummated. Additionally, our insiders (and/or their designees) have agreed not to transfer, assign or sell any of the private units or underlying securities (except to the same permitted transferees as the insider shares<|endoftext|>His duties; (5) the executives breach of any of the restrictive covenants; or (6) a material breach of this agreement or any other agreement, plan or arrangement by and between the executive and the Company or any of its subsidiaries and affiliates or any policy of the Company or any of its subsidiaries and affiliates by the executive.
"Good Reason" means (i) a material diminution in the executives base salary or target bonus (provided that failure to earn a bonus equal to or in excess of the target bonus by reason of failure to achieve applicable performance goals shall not be deemed Good Reason); (ii) a material diminution of the executives position, responsibilities, duties or authorities from those in effect as of the effective date; (iii) any change in reporting structure such that the executive is required to report to someone other than the Board; (iv) any material breach by the Company of its obligations under this agreement; or (v) a change in the executives primary work location that increases the executives commute by more than 50 miles. Executive shall provide notice of the existence of the Good Reason condition within 30 days of the date executive learns of the condition, and the Company shall have a period of thirty 30 days during which it may remedy the condition, and in case of full remedy such condition shall not be deemed to constitute Good Reason.
Steven Basta, Former President and Chief Executive Officer
The compensation paid to Mr. Basta, our former President and Chief Executive Officer, reflects the terms of his Offer Letter, dated as of August 15, 2017, as amended on May 3, 2018, as well as his Separation Agreement, effective as of March 9, 2020. The Merger qualified as a "change in control" under Mr. Basta's Offer Letter. Accordingly, upon his termination, he became entitled to a lump sum payment equal to one and a half times (1.5x) the sum of his annual base salary and target bonus, a pro-rata target bonus for the year of termination and eighteen (18) months of Company-paid COBRA premiums.
In addition, the restricted stock units held by Mr. Basta were accelerated on December 11, 2019 in order to mitigate potential negative tax consequences to the Company and Mr. Basta under Sections 280G and 4999 of the Internal Revenue Code. The stock options held by Mr. Basta prior to the Closing Date were accelerated on the Closing Date. Such options will remain outstanding and exercisable until the earlier to occur of (a) the first anniversary of the date upon which Mr. Basta no longer serves on the Board, if his service is terminated within twelve months of the Closing Date, (b) the expiration of the relevant exercise period under the applicable option agreement if his service is terminated after March 9, 2021 or (c) the original expiration date of the applicable option.
Andrew Saik, Chief Financial Officer and Treasurer
The terms of Mr. Saik's employment are governed by his Offer Letter, dated as of April 7, 2021. Under his Offer Letter, Mr. Saik's annual base salary for 2020 was $400,000, pro-rated for his starting date of March 23, 2020. In February 2021, the Compensation Committee approved an increase to Mr. Saik's annual base salary to $410,500. Mr. Saik is also eligible to receive an annual cash bonus with a target amount equal to 50% of his annual base salary. His eligibility for such annual bonus, and the amount of such annual bonus, will be subject to his achievement of performance targets and milestone criteria, as determined by the Chief Executive Officer, in accordance with our current general bonus plan. Saik in the amount of $112,500, representing 75% of his target bonus for 2020, pro-rated for his start date of March 23, 2020.
On March 23, 2020, Mr. Saik was granted an initial equity award of 12,500 restricted stock units and 25,000 stock options with an exercise price of $12.52 per share. These awards are scheduled to vest over four years, with 25% vesting on March 31, 2021 and 6.25% every three months thereafter, ending on March 31, 2024. In addition, on May 6, 2020, the Company granted Mr. Saik 62,500 restricted stock units and 62,500 stock options with an exercise price of $7.80 per share.
The Offer Letter provides that, in the event of a termination of his employment without Cause (as defined in the 2019 Equity Incentive Plan), subject to Mr. Saiks execution and non-revocation of a release of claims, Mr. Saik will receive (i) a lump sum severance payment equal to 75% of his base salary then in effect and (ii) continued medical plan coverage at active employee rates for nine (9) months following the date of termination, provided that the Companys obligation under clause (ii) shall terminate on the earlier of (x) the date on which he enrolls in a group health plan offered by another employer and (y) the date on which he is no longer eligible for continuation coverage under COBRA.
In addition, if Mr. Saik's employment is terminated by the Company without Cause or he terminates his employment with Good Reason within the twelve month period after a Change of Control (as defined in the 2019 Equity Incentive Plan), he will be entitled to receive a change of control payment equal to (i) one times (1.0x) the sum of his then current base salary plus his target bonus, (ii) his pro rata target bonus for the year of termination, and (iii) continued healthcare plan coverage at active employee rates for twelve (12) months following the date of termination, provided that the Companys obligation under clause (iii) shall terminate on the earlier of (x) the date on which he enrolls in a group health plan offered by another employer and (y) the date on which he is no longer eligible for continuation coverage under COBRA. In addition, in the event of such a termination, all of Mr. Saiks unvested stock options and restricted stock units will become fully vested.
For purposes of Mr. Saiks Offer Letter, Good Reason means: (i) a material reduction in base salary;
Mr. Saiks Offer Letter also contains customary confidentiality, non-competition and non-solicitation covenants.
The terms of Ms. Harschs employment are governed by her Offer Letter, dated as of April 7, 2021. Ms. Harschs annualized base salary for 2020 was $392,208, which was increased to $405,935 in February 2021 by the Compensation Committee. Ms. Harsch is also eligible to receive an annual target bonus of up to 40% of her annual base salary. Her eligibility for such annual target bonus, and the amount of such annual target bonus, will be subject to her achievement of performance targets and milestone criteria, as determined by the Chief Executive Officer, in accordance with our current general bonus plan. Based on the 2020 Performance Assessment, the Compensation Committee approved a cash bonus for Ms. Harsch in the amount of $117,662, representing 75% of her target bonus for 2020.
On May 6, 2020, the Company granted Ms. Harsch 37,500 restricted stock units and 37,500 stock options with an exercise price of $7.80 per share.
The Offer Letter provides that, in the event of a termination of her employment without Cause (as defined in the 2019 Equity Incentive Plan), subject to Ms. Harschs execution of a release of claims, Ms. Harsch will receive (i) a lump sum severance payment equal to 75% of her base salary then in effect and (ii) continued healthcare plan coverage at active employee rates for nine (9) months following the date of termination, provided that the Companys obligation under clause (ii) shall terminate on the earlier of (x) the date on which she enrolls in a group health plan offered by another employer and (y) the date on which she is no longer eligible for continuation coverage under COBRA.
In addition, if Ms. Harsch's employment is terminated by the Company without Cause or she terminates her employment with Good Reason within the twelve month period after a Change of Control (as defined in the 2019 Equity Incentive Plan), she will be entitled to receive a change of control payment equal to (i) one times (1.0x) the sum of her then current base salary plus her target bonus, (ii) her pro rata target bonus for the year of termination, and (iii) continued healthcare plan coverage at active employee rates for twelve (12) months following the date of termination, provided that the Companys obligation under clause (iii) shall terminate on the earlier of (x) the date on which she enrolls in a group health plan offered by another employer and (y) the date on which she is no longer eligible for continuation coverage under COBRA. In addition, in the event of such a termination, all of Ms. Harschs unvested stock options and restricted stock units will become fully vested.
For purposes of Ms. Harschs Offer Letter, Good Reason means: (i) a material reduction in base salary;
Ms. Harschs Offer Letter also contains customary confidentiality, non-competition and non-solicitation covenants.
We participate in a taxqualified retirement plan that provides eligible U.S. Eligible employees are able to defer eligible compensation subject to applicable annual Internal Revenue Code (the Code) limits. Employees pretax contributions are allocated to each participants individual account and are then invested in selected investment alternatives according to the participants directions. The 401(k) plan is intended to be qualified under Section 401(a) of the Code with the 401(k) plans related trust intended to be tax exempt under Section 501(a) of the Code. As a taxqualified retirement plan, contributions to the 401(k) plan and earnings on those contributions are not taxable to the employees until distributed from the 401(k) plan.
All of our fulltime employees, including our NEOs, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits, medical and dependent care flexible spending accounts, shortterm and longterm disability insurance and life insurance. In addition, all of our employees are eligible to participate in our Employee Share Purchase Plan, which allows them to purchase shares of our common stock at a 15% discount to prevailing market prices, subject to certain terms and conditions. We do not provide our NEOs with perquisites or other personal benefits, other than the retirement, health and welfare benefits that apply uniformly to all of our employees.
Director Compensation
Set forth below is a summary of the compensation paid to the non-executive members of the Board during 2020. In addition, our Compensation Committee approved adjustments to our director compensation program for 2021. A summary of these changes is set forth below.
### Initial Equity Grants.
During 2020, each non-employee director who joined the Board received an initial grant of options to purchase 45,000 (or 11,250 as adjusted for the reverse stock split) shares of our common stock. In February 2021, our Compensation Committee approved an adjustment to our director compensation program to increase the equity awards for director compensation such that each non-employee director who joins the Board will receive options to purchase 41,000 shares of our common stock, representing two times (2x) the annual grant described below. The options will vest and become exercisable as to 1/3rd of the shares on each anniversary of the date of grant, subject to the director's continued service to the Company through each applicable vesting date.
Annual Retainers.
Each of our non-employee directors receives an annual cash retainer of $40,000, payable quarterly. During 2020, each non-employee director who had served as a director on our Board or on the Board of Foamix for at least six months received an annual retainer for service in such capacity, consisting of options to purchase common stock, which vest quarterly over one year. On the date of our 2020 annual meeting of stockholders, our non-executive directors were granted options to purchase 22,500 (or 5,625 as adjusted for the reverse stock split) shares of our common stock. In February 2021, our Compensation Committee approved an adjustment to our director compensation program such that each non-executive director who | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Total of 12,500 options to purchase shares of the Company common at a price as of $8.32 per share. The Option Shares will vest ratably over thirty-six (36) months and are exercisable until March 23, 2030. The total estimated value using the Black-Scholes Model, based on a volatility rate of 110.8%-128.0% and an option fair value of $6.98 was $87,258.
On April 6, 2020, the Company granted one employee a total of 938 options to purchase shares of the Company common at a price as of $8.32 per share. The Option Shares will vest ratably over thirty-six (36) months and are exercisable until March 10, 2030. The total estimated value using the Black-Scholes Model, based on a volatility rate of 117.8% and an option fair value of $5.77 was $5,412.
On August 11, 2020, the Company granted one employee a total of 162,500 options to purchase shares of the Company common at a price as of $5.76 per share. The Option Shares will vest ratably over thirty-six (36) months and are exercisable until August 10, 2030. The total estimated value using the Black-Scholes Model, based on a volatility rate of 113.2% and an option fair value of $4.76 was $773,655.
On November 27, 2020, the Company granted three Board members a total of 5,793 options to purchase shares of the Company common at a price as of $3.16 per share. The Option Shares will vest immediately and are exercisable until November 27, 2025. The total estimated value using the Black-Scholes Model, based on a volatility rate of 208.3% and an option fair value of $3.16 was $18,318.
### Twelve Months Ended December 31, 2019
On October 16, 2019, the Company granted one employee a total of 202,599 options to purchase shares of the Company common at a price as of $8.16 per share. The Option Shares will vest ratably over thirty-six (36) months and are exercisable until October 16, 2022. The total estimated value using the Black-Scholes Model, based on a volatility rate of 116.33% and an option fair value of $6.20 was $1,256,163.
On October 29, 2019, the Company granted one former employee a total of 27,345 options to purchase shares of the Company common at a price as of $9.25 per share. The total estimated value using the Black-Scholes Model, based on a volatility rate of 119.98% and an option fair value of $7.70 was $210,564.
On October 29, 2019, the Company granted one employee a total of 30,074 options to purchase shares of the Company common at a price as of $9.25 per share. The total estimated value using the Black-Scholes Model, based on a volatility rate of 119.98% and an option fair value of $7.70 was $231,579.
### Restricted Stock and Restricted Stock Units
In 2020, we issued 70,302 of restricted stock, to certain employees. Shares issued to employees vest monthly over 1 year on the anniversary dates of their grant. In 2020 64,021 shares of restricted stock vested.
The following table summarizes our aggregate restricted stock awards and restricted stock unit activity in 2020:
The Company recognized $459,890 in stock-based compensation expense, which is recorded in selling, general and administrative expenses on the consolidated statement of operations for the years ended December 31, 2020, and the Company will recognize $77,927 over the remaining requisite service period.
NOTE 11
### STOCK OPTIONS AND WARRANTS
In connection with the issuance of the 2020 Convertible Notes, the Company also issued options to purchase 303,623 units at an exercise price of $3.20 per unit, with each unit consisting of one share of common stock, and a warrant to purchase one share of common stock at an exercise price of $3.20 per share. The units and warrants are exercisable for a period of five years from the date of issuance and are subject to a downward provision if the Company issues securities at a lower price. Warrant holders have a right to require the Company to pay cash in the event of a fundamental transaction. In accordance with ASC 815, the warrants and options issued in this period were determined to require equity treatment and $524,452 related to the options and $533,112 related to warrants was recorded in stockholders equity in the year ended December 31, 2020.
In connection with the issuance of the 2020 Convertible Notes, the Company agreed to issue the placement agent and the selling agent five-year warrants to purchase 6,750 shares of the Companys common stock at an exercise price of $3.20. In the year ended December 31, 2020, $47,293 was recorded in stockholders equity related to these warrants.
A Monte Carlo model was used because the investor warrants and options contain fundamental transaction payouts and reset events that cannot be modeled with a Black Scholes model.
The fair value of the options and warrants issued to the convertible debt holders is estimated as of the issue date using a Monte Carlo model with the following assumptions:
Treasury interest rates, the terms of which are consistent with the expected life of the stock options and warrants. Expected volatility is based upon the historical volatility of the Companys common stock over the period commensurate with the expected term of the related instrument. The options and warrants are valued assuming projected reset events adjusting the exercise price and a forced exercise upon a projected fundamental transaction by management. The options and warrants early exercise are modeled assuming registration after 180 days.
NOTE 12
### INCOME TAXES
The provision for income taxes consists of the following for the year ended December 31, 2020 and 2019:
The effective income tax rate is lower than the U.S. federal and state statutory rates primarily because of the valuation allowance and, to a lesser extent, permanent items. A reconciliation of the 2020 and 2019 federal statutory rate as compared to the effective income tax rate is as follows:
Deferred income taxes reflect the net effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax. Significant components of the deferred tax assets and liabilities as of December 31, 2020 and 2019, are as follows:
The Company recorded a full valuation allowance against its net deferred tax asset at December 31, 2020 and 2019 totaling $6,408,401 and $4,401,714, respectively. A naked credit resulting from indefinite lived intangibles was valued at December 31, 2020 and 2019 totaling ($468) and ($433), respectively.
As of December 31, 2020, the Company has federal net operating loss carryforwards totaling $21,819,421. Of that amount, $10,793,313 will expire, if not utilized, in various years beginning in 2028 and which are also subject to the limitations of IRC 382. The remaining carryforward amount of $11,026,108, has no expiration period and can be applied to 80% of taxable income per year in future periods. State net operating loss carryforwards total $16,774,460. Of that amount, $4,659,523 will begin to expire in 2033 and are subject to the limitations of IRC 382. The remaining $12,114,937 of state net operating loss carryforwards are similar to the federal net operating loss in that it has no expiration period and can be applied to 100% of state taxable income per year.
IRC 382 of the Internal Revenue Code of 1986, as amended imposes an annual limit on the ability of a corporation that undergoes an ownership change to use its NOLs to reduce its tax liability. An ownership change is generally defined as any change in ownership of more than 50% of a corporations stock by its 5-percent shareholders over a rolling three-year period based upon each of those shareholders lowest percentage of stock owned during such period. Such a change in ownership occurred in 2007. At this time, The Company does not believe this limitation, when combined with amounts allowable due to net unrecognized built in gains, will affect its ability to use any NOLs before they expire.
The Company routinely inspect its income tax filings for current and previous positions that could be considered uncertain. If a position is deemed to carry a more-likely-than-not probability of notwithstanding challenge from a tax authority, the Company would record a liability for Uncertain Tax Positions (UTP) for the tax in question. As of December 31, 2020, and for all prior years, the Company does not and have not carried any UTPs on the balance sheet. If a UTP was recorded, it is the Companys policy to include interest and penalties on taxes as part of income tax expense.
There are currently no income tax examinations being performed at the federal or state level and the Company is not aware of any possible future audits or examinations. The Companys federal and state income tax returns from 2017 and forward remain open to examination by the corresponding taxing authorities under the statute of limitations, generally. However, due to the loss carryforwards established on historical tax filings, it is possible that the taxing authorities could examine tax years as far back as 2007 in order to determine if the net operating loss carryforward is appropriate.
NOTE 13
A) Litigation
INVO Bioscience, Inc. v. James Bowdring
On August 7, 2019, the Company sent James Bowdring, the brother of the Companys then Chief Financial Officer, a check in the amount of $65,197 as full and final payment under those certain promissory notes dated April 8, 2011 and November 9, 2011. On August 8, 2019, Mr. The basis for returning the check was a claim that the interest due under the Notes called for compounded interest and not per annum interest, this amount is recorded in Accounts Payable and Accrued Liabilities on the Consolidated Balance Sheet. Bowdring was considering a future intention to convert his Promissory Notes into shares of the Companys common stock. Mr. In order to resolve the issue of the Companys tender of payment in full versus Mr. Bowdrings assertion that he can reject tender and seek conversion, the Company has filed an action in the Suffolk Superior Court in Boston on September 3, 2019 seeking Declaratory Judgment and Judgment for Breach of Contract. On September 30, 2019, Mr. Bowdring filed an answer and counterclaim under which he alleged breach of contract, fraud, promissory estoppel, unfair and deceptive practices and constructive trust. Mr. Bowdring is seeking receipt of all shares due under the adjusted conversion price.
The 10% Senior Secured Convertible Promissory Notes were issued on April 8, 2011 and November 9, 2011, with maturity dates thirty days subsequent to the dates of issuance. Interest was calculated at 10% per annum, compounded based on a 360-day year. Investors had the option to convert any unpaid principal and accrued interest into shares of Companys common stock original conversion prices of $0.96 and $0.32, respectively, subject to adjustments upon the Companys issuances of stock at prices less than the original conversion prices during the 24-months after issuance of each note (i.e., currently $0.2100).
The Company does not currently expect the above matter to have a material adverse effect upon either the Companys results of operations, financial position, or cash flows.
### B) Employee Agreements
On October 10, 2019, the Company entered into an agreement with our newly appointed CEO, Steve Shum. The Company agreed to pay Mr. Shum an annual salary of $260,000. In addition, Mr. Shum earned a bonus compensation of $75,000 bonus upon a successful up-listing to the Nasdaq exchange which was paid as of December 31, 2020. All other bonus amounts will be determined by the Board of Directors, at their sole discretion. In addition to his base salary and performance bonus, the Company granted Mr. Shum: (i) 400,000 shares of our common stock and (ii) a three-year option to purchase 6,483,171 shares of our common stock at an exercise price of $0.255 per share.
Mr.
### C) Consulting Agreements
The Company has entered into a consulting agreement with Shine Management, Inc. through which it is receiving outsourced accounting and the support of its acting CFO, Debra Hoopes. Debra is the CFO and Chief Administrative Officer of Shine Management,<|endoftext|>Redemption rights against a proposed business combination as a means to force us or our management to purchase their shares at a significant premium to the then- current market price or on other undesirable terms.
If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different target until 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period.
Our amended and restated memorandum and articles of association provide that we have only 18months from the closing of our Initial Public Offering, until the Contractual Redemption Date if extended at our sponsors option or during any Extension Period to consummate an initial business combination. If we have not consummated an initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, we will: (i)cease all operations except for the purpose of winding up; (ii)as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per- share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest and other income earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any (less up to $100,000 of interest to pay dissolution expenses) divided by the number of the then-outstanding public shares, which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further liquidation distributions, if any); There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate an initial business combination within 18months from the closing of our Initial Public Offering and our sponsor does not exercise its option to extend the time period.
Our sponsor and each member of our management team have entered into an agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within the prescribed time frame).
Our sponsor, executive officers, and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (A)that would modify the substance or timing of our obligation to provide holders of our ClassA ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, or (B)with respect to any other provision relating to the rights of holders of our ClassA ordinary shares, unless we provide our public shareholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest and other income earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any, divided by the number of the then-outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsor, any executive officer, directors, or any other person.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the $1,906,348 held outside the trust account (as of December31, 2020) plus up to $100,000 of funds from the trust account available to us to pay dissolution expenses, although we cannot assure you that there will be sufficient funds for such purpose.
If we were to expend all of the net proceeds of our Initial Public Offering and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by shareholders upon our dissolution would be $10.10. We cannot assure you that the actual per-share redemption amount received by shareholders will not be less than $10.10.
Cowen and Company, LLC and Wells Fargo Securities, LLC will not execute an agreement with us waiving such claims to the monies held in the trust account. In order to protect the amounts held in the trust account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party for services rendered or products sold to us (other than our independent registered public accounting firm), or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i)$10.10 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.10 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our income tax obligations, provided that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the Underwriters against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the trust account are reduced below the lesser of (i)$10.10 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.10 per public share due to reductions in the value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay our income tax obligations, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.10 per public share.
Our sponsor will also not be liable as to any claims under our indemnity of the Underwriters against certain liabilities, including liabilities under the Securities Act. We will have access to up to $1,906,348 of proceeds held outside the trust account (as of December31, 2020) with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000).
To the extent any bankruptcy claims deplete the trust account, we cannot assure you we will be able to return $10.10 per public share to our public shareholders.
Our public shareholders are entitled to receive funds from the trust account only (i)in the event of the redemption of our public shares if we do not complete our initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, (ii)in connection with a shareholder vote to amend our amended and restated memorandum and articles of association (A)to modify the substance or timing of our obligation to provide holders of our ClassA ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, or (B)with respect to any other provision relating to the rights of holders of our ClassA ordinary shares, or (iii)if they redeem their respective shares for cash upon the completion of the initial business combination. Public shareholders who redeem their ClassA ordinary shares in connection with a shareholder vote described in clause (ii)in the preceding sentence shall not be entitled to funds from the trust account upon the subsequent completion of an initial business combination or liquidation if we have not consummated an initial business combination within 18months from the closing of our Initial Public Offering, prior to the Contractual Redemption Date if extended at our sponsors option or during any Extension Period, with respect to such ClassA ordinary shares so redeemed.
### Competition
### Indemnity
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third-party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i)$10.10 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.10 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our income tax obligations, provided that such liability will not apply to any claims by a third-party or prospective target business that executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
### Facilities
### Employees
Prior to the effectiveness of the registration statement of which this Report forms a part, we will file a Registration Statement on Form 8-A with the SEC to voluntarily register our securities under Section12 of the Exchange Act.
As an exempted company, we applied for and expect to receive, after the effectiveness of the registration statement of which this Report forms a part, a tax exemption undertaking from the Cayman Islands government that, in accordance with Section6 of the Tax Concessions Act (as amended) of the Cayman Islands, for a period of 30years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i)on or in respect of our shares, debentures or other obligations or (ii)by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The base salary, bonuses and stock options actually earned up to the date of termination.
Pursuant to his agreement, Dr. Rothbard is subject to a six-month post-employment non-competition, non-solicitation and non-hire covenant.
As noted above, upon the Closing of the Business Combination, Dr. Rothbard was appointed to serve as the Chief Scientific Officer of our company.
On August 21, 2019, the Company entered into an Employment Agreement with Dr. Rothbard which replaced his prior agreement, which was not effective until the Closing Date, but became effective on such date. The Employment Agreement has a term of three years from the Closing Date (i.e., until November 6, 2023), automatically extending for additional one-year terms thereafter unless either party terminates the agreement with at least 90 days prior written notice before the next renewal date.
Rothbard to be paid a salary of $375,000 per year, with automatic increases in salary, on the first anniversary of the effective date, and each anniversary thereafter, of 10%.
Rothbard to receive an annual bonus subject to meeting certain objectives set by the Board of Directors, with a targeted bonus amount of 50% of his then salary, payable on or before February 15 th of each year.
The Employment Agreement also provides for Dr. Rothbard to earn equity compensation in the discretion of the Board of Directors. Dr. Rothbard may also be issued bonuses, from time to time, in the discretion of the board of directors, which may be payable in cash, stock or options.
In the event Dr. Rothbards employment is terminated by the Company without cause, by Dr. Rothbard for good reason (as discussed in the employment agreement), or the agreement is not renewed by the Company, he is required to be paid 36 months of severance pay (if such termination occurs during the first year of the term); 24 months of severance pay (if such termination occurs during the second year of the term); and 12 months of severance pay (if such termination occurs after the second year of the term), along with any accrued bonus amount and a pro rata annual bonus based on the targeted bonus, as well as the payment of health insurance premiums for the same period over which he is required to be paid severance pay.
### Ozan Pamir Katexco Employment Agreement
Our indirect wholly-owned subsidiary Katexco entered into an employment agreement with Mr. Pamir on October 22, 2018. The initial annual base salary set forth in the agreement was CAD $120,000, with annual increases as determined by the board of directors. The agreement also provided Mr. Pamir with a CAD $20,000 signing bonus. In 2019, the compensation was increased to $120,000 per annum in US dollars.
On February 1, 2020, there was an amendment to Mr. Pamirs consulting agreement with Katexco, whereby the contract was transferred from Katexco to Katexco Pharmaceuticals Corp. - US.
### Ozan Pamir Company Employment Agreement
On February 25, 2021, the Company entered into an Employment Agreement dated February 24, 2021, and effective November 6, 2020, which agreement was amended and corrected on March 1, 2021, to be effective as of the effective date of the original agreement (which amendment and correction is retroactively updated in the discussion of the agreement), with Ozan Pamir, the Companys Interim Chief Financial Officer, which replaced and superseded Mr. Pamirs agreement with Katexco, as discussed above. Pursuant to the agreement, Mr. Pamir agreed to serve as the Interim Chief Financial Officer of the Company; and the Company agreed to pay Mr. Pamir $300,000 per year. Such salary is to be increased to a mutually determined amount upon the closing of a new financing, and shall also be increased on a yearly basis.
Under the agreement, Mr. Pamir is eligible to receive an annual bonus, in a targeted amount of 30% of his then salary, based upon the Companys achievement of performance and management objectives as set and approved by the Chief Executive Officer, in consultation with Mr. Pamir. The bonus amount is subject to adjustment. The board of directors, as recommended by the Compensation Committee of the Company (and/or the Compensation Committee), may also award Mr. Pamir bonuses from time to time (in stock, options, cash, or other forms of consideration) in its discretion.
As additional consideration for Mr. Pamir agreeing to enter into the agreement, the Company awarded him options to purchase 180,000 shares of the Companys common stock, which have a term of 10 years, and an exercise price of $4.43 per share (the closing sales price on the date the board of directors approved the grant (February 26, 2021)). The options as subject to the Companys 2020 Omnibus Incentive Plan and vest at the rate of (a)1/5th of such options upon the grant date; provided, however, that such options vest immediately upon Mr. Pamirs death or disability, termination without cause or a termination by Mr. Pamir for good reason (as defined in the agreement), a change in control of the Company or upon a sale of the Company. Under the employment agreement, Mr. Pamir is also eligible to participate in any stock option plans and receive other equity awards, as determined by the board of directors from time to time.
The agreement can be terminated any time by the Company with or without cause with 60 days prior written notice and may be terminated by Mr. Pamir at any time with 60 days prior written notice. The agreement may also be terminated by the Company with six days notice in the event the agreement is terminated for cause under certain circumstances. Upon the termination of Mr. Pamirs agreement by the Company without cause or by Mr. Pamir for good reason, the Company agreed to pay him three months of severance pay.
The agreement contains standard and customary invention assignment, indemnification, confidentiality and non-solicitation provisions, which remain in effect for a period of 24 months following the termination of his agreement.
On May 27, 2021, the Company entered into a Second Amendment to Employment Agreement with Ozan Pamir (the Second Amendment). The Second Amendment amended the terms of Mr. Pamirs employment solely to provide that all compensation payable to Mr. Pamir under such agreement would be paid directly by the Company.
Sir Marc Feldmann and Prof. Jagdeep Nanchahal
See
Sir Marc Feldmann and Prof. Jagdeep Nanchahal under
### Material AgreementsConsulting Agreements
, under
Item 1. Business
, above.
See
under
Material AgreementsConsulting Agreements
, under
### Item 1. Business
, above.
Summary Compensation Table
The following table sets forth certain information concerning compensation earned by or paid to certain persons who we refer to as our
Named Executive Officers for services provided for the fiscal years ended December 31, 2020 and 2019. Our Named Executive Officers include persons who (i) served as our, or 180s, principal executive officer or acted in a similar capacity during the years ended December 31, 2020 and 2019, (ii) were serving at fiscal year-end as our two most highly compensated executive officers, other than the principal executive officer, whose total compensation exceeded $100,000, and (iii) if applicable, up to two additional individuals for whom disclosure would have been provided as a most highly compensated executive officer, but for the fact that the individual was not serving as an executive officer at fiscal year-end.
As noted above, none of the executive officers of KBL prior to the Closing of the Business Combination, including our former Chief Executive Officer, received any cash compensation for their services.
Does not include perquisites and other personal benefits or property, unless the aggregate amount of such compensation is more than $10,000. No executive officer earned any stock awards, option awards, non-equity incentive plan compensation or nonqualified deferred compensation during the periods reported above. Option Awards and Stock Awards represent the aggregate grant date fair value of awards computed in accordance with Financial Accounting Standards Board Accounting Standard Codification Topic 718.
(1)
Dr. Woody was a consultant of 180 from January 1, 2020 through June 30, 2020 and was paid $90,000 in consultant fees. On August 13, 2020, effective July 1, 2020, Mr. Woody was hired as the Chief Executive Officer of 180, and of our Company, beginning November 6, 2020. Effective November 6, 2020, Dr. Woody and the Company entered into an employment agreement which entitles Dr. Woody to an annual salary of $450,000 and a target bonus of 45%. Woody have been fully paid.
(2)
On November 9, 2020, Mr. Pamir was hired as the Chief Financial Officer of 180, and, starting November 27, 2020, Interim Chief Financial Officer of our Company. Effective November 9, 2020, Mr. Pamir has a new employment agreement which entitles him to an annual salary of $300,000 and a target bonus of 30%. As of the date of this filing, all of the amounts owed to Mr. Pamir have been fully paid.
(3)
Dr. Rothbard was the Chief Executive Officer and Chief Scientific Officer of Katexco, and Chief Scientific Officer of our Company following the closing of the Business Combination. As of the Business Combination, Dr. Rothbard has a new employment agreement which entitles him to an annual salary of $375,000 and a target bonus of 50%. Rothbard have been fully paid via cash and issuance of stock.
(4)
Represents consulting fees paid by CBR Pharma. The consulting agreement has been terminated.
(5)
Based on a U.S. dollar to Canadian dollar exchange rate of 1.3262 on December 31, 2019.
(6)
Based on a U.S. dollar to Canadian dollar exchange rate of 1.3649 on December 31, 2020.
### Bonuses
No bonuses were paid to the officers named in the table above, whether by 180 prior to the Closing of the Business Combination or by our company following the Closing of the Business Combination, during the fiscal years ended December 31, 2020 or 2019.
Stock Options
No stock options were granted to the officers named in the table above, whether by 180 prior to the Closing of the Business Combination or by our company following the Closing of the Business Combination, during the fiscal years ended December 31, 2020 or 2019.
### Potential Payments Upon Termination
Pursuant to the employment agreements for Dr.Woody, Dr. Rothbard and Mr. Pamir, severance benefits will be paid in the event of a termination without just cause (as defined in such agreements). Dr. Woody, in the event of such termination, is entitled to severance payments in the form of continued base salary, for the lesser of eighteen (18) months or the then remaining term of the agreement, (ii) payment of any accrued and unpaid annual bonus for any year preceding the year in which the employment terminates; (iii)payment of a pro rata annual bonus for the year in which the employment terminates calculated by multiplying the target bonus amount by a fraction, the numerator of which is the number of calendar days elapsed in the year as of the effective date of termination of employment and the denominator of which is 365; and (iv)payment by the Company of Dr. Woodys monthly health insurance premiums. For Dr. Rothbard, in the event of such termination during his first year, Dr. Rothbard would be entitled to his then base salary for a period of 36 months, during his second year, Dr Rothbard would be entitled to his then base salary for a period of 24 months, and 12 months if the termination happens in the third year of Dr Rothbards employment or thereafter; (ii) payment of any accrued and unpaid annual bonus for any year preceding the year in which the employment terminates; (iii) payment of a pro rata annual bonus for the year in which the employment terminates calculated by multiplying the target bonus amount by a fraction, the numerator of which is the number of calendar days elapsed in the year as of the effective date of termination of employment and the denominator of which is 365; and (iv) payment by the Company of monthly health insurance premiums. Mr. Pamir, in the event of such termination, would be entitled<|endoftext|>The closing of the IPO, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
If the corporation complies with certain procedures set forth in Section 280 of the Delaware General Corporation Law intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any redemptions are made to stockholders, any liability of stockholders with respect to a redemption is limited to the lesser of such stockholders pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution.
It is our intention to redeem our public shares as soon as reasonably possible following the 24th month from the closing of the IPO, but not more than five business days thereafter, and, therefore, we do not intend to comply with the above procedures.
Because we will not be complying with Section 280 of the Delaware General Corporation Law, Section 281(b) of the Delaware General Corporation Law requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the subsequent 10 years. However, because we are a blank check company, rather than an operating company, and our operations will be limited to seeking to complete an initial business combination, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses.
We will seek to have all third parties (including any vendors or other entities we engage) and any prospective target businesses enter into valid and enforceable agreements with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account.
Nevertheless, there is no guarantee that vendors, service providers and prospective target businesses will execute such agreements. In the event that a potential contracted party was to refuse to execute such a waiver, we will execute an agreement with that entity only if our management first determines that we would be unable to obtain, on a reasonable basis, substantially similar services or opportunities from another entity willing to execute such a waiver. Examples of instances where we may engage a third party that refused to execute a waiver would be the engagement of a third party consultant who cannot sign such an agreement due to regulatory restrictions, such as our auditors who are unable to sign due to independence requirements, or whose particular expertise or skills are believed by management to be superior to those of other consultants that would agree to execute a waiver or a situation in which management does not believe it would be able to find a provider of required services willing to provide the waiver. There is also no guarantee that, even if they execute such agreements with us, they will not seek recourse against the trust account. Our insiders have agreed that they will be jointly and severally liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below $10.00 per public share, except as to any claims by a third party who executed a valid and enforceable agreement with us waiving any right, title, interest or claim of any kind they may have in or to any monies held in the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. Our board of directors has evaluated our insiders financial net worth and believes they will be able to satisfy any indemnification obligations that may arise. However, our insiders may not be able to satisfy their indemnification obligations, as we have not required our insiders to retain any assets to provide for their indemnification obligations, nor have we taken any further steps to ensure that they will be able to satisfy any indemnification obligations that arise. Moreover, our insiders will not be liable to our public stockholders and instead will only have liability to us. As a result, if we liquidate, the per-share distribution from the trust account could be less than approximately $10.00 due to claims or potential claims of creditors. We will distribute to all of our public stockholders, in proportion to their respective equity interests, an aggregate sum equal to the amount then held in the trust account, inclusive of any interest not previously released to us (subject to our obligations under Delaware law to provide for claims of creditors as described below).
If we are unable to consummate an initial business combination and are forced to redeem 100% of our outstanding public shares for a portion of the funds held in the trust account, we anticipate notifying the trustee of the trust account to begin liquidating such assets promptly after such date and anticipate it will take no more than 10 business days to effectuate the redemption of our public shares. Our insiders have waived their rights to participate in any redemption with respect to their insider shares. If such funds are insufficient, our insiders have agreed to pay the funds necessary to complete such liquidation (currently anticipated to be no more than approximately $50,000) and have agreed not to seek repayment of such expenses. Each holder of public shares will receive a full pro rata portion of the amount then in the trust account, plus any pro rata interest earned on the funds held in the trust account and not previously released to us or necessary to pay our taxes. The proceeds deposited in the trust account could, however, become subject to claims of our creditors that are in preference to the claims of public stockholders.
Our public stockholders shall be entitled to receive funds from the trust account only in the event of our failure to complete our initial business combination in the required time period or if the stockholders seek to have us convert their respective shares of common stock upon a business combination which is actually completed by us.
To the extent any bankruptcy claims deplete the trust account, the per share redemption or conversion amount received by public stockholders may be less than $10.00.
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO and will apply to us until the consummation of our initial business combination. If we hold a stockholder vote to amend any provisions of our amended and restated certificate of incorporation relating to stockholders rights or pre-business combination activity (including the substance or timing within which we have to complete a business combination), we will provide our public stockholders with the opportunity to redeem their shares of common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes, divided by the number of then outstanding public shares, in connection with any such vote. Our insiders have agreed to waive any conversion rights with respect to any insider shares and any public shares they may hold in connection with any vote to amend our amended and restated certificate of incorporation. Specifically, our amended and restated certificate of incorporation provides, among other things, that: prior to the consummation of our initial business combination, we shall either (1) seek stockholder approval of our initial business combination at a meeting called for such purpose at which public stockholders may seek to convert their shares of common stock, regardless of whether they vote for or against the proposed business combination, into a portion of the aggregate amount then on deposit in the trust account, or (2) provide our stockholders with the opportunity to sell their shares to us by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the trust account, in each case subject to the limitations described herein; we will consummate our initial business combination only if public stockholders do not exercise conversion rights in an amount that would cause our net tangible assets to be less than $5,000,001 and a majority of the outstanding shares of common stock voted are voted in favor of the business combination; if our initial business combination is not consummated within 24 months of the closing of the IPO, then our existence will terminate and we will distribute all amounts in the trust account to all of our public holders of shares of common stock; and prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial business combination.
### Potential Revisions to Agreements with Insiders
Each of our insiders has entered into letter agreements with us pursuant to which each of them has agreed to do certain things relating to us and our activities prior to a business combination. We could seek to amend these letter agreements without the approval of stockholders, although we have no intention to do so. In particular:
Restrictions relating to liquidating the trust account if we failed to consummate a business combination in the time-frames specified above could be amended, but only if we allowed all stockholders to redeem their shares in connection with such amendment;
Restrictions relating to our insiders being required to vote in favor of a business combination or against any amendments to our organizational documents could be amended to allow our insiders to vote on a transaction as they wished;
The requirement of members of the management team to remain our officer or director until the closing of a business combination could be amended to allow persons to resign from their positions with us if, for example, the current management team was having difficulty locating a target business and another management team had a potential target business;
The restrictions on transfer of our securities could be amended to allow transfer to third parties who were not members of our original management team;
The obligation of our management team to not propose amendments to our organizational documents could be amended to allow them to propose such changes to our stockholders;
The obligation of insiders to not receive any compensation in connection with a business combination could be modified in order to allow them to receive such compensation;
The requirement to obtain a valuation for any target business affiliated with our insiders, in the event it was too expensive to do so.
Except as specified above, stockholders would not be required to be given the opportunity to redeem their shares in connection with such changes. Such changes could result in:
Our having an extended period of time to consummate a business combination (although with less in trust as a certain number of our stockholders would certainly | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment with us and for 12 months following his termination date.
For purposes of the Shannon Agreement, cause means the occurrence of the following: (i) a material breach of the Shannon Agreement by Mr. Shannon (where he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Shannons failure (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond ten days after a written demand for substantial performance is delivered to him; (iii) Mr. Shannon engaging in or causing an act of willful misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Shannons conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense; and (v) Mr. Shannons willful refusal to perform the specific lawful directives of our Board of Directors which are consistent with the scope of his duties and responsibilities under the Shannon Agreement; Shannon in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his employment for cause under clause (i) above, and no failure of Mr. Shannon or the Company to achieve performance goals, alone, shall be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Shannon Agreement, good reason means: (i) any material breach of the Shannon Agreement by us (where we fail to cure such breach within ten business days after being notified in writing by Mr. Shannon of such breach); Shannons written consent, of his position, title, authority, duties or responsibilities as indicated in the Shannon Agreement, including the failure to be reelected to the Board, or the appointment of any other person, without Mr. Shannons written consent, to perform any material part of such duties, including, without limitation, the failure of Mr. Shannon to have such duties and responsibilities with respect to the acquiring entity following a change in control; (iii) the involuntary material relocation of Mr. Shannons then current principal place of business to a location more than 50 miles from his current principal place of business; and (iv) the failure by us to obtain the assumption in writing of our obligation to perform under the Shannon Agreement by any successor to all or substantially all of our assets. Mr. Shannon may terminate his employment for good reason by providing us with 30 days written notice setting forth in reasonable specificity the event that constitutes good reason, within 90 days of the occurrence of such event. Shannons termination will be effective upon the expiration of such cure period.
For purposes of the Shannon Agreement, change in control is defined under the Prior Plan on the date of the change in control or as defined under the Prior Plan on the effective date of the Shannon Agreement, whichever is more favorable to Mr. Shannon
### The Bonello Agreement
Pursuant to the Bonello Agreement, in the event Mr. Bonellos employment is terminated by us without cause or by the executive for good reason (each as defined below) and Mr. Bonello executes and does not revoke a general release of claims in favor of us, then Mr. Bonello will receive (i) a severance payment equal to the sum of his base salary plus an amount equal to his annual bonus for the calendar year immediately preceding the date of the termination of employment, payable over 12 months, (ii) 12 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
In the event Mr. Bonellos employment is terminated by us without cause or by Mr. Bonello for good reason on or prior to the expiration of the one-year period immediately following a change in control (as defined below), then Mr. Bonello will receive in lieu of the severance set forth in the preceding paragraph: (i) a severance payment equal to two times the sum of his base salary plus an amount equal to his annual bonus for the calendar year immediately preceding the date of the termination of employment, payable in a lump-sum cash payment, (ii) 24 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
Under the Bonello Agreement, termination payments and benefits will be delivered to Mr. Bonello either in full or to such lesser extent as would result in no portion of such termination payments and benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such termination payments and benefits to Mr. Bonello on an after-tax basis.
Bonello is also subject to certain restrictive covenants, including confidential information and non-disparagement covenants, each for the term of his employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment with us and for 12 months following his termination date.
For purposes of the Bonello Agreement, cause means the occurrence of the following: (i) a material breach of the Bonello Agreement by Mr. Bonello (where he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Bonellos failure (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond ten days after a written demand for substantial performance is delivered to him; (iii) Mr. Bonello engaging in or causing an act of willful misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Bonellos conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense; and (v) Mr. Bonellos willful refusal to perform the specific lawful directives of our Board of Directors which are consistent with the scope of his duties and responsibilities under the Bonello Agreement; Bonello in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his employment for cause under clause (i) above, and no failure of Mr. Bonello or the Company to achieve performance goals, alone, shall be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Bonello Agreement, good reason means: (i) any material breach of the Bonello Agreement by us; Bonellos written consent, of his position, authority, duties or responsibilities as indicated in the Bonello Agreement, or the appointment of any other person, without Mr. Bonellos written consent, to perform any material part of such duties, including, without limitation, the failure of Mr. Bonello to have such duties and responsibilities with respect to the acquiring entity following a change in control; and (iii) the failure by us to obtain the assumption in writing of our obligation to perform under the Bonello Agreement by any successor to all or substantially all of our assets. Mr. Bonello may terminate his employment for good reason by providing us with 30 days written notice setting forth in reasonable specificity the event that constitutes good reason, within 90 days of the occurrence of such event. Bonellos termination will be effective upon the expiration of such cure period.
For purposes of the Bonello Agreement, change in control is defined under the 2014 Plan on the date of the change in control or as defined under the 2014 Plan on the effective date of the Bonello Agreement, whichever is more favorable to Mr. Bonello.
### The Gaenzle Agreement
Pursuant to the Gaenzle Agreement, in the event Mr. Gaenzles employment is terminated by us without cause or by the executive for good reason (each as defined below), then Mr. Gaenzle will receive (i) a severance payment equal to the sum of his base salary plus an amount equal to his target annual bonus for the calendar year immediately preceding the date of the termination of employment, payable over 12 months, (ii) 12 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
In the event Mr. Gaenzles employment is terminated by us without cause or by Mr. Gaenzle for good reason on or prior to the expiration of the one-year period immediately following a change in control (as defined below), then Mr. Gaenzle will receive in lieu of the severance set forth in the preceding paragraph: (i) a severance payment equal to two times the sum of his base salary plus an amount equal to his target annual bonus for the calendar year immediately preceding the date of the termination of employment, payable in a lump-sum cash payment, (ii) 24 months of continued medical, dental and other health benefit coverage with the same employee cost-sharing as is provided to employees generally and (iii) all accrued but unpaid obligations.
Under the Gaenzle Agreement, termination payments and benefits will be delivered to Mr. Gaenzle either in full or to such lesser extent as would result in no portion of such termination payments and benefits being subject to the excise tax imposed by the golden parachute rules of Section 4999 of the Code, whichever of the foregoing amounts, after taking into account all applicable taxes, results in the greatest amount of such termination payments and benefits to Mr. Gaenzle on an after-tax basis.
Gaenzle is also subject to certain restrictive covenants, including confidential information and non-disparagement covenants, each for the term of his employment with us and thereafter, and covenants not to compete and not to solicit, each for the term of his employment with us and for 12 months following his termination date.
For purposes of the Gaenzle Agreement, cause means the occurrence of the following: (i) a material breach of the Gaenzle Agreement by Mr. Gaenzle (where he fails to cure such breach within ten business days after being notified in writing by us of such breach); (ii) Mr. Gaenzles willful refusal (except where due to a physical or mental incapacity) to substantially perform his material duties which continues beyond ten days after a written demand for substantial performance is delivered to him; (iii) Mr. Gaenzle engaging in or causing an act of willful misconduct that has a material adverse impact on our reputation, business, business relationships or financial condition; (iv) Mr. Gaenzles conviction of, or plea of guilty or nolo contendere to, a felony, or any crime involving moral turpitude not involving a traffic offense; and (v) Mr. Gaenzles willful refusal to perform the specific lawful directives of our Board of Directors which are consistent with the scope of his duties and responsibilities under the Bonello Agreement; Gaenzle in the reasonable, good faith belief that it was in the best interest of the Company shall be treated as a basis for termination of his employment for cause under clause (i) above, and no failure of Mr. Gaenzle or the Company to achieve performance goals, alone, shall be treated as a basis for termination of his employment for cause under clause (ii) or (v) above.
For purposes of the Gaenzle Agreement, good reason means: (i) any material breach of the Gaenzle Agreement by us; Gaenzles written consent, of his position, authority, duties or responsibilities as indicated in the Gaenzle Agreement, or the appointment of any other person, without Mr. Gaenzles written consent, to perform any material part of such duties, including, without<|endoftext|>Twelve months ended December 31, 2019, and related information, are discussed below.
Each Series had exposure to commodity interest positions within one or more sectors during fiscal 2019.
As of the date of this report, for a Series that has invested in a swap, a trading advisor does not receive any management fees directly from the Series for such swap, and instead the relevant trading advisor receives compensation via the fees embedded in the swap. As of December 31, 2019, the weighted average management fee embedded in (i) swaps owned by Frontier Diversified Fund was 0.80% per annum, (ii) swaps owned by Frontier Balanced Fund was 0.64% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 1.89% per annum, (iv) swaps owned by Frontier Heritage Fund was 2.19% per annum, and (v) swaps owned by Frontier Select Fund was 1.95% per annum and the managing owner has waived the entire management fee due to it from those Series in respect of such Series investment in swaps.
The Frontier Diversified Fund Class 1 NAV lost 1.12% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Diversified Fund Class 2 NAV gained 0.61% for the twelve months ended December 31, 2019 net of fees and expenses; the Frontier Diversified Fund Class 3 NAV gained 0.87% for the twelve months ended December 31, 2019 net of fees and expenses. For the twelve months ended December 31, 2019, the Frontier Diversified Fund recorded a net gain on investments of $552,005, net investment loss of $521,625 and total expenses of $540,979, resulting in a net increase in owners capital from operations attributable to controlling interests of $30,380. The NAV per Unit, Class 1, decreased from $102.25 at December 31, 2018 to $101.10 as of December 31, 2019. The NAV per Unit, Class 2, increased from $120.84 at December 31, 2018, to $121.58 as of December 31, 2019. The NAV per Unit, Class 3, increased from $112.62 at December 31, 2018, to $113.61 as of December 31, 2019. Total Class 1 subscriptions and redemptions for the period were $0 and $269,710, respectively. Total Class 2 subscriptions and redemptions for the period were $0 and $2,063,288, respectively. Total Class 3 subscriptions and redemptions for the period were $0 and $1,854,272, respectively. Ending capital at December 31, 2019, is $1,303,195 for Class 1 and $5,600,851 for Class 2 and $5,095,574 for Class 3.
The Frontier Diversified Fund invests in one or more swaps.
In
The incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps range from 20% to 25% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management fees and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled.Themanagement and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.
As of December 31, 2019, the management fee embedded in swaps owned by Frontier Diversified Fund was 1.00% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series investment in swaps.
Based on an analysis of the management fees charged toFrontier Diversified Fund, the effective management fee rate of the Series were higher than the management fee rate otherwise payable to the Managing Owner. For the period ended December 31, 2019, the effective management fee rate ofFrontier Diversified Fundwas 0.80%, compared to a management fee payable to the Managing Owner of 0.75%. For the year ended December 31, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Diversified Fund was $103,676.
Two of the six sectors traded in the Frontier Diversified Fund were profitable in Q4 2019.
Stock Indices and Interest Rates sectors were positive year-to-date (YTD) while Metals, Currencies, Energies and Agriculturals were negative YTD.
In terms of major CTA performance, three of the eight major CTAs in the Frontier Diversified Fund were profitable in Q4 2019. H2O, QIM and Crabel finished positive for the quarter. Aspect, Emil Van Essen, Fort, Quest and Welton finished negative for the quarter. In terms of YTD performance Aspect, Crabel, Fort, H2O and Welton were positive YTD while Emil Van Essen, QIM, Quantmetrics, Quest, and Winton were negative YTD.
The Frontier Long/Short Commodity Fund Class 2 NAV lost 17.43% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3 NAV lost 17.38% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 1a NAV lost 22.19% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 2a NAV lost 21.00% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3a NAV lost 20.79% for the twelve months ended December 31, 2019, net of fees and expenses.
For the twelve months ended December 31, 2019, the Frontier Long/Short Commodity Fund recorded net loss on investments of $343,205, net investment loss of $52,878, and total expenses of $54,896, resulting in a net decrease in owners capital from operations attributable to controlling interests of $396,083. The NAV per Unit, Class 2, decreased from $98.82 at December 31, 2018, to $81.60 as of December 31, 2019. The NAV per Unit, Class 3, decreased from $103.66 at December 31, 2018, to $85.64 as of December 31, 2019. The NAV per Unit, Class 1a, decreased from $56.80 at December 31, 2018, to $44.20 as of December 31, 2019. The NAV per Unit, Class 2a, decreased from $66.52 at December 31, 2018, to $52.55 as of December 31, 2019. The NAV per Unit, Class 3a, decreased from $69.83 at December 31, 2018, to $55.31 as of December 31, 2019. Total Class 2 subscriptions and redemptions for the twelve months were $0 and $33,087, respectively. Total Class 3 subscriptions and redemptions for the twelve months were $0 and $519,520, respectively. Total Class 1a subscriptions and redemptions for the twelve months were $0 and $4,858, respectively. Total Class 2a subscriptions and redemptions for the twelve months were $0 and $71,516, respectively. Total Class 3a subscriptions and redemptions for the twelve months were $0 and $85,853, respectively. Ending capital at December 31, 2019, is $41,045 for Class 2, $991,828 for Class 3, $11,447 for Class 1a, $81,826 for Class 2a and $208,144 for Class 3a.
The Frontier Long/Short Commodity Fund invests in one or more swaps.
The management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.50% per annum of notional assets. The incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 25% of new net trading profits on a monthly or quarterly basis.To the extent that there are embedded management and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled.Themanagement and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.
As of December 31, 2019, the management fee embedded in swaps owned by Frontier Long/Short Commodity Fund was 1.50% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series investment in swaps.
Based on an analysis of the management fees charged toFrontier Long/Short Commodity Fund, the effective management fee rate of the Series were lower than the management fee rate otherwise payable to the Managing Owner.For the period ended December 31, 2019, the effective management fee rate ofFrontier Long/Short Commodity Fundwas 1.89%, compared to a management fee payable to the Managing Owner of 2.00%. For the year ended December 31, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Long/Short Commodity Fund was $3,412.
Sector Attribution for the Frontier Long/Short Commodity Fund
None of the seven sectors traded in the Frontier Long/Short Commodity Fund was profitable in Q4 2019. Energies, Base Metals, Grains, Meats, Precious Metals, Softs and Financials finished negative for the quarter.
Energies, Base Metals, Grains, Meats, Precious Metals, Softs and Financials were negative YTD.
In terms of major CTA performance, none finished positive for the quarter while Emil Van Essen, JE Moody, Welton and Rosetta were negative for the quarter.
In terms of YTD performance, Red Oak was positive YTD while Emil Van Essen, JE Moody, Rosetta and Welton were negative YTD.
### Frontier Masters Fund
The Frontier Masters Fund Class 1 NAV lost 20.66% for the twelve months ended December 31, 2019, net of fees and expenses, the Frontier Masters Fund Class 2 NAV lost 19.03% for the twelve months ended December 31, 2019, net of fees and expenses, the Frontier Masters Fund Class 3 NAV lost 18.84% for the twelve months ended December 31, 2019, net of fees and expenses.
For the twelve months ended December 31, 2019 the Frontier Masters Fund recorded a net loss on investments of $383,472, net investment loss of $227,797, and total expenses of $232,453, resulting in a net decrease in owners capital from operations attributable to controlling interests of $611,269. The NAV per Unit, Class 1, decreased from $91.10 at December 31, 2018, to $72.28 as of December 31, 2019. The NAV per Unit, Class 2, decreased from $107.68 at December 31, 2018, to $87.18 as of December 31, 2019. The NAV per Unit, Class 3 decreased from $100.77 at December 31, 2018 to $81.78 as of December 31, 2019. Total Class 1 subscriptions and redemptions for the twelve months were $0 and $1,450,004, respectively. Total Class 2 subscriptions and redemptions for the twelve months were $0 and $231,974, respectively. Total Class 3 subscriptions and redemptions for the twelve months were $0 and $1,040,846, respectively. Ending capital at December 31, 2019, was $12,794 for Class 1, $850,808 for Class 2 and $1,374,437 for Class 3.
Two of the six sectors traded in the Frontier Masters Fund were profitable in Q4 2019.
Interest Rates were positive for the year while Metals, Currencies, Agriculturals, Energies and Stock Indices were negative.
In terms of major CTA performance, no CTAs finished positive for the quarter while Aspect, Emil Van Essen, Transtrend and Welton were negative during the quarter. In terms of YTD performance, Aspect was positive while Emil Van Essen, Transtrend, Welton and Winton were negative YTD.
### Frontier Balanced Fund
The Frontier Balanced Fund Class 1 NAV lost 0.34% for the twelve months ended December 31, 2019, net of fees and expenses; The Frontier Balanced Fund Class 1AP NAV gained 2.72% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Balanced Fund Class 2 NAV gained 2.70% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Balanced Fund Class 2a NAV gained 2.70% for the twelve months ended December 31, 2019, net of fees and expenses; the Frontier Balanced Fund Class 3a NAV gained 2.71% for the twelve months ended December 31, 2019, net of fees and expenses.
For the twelve months ended December 31, 2019, the Frontier Balanced Fund recorded net gain on investments of $1,527,182, net investment loss of $1,560,971, and total expenses of $1,606,990, resulting in a net decrease in owners capital from operations attributable to controlling interests of $33,789. The NAV per Unit, Class 1, decreased from $117.63 at December 31, 2018, to $117.23 as of December 31, 2019. The NAV per Unit, Class 1AP, increased from $134.16 at December 31, 2018, to $137.81 as of December 31, 2019. The NAV per Unit, Class 2, increased from $180.94 at December 31, 2018, to | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Price would generally be required to be at least $4.00 per share, our global market capitalization would be required to be at least $200,000,000, the aggregate market value of publicly-held shares would be required to be at least $100,000,000 and we would be required to have at least 400 round lot holders.
Because our Units, Class A Common Stock and Warrants are listed on the NYSE, our Units, Class A Common Stock and Warrants are covered securities.
### Table of Content
In the case that additional shares of Class A Common Stock, or equity-linked securities convertible into or exercisable or exchangeable for Class A Common Stock, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of the initial business combination, the ratio at which founder shares shall convert into Class A Common Stock will be adjusted so that the number of Class A Common Stock issuable upon conversion of all founder shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of (i) the total number of all outstanding shares of common stock upon completion of the Initial Public Offering, plus (ii) all shares of Class A Common Stock and equity-linked securities issued, or deemed issued in connection with the initial business combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the business combination, and any private placement-equivalent Warrants issued to our Sponsor or its affiliates upon conversion of loans made to us).
### Table of Content
We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per Warrant, provided that the last reported sales price of our Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities) for any 20 trading days within the 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. None of the Private Placement Warrants will be redeemable by us (except as described elsewhere in this Form 10-K) so long as they are held by our Sponsor or its permitted transferees.
### Table of Content
In addition, we have the ability to redeem the outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per Warrant upon a minimum of 30 days prior written notice of redemption, provided that the closing price of our Class A Common Stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A Common Stock and equity-linked securities) for any 20 trading days within the 30 trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their Warrants prior to redemption for a number of shares of Class A Common Stock determined based on the redemption date and the fair market value of shares of our Class A Common Stock. The value received upon exercise of the Warrants (1) may be less than the value the holders would have received if they had exercised their Warrants at a later time where the underlying share price is higher and (2) where exercised on a cashless basis, may not compensate the holders for the value of the Warrants, including because the number of shares received is capped at 0.361 shares of Class A Common Stock per whole Warrant (subject to adjustment) irrespective of the remaining life of the Warrants.
None of the Private Placement Warrants will be redeemable by us, except as otherwise described in this Form 10-K, so long as they are held by our Sponsor or its permitted transferees.
We issued Warrants to purchase 22,500,000 shares of Class A Common Stock, at $11.50 per share, as part of the Units offered in the Initial Public Offering and we issued in a Private Placement Warrants to purchase an aggregate of 11,000,000 shares of Class A Common Stock, at $11.50 per share. Our initial stockholders currently own an aggregate of 11,250,000 founder shares. In addition, if our Sponsor makes any working capital loans, up to $2,000,000 of such loans may be converted into Warrants, at the price of $1.00 per Warrant at the option of the lender.
The Private Placement Warrants are identical to the Warrants sold as part of the Units in the Initial Public Offering except that, so long as they are held by our Sponsor or its permitted transferees, (i) they will not be redeemable by us (except as described elsewhere in this Form 10-K), (ii) they (including the Class A Common Stock issuable upon exercise of these Warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of our initial business combination, (iii) they may be exercised by the holders on a cashless basis and (iv) they are entitled to registration rights.
### Table of Content
An active trading market for our securities may not exist, which would adversely affect the liquidity and price of our securities.
Furthermore, an active trading market for our securities may not exist or be sustained.
These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred stock, and the fact that prior to the completion of our initial business combination only holders of our founder shares will have the right to vote on the election of directors, which may make the removal of management more difficult and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
Only holders of our founder shares currently have the right to vote on the election of directors. and
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The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants, in the amount of $450,000,000, are being held in an interest-bearing Trust Account. Treasury obligations. While short-term U.S. If the balance of the Trust Account is reduced below $450,000,000 as a result of negative interest rates, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If we have not completed an initial business combination within 24 months from the closing of the Initial Public Offering or during any Extension Period, the proceeds then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay taxes (less up to $100,000 of the interest to pay dissolution expenses), will be used to fund the redemption of our Public Shares, as further described herein.
### Table of Content
The pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our Public Shares in the event we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or during any Extension Period may be considered a liquidating distribution under Delaware law.
Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our Public Shares in the event we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or during any Extension Period is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
### Table of Content
We may not hold an annual meeting of stockholders until after we consummate our initial business combination (unless required by the NYSE) and thus may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a companys bylaws unless such election is made by written consent in lieu of such a meeting. In addition, prior to our business combination (a) as holders of our Class A common stock, our public stockholders will not have the right to vote on the appointment of our directors and (b) holders of a majority of the outstanding shares of our Class B common stock may remove a member of our board of directors for any reason.
However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of Class A Common Stock issuable upon exercise of the Warrants and thereafter will use our commercially reasonable efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain the effectiveness of the registration statement, and a current prospectus relating to the Class A Common Stock issuable upon exercise of the Warrants, until the expiration of the Warrants in accordance with the provisions of the warrant agreement.
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Our initial stockholders own shares representing approximately 20% of our issued and outstanding shares of common stock. If our initial stockholders purchase any additional shares of common stock in the market or in privately negotiated transactions, this would increase their control. These provisions of our amended and restated certificate of incorporation may only be amended by a resolution passed by a majority of the founder shares.
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In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act or the rules and regulations promulgated thereunder.
### General Risk Factors
Past performance by members of our management team and our Sponsor may not be indicative of future performance of an investment in us.
Information regarding performance by, or businesses associated with, members of our management team and our Sponsor is presented for informational purposes only. Any past experience and performance, including related to acquisitions, of members of our management team and/or our Sponsor is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; You should not rely on the historical record and performance of members of our management team and/or our Sponsor as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.
### Table of Content
Item 1B.
None.
Item 2.
### Properties
We currently maintain our executive offices at Golden Bear Plaza, 11760 US Highway 1, Suite W506, North Palm Beach, FL and our telephone number is (561) 402-0741. Our website address is www.sportsentcorp.com.
Item 3.
### Legal Proceedings
None.
Item 4.
### Mine Safety Disclosures
Not applicable.
Table of Content
### PART II
Item 5.
### Market Information<|endoftext|>Period would be divided equally between the Company and the Sellers. No capital was raised for Bluwire Group and this 19% was issued to 12 ReTech Corporation
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12 Tech, Inc.
An Arizona corporation is a subsidiary of 12 ReTech Corporation and has a number of subsidiaries (12Tech). On December 26, 2019, the Company formed 12 Tech to spearhead the Companys software technology development and to focus more effort on the largest retail market in the world: the United States of America. The Company then closed or consolidated under 12 Tech all its other software technology companies and maintains the following subsidiaries;
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12 Hong Kong, Ltd
, a corporation organized in the special economic region of Hong Kong is a subsidiary of 12 Tech, Inc. On June 27, 2017 the Company acquired 12 Hong Kong, Ltd. in a share exchange transaction. Originally this is the Company that managed all the Companys proprietary and licensed technology that is utilized and sold by the other subsidiaries. With the formation of 12 Tech that role is now being managed by 12 Tech. Today, 12 HK operates as a subsidiary of 12 Tech and serves as the marketing and sales hub for Asia, particularly the Chinese market and now services our customers in Japan, formerly managed by 12 Japan Ltd.
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12 Japan, LTD. Organized in Japan and is a subsidiary of 12 Tech inc.
After the initial acquisition of 12 Hong Kong, LTD during 2017 and the first half of 2018 the Company made several acquisitions including 12 Japan, LTD. Subsequent to this acquisition, the Company took steps to consolidate the assets and streamline operations that effectively by the end the 3rd quarter 2019, this Company no longer functions as independent subsidiary. In the third quarter of 2019 the Company closed the offices of 12 Japan, and its flagship customer ITOYA and the revenue generated will be serviced and managed by 12 Hong Kong.
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12 Europe, A.G.
12 Europe A.G. was acquired in 2017, and underperformed. Therefore, the Company reaffirmed its previous master representation agreement between 12 Hong Kong, LTD and Coppola, AG so that the software customers in Europe can continue to be supported and then closed its operations in Europe. On August 20, 2019, the Company had successfully discharged all of its debts associated with 12 Europe A.G., as part of the completion of the 12 Europe A.G., bankruptcy filing except for certain social benefit payments still owed approximately $35K by the Company.
### Business and Operations
12 ReTech Corporation is a Technology company that is creating software that management believes will create new platforms and tools for smaller retailers to compete with major companies like Amazon and Walmart and delight consumers. To better understand the entire retail environment the Company has acquired operating companies that sell direct to consumers online and in physical stores as well as to other retailers. These acquisitions, in addition to providing current revenue to the Company management believes that they will provide entree to other retailers for the sale and or licensing of our technology solutions.
From an operating perspective, 12 ReTech Corporation is a holding company with two main operating companies that themselves may now and/or in the future own other subsidiaries. They are: 12 Retail Corporation which now operates our casino stores and subsidiaries Bluwire Group, LLC, 12 Fashion Group, Inc and others, and 12 Tech Inc that designs and develops our retail software.
The Company has earned money from four different revenue streams (in declining order): Retail Sales, Wholesale and Online sales of Fashion products, Royalty Payments for 3rd party licensing of the Bluwire name, and technology sales.
### Effects on us of the Covid-19 Pandemic
2020 was an unusual year, in that at nearly the same time the entire world was in the grip of the Covid-19 pandemic with unprecedented closings of businesses, a virtual cessation of most business and personal travel, lockdown and stay at home orders. As a Company centered on retail and which derives the most significant portion of its revenue from retail stores in airports and casinos, we were hit particularly hard. In retail, the 1st quarter of every year is the slowest revenue quarter of any year, and even before that first quarter ended all of our retail stores were closed due to the pandemic. Only the casino store was able to be re-opened in mid-December 2020 to lackluster sales. Supply chains were interrupted, and it became difficult to re-stock our retail store for the holiday season which also delayed its re-opening to mid-December, after an aborted restart in September. The supply chain problems also delayed the receipt of fabric and other products needed by our Fashion Group as they began to re-emerge from under the pandemic closures. Our fashion group, being based-in NYC was closed for many months and only reopened in July to produce masks. All of the stores our fashion group would sell to were also closed. Our technology division, 12 Tech Inc, was also hard hit. Not only were retailers closed and conserving cash like we were, but it became apparent that consumers would no longer interact with public touchscreens, which was the corner stone of our technology. In other words, our technology was made obsolete in the blink of an eye.
The Company managed survival during the pandemic by squirreling cash and obtaining PPP and or EIDL loans from the SBA. We attempted to retain all of our key employees utilizing these funds, but as a subsequent event by June 2021 most have found other jobs once the PPP money ran out. This presents challenges for our airport stores re-openings, as it is a long process to get employees certified (badged) to work in airports. This will further slow our re-openings during 2021. We also renegotiated various leases and commitments to make us more streamlined and efficient as we re-open and expand. In Japan, we renegotiated out licensing arrangement with ITOYA whereby they managed more of the day to day software for a smaller fee and we eliminated virtually all of our costs there. We also learned that the App we had developed there was strongly used by Japanese consumers of ITOYA and we could re-develop it for the U.S. market. This process is well on the way and management believes will create the next great shopping platform.
For more information about our existing technology please visit our website at www.12retech.com.
### Financing and Convertible Debt
To finance our operations the Company has historically resorted to a number of convertible debt providers (see Note 10). These debt providers have in many cases exercised their rights to convert their debt into the Companys common stock at a discount to market. They then sell that stock to recover their investment and profits. This has over time depressed the value of our Companys common stock and caused a significant dilution to our shareholders. This could not be avoided, and management believes it was necessary in order to provide continuation of the Companys business so that we could make significant acquisitions. The Company has been building revenue momentum through these acquisitions and is no longer exclusively reliant on this form of fund raising. The vast majority of the funds the Company has received over the last 4 months have been sourced through non-convertible debt incurred by our operating subsidiaries. There is, however, still a considerable amount of convertible debt that needs to be retired over the near term. Management is working closely with the convertible note holders to find less dilutive alternatives and management believes that in first half of 2021 it will arrive at a solution that will involve less dilution, may require some cash payments from other sources including an equity offering and/or debt offerings through one or more of its subsidiaries as well as leak out provisions negotiated with the convertible debt holders themselves.
The Company had also entered into a $12 million dollar Equity Line of Credit with Oasis Capital which it has been unable to access due to some delays in the audits of one of its acquired subsidiaries. That has been resolved and Management has been in talks with Oasis on amending that original offering, so that the Company may refile the S-1 required with the SEC. The equity line of credit is ineffective at the current share price, and we will not be able to reinstitute at current share price levels.
In addition, Management has received tentative commitments for preferred Equity Funding that if completed would allow the Company to fully retire the convertible debt. Management, however, cautions readers that while promising no Equity or Debt funding can truly be counted upon until the money is in the bank. The exact amount of the final funding and timing have not been fully determined at this time.
However, management believes that now that the Company has significant and growing revenue, has streamlined operations, is set to launch its software products in its own stores in the United States, and has access to more standard debt capital, that the issues associated with the convertible debt have become more manageable and therefore will be resolved more favorably to the Company than was previously observed.
YEAR ENDED December 31, 2020 COMPARED TO THE YEAR ENDED December 31, 2019
Amounts reflected in our financial statements are accounted for under common control accounting (see footnotes).
### Revenues
During the year ended December 31, 2020 our revenues decreased to $721,312 from $1,628,607 in the prior comparable year. This represents and decrease of $907,295 or 56%, which is primarily the result of the global pandemic due to COVID 19 on our Bluwire subsidiary and 12 Fashion Group subsidiary. The government forced the closure of all our store locations on March 16, 2020. When allowed, the company was able to re-open one of our store locations in December 2020. We hope to open additional store locations in the near future.
Cost of revenues
During the twelve months ended December 31, 2020 we incurred Cost of Revenues associated with the delivery of our products in the amount of $385,236, as compared to $1,122,086 for the comparable period in 2019. These expenses are related to costs of delivering goods. In 2020, our Cost of Revenues as a percentage of Revenues was 53% as compared to 66% in the prior comparable period. The lower cost of revenues as a percentage of Revenues in 2020 is mainly the result of on cutting purchases of inventory and production materials due to COVID 19.
### General and Administrative
Our general and administrative expenses for the year ended December 31, 2020 were $1,762,856, a significant decrease of $361,516 or 17% when compared to $2,124,372 for the year ended December 31, 2019. The decrease is a result of impact due to COVID 19 and forced closure of operations during many months.
Professional fees
Our professional fee expenses for the year ended December 31, 2020 were $683,251 a decrease of $542,448 or 44% when, compared to $1,225,699 for the year ended December 31, 2019. Our professional fees include expenses related to our external auditors, legal costs, and consultants. In order to preserve our subsidiaries operations, the company conserved on spending from the period of closure on March 16, 2020 until December 31, 2020.
### Depreciation and amortization
Our depreciation expense for the year ended December 31, 2020 were $439,269 an increase of $340,163 or 343% when, compared to $99,107 for the year ended December 31, 2019. Our depreciation and amortization expense includes intangibles and leasehold improvements added October 1, 2019 as part of the Bluwire acquisition. As such the company had twelve months of depreciation and amortization as opposed to three months in 2019.
Other Expense
Our Other Expenses increased by $10,187,508 or 110% to $19,391,799 for the year ended December 31, 2020 compared to $9,204,291 for the year ended December 31, 2019. There are four main components of the increase of the 2020 Other Expense category:
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$400,000 effective January 9, 2020. Mr. Liner is also entitled to receive employee benefits provided by DMS at no cost to Mr. Liner. Mr. Liners offer letter provides for at-will employment.
Liner was eligible to earn a $200,000 sign-on bonus with $50,000 becoming payable every three months (on December 15, 2018, March 15, 2019, June 14, 2019 and September 21, 2019), such that $150,000 was paid in 2019. Mr. Liner was also eligible to earn monthly performance incentives and annual performance incentives under our Performance Incentive Plan equal to a percentage of gross profits from direct sales introduced and/or closed by him and a percentage of DMS net revenues. As of December 31, 2020, the Performance Incentive Plan is no longer in effect.
Mr. Liner is entitled in his offer letter to certain severance benefits in the event his employment is terminated without cause, as described in more detail below.
### Employment Arrangement with Randall Koubek
Mr. Koubek is a party to an offer letter with DMS, dated October 23, 2018. The offer letter provides for an annual base salary of $250,000 for Mr. Koubek. Mr. Koubek is also entitled to receive employee benefits provided by DMS at no cost to Mr. Koubek. Mr. Koubeks offer letter provides for at-will employment.
Koubek is eligible to earn an annual discretionary bonus of not less than 20% of his then-current base salary at the end of each calendar year. The annual bonus applicable to Mr. Koubeks service in 2018 and the first quarter of 2019 was paid in the second quarter of 2019. The annual bonus for the remainder of 2019 was paid during the first quarter of 2020.
Mr. Koubek is entitled under his offer letter to certain severance benefits in the event his employment is terminated without cause, as described in more detail below.
The offer letters with each of Messrs. Liner and Koubek provide that in the event of a termination without cause by DMS, Mr. Liner (for six months) and Mr. Koubek (for one year) would be entitled to (i) continued payment of their respective base salary, and (ii) payment of DMS portion of the premium for healthcare continuation coverage under COBRA at the same level of coverage they were entitled to at the time of termination of employment. In the event Mr. Koubek is terminated as a result of a change in control of DMS, the base salary component of his severance entitlement will become payable in a lump sum upon the change in control, provided that the executive executes a general release of claims.
Cause means: (i) the executives violation of Companys current documented policies; (ii) the executives failure to substantially perform the executives duties under this Agreement; (iii) the executives failure to reasonably cooperate with any lawful investigation undertaken by the Company; (iv) the executives gross negligence or breach of fiduciary duty or (v) any (A) conviction of the executive under any local, state, provincial or federal statute which makes the performance of the executives duties impracticable or impossible, (B) arrest of the executive for any criminal offense against the Company or its personnel, affiliates, or customers, or (C) arrest of the executive for any other felony criminal offense which in the view of the
Company may harm the reputation of the Company or any of its affiliates; (vi) any intentional misconduct, gross incompetence or conduct materially incompatible with the Employees duties hereunder, or prejudicial to the Companys business; or (vii) gross insubordination or willful disobedience to the lawful directions of management of the Company, provided that the executive has been given written notice thereof and has failed to correct such conduct forthwith.
Treatment of Unvested Equity Awards of Our Named Executive Officers
### Termination Without Cause.
Pursuant to the RSU and option award agreements, a pro rata portion of the RSUs and options subject to the award agreements will vest upon termination of the Named Executive Officers employment without cause, provided that the executive executes a general release of claims.
The pro rata number of RSUs and options that will vest will be equal to the number of RSUs and options that are scheduled to vest on the next applicable vesting date, multiplied by the quotient of the number of full calendar months the executive was employed following July 16, 2020 divided by twelve.
### Death or Disability.
Pursuant to the RSU and option award agreements, a pro rata portion of the RSUs and options subject to the award agreements will vest upon the Named Executive Officers death or disability. The pro rata number of RSUs and options that will vest will be equal to the number of RSUs and options that are scheduled to vest on the next applicable vesting date.
Termination Following a Change of Control.
Pursuant to the RSU and option award agreements, if the Named Executive Officers employment is terminated without cause within twenty-four months following a change of control, all RSUs and options will immediately vest, provided that the executive executes a general release of claims.
The following table sets forth information with respect to our Named Executive Officers concerning unexercised stock option awards and unvested RSU awards as of December 31, 2020.
1.
The options and RSUs vest in three equal annual installments beginning on the first anniversary of the closing of the Business Combination, subject, in each case, to the executives continued employment on each applicable vesting date.
2.
The dollar values are calculated using a per share stock price of $12.04, the closing price of our common stock reported on NYSE on December 31, 2020.
In 2020, our Board of Directors approved the following yearly cash compensation for non-employee directors.
In October 2020, the Board of Directors approved a grant of 13,000 RSUs to each of the non-employee directors, which will vest on the date of the 2021 annual stockholder meeting, June 24, 2021.
2020 Director Compensation
The following table lists the compensation paid to our non-employee directors during 2020:
1.
In addition to serving as a director, Mr. Marinucci serves as our Chief Executive Officer and his compensation is reflected in the Summary Compensation Table. Mr. Borghese serves as our Chief Operating Officer. Messrs. Marinucci and Borghese do not receive any compensation for serving as directors.
Accordingly, they are omitted from the table.
2.
Represents the full grant date fair value of RSUs granted in 2020, calculated in accordance with FASB ASC Topic 718. We value RSUs using the closing market price of our common stock reported on NYSE on the applicable grant date. All RSUs vest on the 2021 annual meeting of stockholders, provided the director remains in continuous service with the Company through such date. For additional valuation assumptions, see Note 12 to our Consolidated Financial Statements for the fiscal year ended December 31, 2020.
Outstanding Equity Awards of Directors at Fiscal Year End
The following table lists the number of outstanding RSU awards and held by our non-employee directors as of December 31, 2020. The reported numbers reflect only grants made by the Company and do not include any other shares of our common stock that a director may have acquired on the open market.
ITEM 12.
The following table sets forth information known to us regarding the beneficial ownership of shares of Common Stock as of the close of business on March 15, 2021 by: each person who is known to be the beneficial owner of more than 5% of the outstanding shares of any class of DMS Common Stock;
Unless otherwise indicated, we believe that all persons named in the table below have or will have as of March 8, 2020, as applicable, sole voting and investment power with respect to the voting securities beneficially owned by them.
*
Less than one percent
(1)
Unless otherwise noted, the business address of each of the following entities or individuals is c/o Digital Media Solutions, Inc., 4800 140th Avenue N., Suite 101, Clearwater, FL 33762.
(2)
1 to the Schedule 13G/A filed with the SEC on February 16, 2021. The Schedule 13G/A indicates 3,012,718 shares of Class A Common Stock and warrants to purchase 2,000,000 shares of Class A Common Stock are owned by Leo Investors Limited Partnership. Leo Investors Limited Partnership is controlled by its general partner, Leo Investors General Partner Limited, which is governed by a three member board of directors. Each director has one vote, and the approval of a majority of the directors is required to approve an action of the Companys sponsor. Under the so-called rule of three, if voting and dispositive decisions regarding an entitys securities are made by two or more individuals, and a voting and dispositive decision requires the approval of a majority of those individuals, then none of the individuals is deemed a beneficial owner of the entitys securities. This is the situation with regard to the Companys sponsor. Based on the foregoing analysis, no individual director of the general partner of Leo Investors Limited Partnership exercises voting or dispositive control over any of the securities held by Leo Investors Limited Partnership, even those in which such director directly holds a pecuniary interest. The business address of Leo Investors Limited Partnership is 21 Grosvenor Place, London, SW1X 7HF.
(3)
Based on information set forth in the Schedule 13G filed with the SEC on February 16, 2021 by Lion Capital (Guernse) Bridgeco Ltd. The address of the principal business office of Lion Capital (Guernsey) Bridgeco Limited is Trafalgar Court, Les Banques, St Peter Port, Guernsey.
(4)
2 to the Schedule 13D filed with the SEC on October 26, 2020. The Schedule 13D/A indicates Prism Data, LLC has shared voting power over the shares of Class A Common Stock and warrants to purchase shares of Class A Common Stock held by Clairvest Group Inc. (as described in footnote (5)) as a result of the Director Nomination Agreement. Joseph Marinucci, as the manager of Prism Data, LLC, is deemed to have beneficial ownership over the interests shown. The Schedule 13D/A also indicates that Joseph Marinucci holds 538,912 warrants to purchase shares of Class A Common Stock. Joseph Marinucci also owns directly 1,500 shares of Class A Common Stock.
(5)
1 to the Schedule 13D/A filed with the SEC on October 26, 2020. Interests shown consist of (i) shares of Class A Common Stock held by Clairvest Equity Partners V Limited Partnership and CEP V Co-Investment Limited Partnership, (ii) shares of Class B Common Stock acquired held by CEP V-A DMS AIV and (iii) warrants to purchase shares of Class A Common Stock held by CEP V-A DMS AIV Limited Partnership, Clairvest Equity Partners V Limited Partnership and CEP V Co-Investment Limited Partnership. Each of the foregoing limited partnerships has the power to make voting and dispositive decisions with respect to such shares and is an indirect subsidiary of Clairvest Group Inc. Interests shown also consist of the shares of Class B Common Stock held by Prism Data, LLC (as described in footnote (4)) over which Clairvest Group Inc. has shared voting power as a result of the Director Nomination Agreement. The business address of Clairvest Group Inc. and each of the foregoing limited partnerships is 22 St. Clair Avenue East, Suite 1700, Toronto, Ontario, Canada M4T 2S3.
(6)
Interests shown are based on such individuals ownership interests in Prism Data, LLC. Fernando Borghese also owns directly 538,911 warrants to purchase shares of Class A Common Stock.
(7)
The business address of Mr. Darwent is 21 Grosvenor Place, London, SW1X 7HF.
(8)
Based on the Schedule 13G filed with the SEC on February 16, 2021. Interests consist of shares of Class A Common Stock beneficially owned by Lion Capital Fund IV, L.P., Lion Capital Fund IV-A, L.P., Lion Capital Fund IV (USD), L.P., Lion Capital Fund IV-A (USD), L.P., Lion Capital Fund IV SBS, L.P., and Lion Capital Fund IV SBS (USD), L.P., each of which is managed by Lion Capital IV GP Limited, which is controlled by Lyndon Lea. The business address of Lyndon Lea is<|endoftext|>Or contributions.
### Dividend Equivalents.
The CNG Committee determines whether dividend equivalent rights will be conditioned upon the vesting or payment of the grant to which they relate and the other terms and conditions of the grant.
Other Stock-Based or Cash-Based Awards
Under the 2013 Plan, the CNG Committee may grant other types of equity-based, equity-related or cash-based awards subject to such terms and conditions that the CNG Committee may determine. Such awards may include the grant or offer for sale of unrestricted shares of our common stock, performance share awards, and performance units settled in cash.
### Other Performance Awards
Under the 2013 Plan, the CNG Committee may provide that the grant, vesting or settlement of an award granted under the 2013 Plan is subject to the attainment of one or more performance goals. The CNG Committee has the authority to establish any performance objectives to be achieved during the applicable performance period when granting performance awards.
Termination of Employment.
The impact of a termination of employment on an outstanding award granted under the 2013 Plan, if any, will be set forth in the applicable award agreement.
Treatment of Outstanding Equity Awards following a Change in Control.
The 2013 Plan provides that, unless otherwise set forth in an award agreement, in the event of a change in control (as defined in the 2013 Plan), (i) any stock option or SAR will become fully exercisable and vested, (ii) the restrictions on any restricted stock will lapse and the shares will vest and become transferable, (iii) all restricted stock units will be considered earned and payable in full and any restrictions will lapse, and (iv) any performance-based awards will be deemed earned and payable in full, with the applicable performance goals to be deemed achieved at the greater of target or actual performance through the date of the change in control. The CNG Committee may also make additional adjustments and/or settlements of outstanding equity awards as it deems appropriate and consistent with the purposes of the 2013 Plan.
A change in control is generally deemed to occur under the 2013 Plan upon:
(a) The acquisition in a transaction or series of transactions by any person of beneficial ownership of thirty percent (30%) or more of the combined voting power of the then outstanding shares of common stock of the Company; provided, however, the following acquisitions will not constitute a Change in Control: (A) any acquisition by the Company; (B) any acquisition of common stock of the Company by an underwriter holding securities of the Company in connection with a public offering thereof; and (C) any acquisition by any person pursuant to a transaction which complies with subsections (c) (i), (ii) and (iii), below;
(b) Individuals who, as of date of the an award agreement are members of the Board (the Incumbent Board), cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the election, or nomination for election by the Companys common shareholders, of any new director was approved by a vote of at least two- thirds of the Incumbent Board, such new director will, for purposes of the 2013 Plan, be considered as a member of the Incumbent Board; provided further, however, that no individual will be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened Election Contest (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board (a Proxy Contest) including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest;
(c) Consummation, following shareholder approval, of a reorganization, merger, or consolidation of the Company and/or its subsidiaries, or a sale or other disposition (whether by sale, taxable or non-taxable exchange, formation of a joint venture or otherwise) of fifty percent (50%) or more of the assets of the Company and/or its subsidiaries (each a business combination), unless, in each case, immediately following such business combination, (i) all or substantially all of the individuals and entities who were beneficial owners of shares of the common stock of the Company immediately prior to such business combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding shares of the entity resulting from the business combination or any direct or indirect parent corporation thereof (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Companys assets either directly or through one (1) or more subsidiaries)(the Successor Entity); (ii) no person (excluding any Successor entity or any employee benefit plan or related trust, of the Company or such Successor Entity) owns, directly or indirectly, thirty percent (30%) or more of the combined voting power of the then outstanding shares of common stock of the Successor Entity, except to the extent that such ownership existed prior to such business combination; and (iii) at least a majority of the members of the Board of Directors of the entity resulting from such business combination or any direct or indirect parent corporation thereof were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such business combination; or
(d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a business combination that complies with subsections (c)(i), (ii), and (iii) above.
### Amendment and Termination.
The 2013 Plan may be amended, altered, suspended, discontinued or terminated by our Board of Directors, but no amendment, alteration, suspension, discontinuation or termination may be made if it would materially impair the rights of a participant (or his or her beneficiary) without the participants (or beneficiarys) consent, except for any such amendment required to comply with law. The 2013 Plan may not be amended without stockholder approval to the extent such approval is required to comply with applicable law or the listing standards of the applicable exchange.
New Plan Benefits.
Awards under the 2013 Plan are made at the discretion of the CNG Committee. Therefore, the benefits or amounts that will be received by or allocated to each NEO, all current executive officers as a group, all directors who are not executive officers as a group, and all employees who are not executive officers as a group, under the 2013 Plan if the Amendment is approved by stockholders are not presently determinable.
Federal Income Tax Consequences Relating to Awards Granted pursuant to the 2013 Plan.
The following discussion summarizes certain federal income tax consequences of awards under the 2013 Plan. This discussion is based on current laws in effect on the date of this Report, which are subject to change (possibly retroactively). The summary does not purport to cover federal employment tax or other federal tax consequences that may be associated with the 2013 Plan, nor does it cover state, local or non-U.S. tax consequences. The tax treatment of participants in the 2013 Plan may vary depending on each participants particular situation and may, therefore, be subject to special rules not discussed below. Participants are advised to consult with a tax advisor concerning the specific tax consequences of participating in the 2013 Plan.
In general, a participant realizes no taxable income upon the grant or exercise of an incentive stock option (ISO). However, the exercise of an ISO may result in an alternative minimum tax liability to the participant. With certain exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the participant (and a deduction for us) equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain for which we are not entitled to a deduction. If the participant does not dispose of the shares until after the expiration of these one- and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss for which we are not entitled to a deduction.
In general, in the case of a nonqualified stock option, the participant has no taxable income at the time of grant but realizes ordinary income in connection with exercise of the option in an amount equal to the excess (at the time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price. A corresponding deduction is available to us. Any gain or loss recognized upon a subsequent sale or exchange of the shares is treated as capital gain or loss for which we are not entitled to a deduction.
Restricted Stock
Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, the participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award is granted. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the common stock as of that date, less any amount paid for the stock, and the Company will be allowed a corresponding tax deduction at that time. If the participant files an election under Section 83(b) of the Code within 30 days after the date of grant of the restricted stock, the participant will recognize ordinary income as of the date of grant equal to the fair market value of the common stock as of that date, less any amount the participant paid for the common stock, and the Company will be allowed a corresponding tax deduction at that time. Any future appreciation in the common stock will be taxable to the participant at capital gains rates. However, if the restricted stock award is later forfeited, the participant will not be able to recover the tax previously paid pursuant to his Section 83(b) election.
### Restricted Stock Units
A participant does not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock unit is granted. When the restricted stock units vest and are settled for cash or stock, the participant generally will be required to recognize as ordinary income an amount equal to the fair market value of the shares, or the amount of cash, delivered. Any gain or loss recognized upon a subsequent sale or exchange of the stock (if settled in stock) is treated as capital gain or loss for which the Company is not entitled to a deduction.
Section 162(m) of the Internal Revenue Code.
Under Section 162(m) of the Internal Revenue Code, or Revenue Code, the deduction for a publicly held corporation for otherwise deductible compensation to a covered employee (the chief executive officer, the chief financial officer and the next three most highly compensated executive officers is limited to $1 million per year. Prior to 2018, there were two exceptions to the deduction limit - the exception for performance-based pay (including stock options) and the exception for commission-based pay. However, the Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017, repealed these exceptions, placing an effective cap on the amount a company can deduct for executive compensation at $1 million-dollars for a companys CEO, CFO, and the next three most highly paid executives.
ITEM 12.
The following table sets forth information as of April9, 2021, concerning beneficial ownership of our Common Stock (i) by persons (other than depositories) known by us to own five percent (5%) or more of our outstanding Common Stock, (ii) by each of our directors or nominees, (iii) by each of our executive officers and the executive officers of the Bank, and (iv) by all current | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Us, we believe that all of the officers, directors, and owners of more than 10% of the outstanding shares of our common stock complied with Section 16(a) of the Exchange Act for the year ended December31, 2020.
### Code of Conduct
We have adopted a code of conduct for all employees, including the chief executive officer, principal financial officer and principal accounting officer or controller, and/or persons performing similar functions, which is available on our website, under the link [IDX]
Limitation of Liability of Directors and Indemnification of Directors and Officers
The Delaware General Corporation Law provides that corporations may include a provision in their certificate of incorporation relieving directors of monetary liability for breach of their fiduciary duty as directors, provided that such provision shall not eliminate or limit the liability of a director (i) for any breach of the directors 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) for unlawful payment of a dividend or unlawful stock purchase or redemption, or (iv) for any transaction from which the director derived an improper personal benefit. Our certificate of incorporation provides that directors are not liable to us or our stockholders for monetary damages for breach of their fiduciary duty as directors to the fullest extent permitted by Delaware law. In addition to the foregoing, our certificate of incorporation provides that we shall indemnify directors, officers, employees or agents to the fullest extent permitted by law and we have agreed to provide such indemnification to each of our executive officers and directors by way of written indemnification agreements.
The above provisions in our certificate of incorporation and bylaws and in the written indemnity agreements may have the effect of reducing the likelihood of derivative litigation against directors and may discourage or deter stockholders or management from bringing a lawsuit against directors for breach of their fiduciary duty, even though such an action, if successful, might otherwise have benefited us and our stockholders. However, we believe that the foregoing provisions are necessary to attract and retain qualified persons as directors.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted 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.
Item 11.
### Executive Compensation
Summary Compensation Table
The following table sets forth the compensation awarded to or earned by our chief executive officer and our two other highest paid executive officers for the years ended December 31, 2020 and 2019.
The dollar amounts in the Option Awards columns above reflect the values of options as of the grant date for the years ended December 31, 2020 and 2019, in accordance with ASC 718,
### Mattes Employment Agreement
We entered into an agreement with Mr. Mattes dated April 23, 2018. Mr.Mattes served as our President and Chief Executive Officer pursuant to that agreement until December 20, 2018, at which time we entered into a superseding agreement with Mr. Mattes described below. We paid Mr. Mattes at the rate of $25,000 per month under the April 2018 agreement. Mr. Mattes was also eligible to receive a bonus of up to $150,000 for calendar year 2018, based on performance parameters set by our Board. Mr. Mattes received his full $150,000 bonus for 2018. The April 2018 agreement contained customary provisions relating to intellectual property assignment, confidentiality and indemnification.
We have also entered into an executive employment agreement dated December 20, 2018 with Mr. Mattes, which became effective, and replaced and superseded the April 2018 agreement, upon the close of our initial public offering in October 2019. Pursuant to Mr. Mattes executive employment agreement, he continues to serve as our President and Chief Executive Officer. Pursuant to the December 2018 employment agreement, we agreed to pay Mr. Mattes at the rate of $33,333 per month commencing upon the close of the IPO, and on May 14, 2020 we amended Mr. Mattes employment agreement to increase his salary to $37,500 effective as of June 1, 2020. Mr. Mattes is also eligible to receive a bonus of up to 50% of his base salary, commencing with calendar year 2019, based on performance parameters set by our Board, and is also eligible for participation in our incentive compensation plans. Mr. Mattes received his full $200,000 bonus for 2019 and his full bonus of $225,000 for 2020. Mr. Mattes executive employment agreement entitles him to reasonable and customary health insurance and other benefits, at our expense, and a severance payment in the amount of 12 months of his base salary in the event of his termination by us without cause or his resignation for good reason, as such terms are defined in the executive employment agreement. Mr. Mattes executive employment agreement is an at will agreement subject to termination by either party at any time and for any reason.
In the first half of 2018, we granted Mr. Mattes options to purchase up to 200,000 shares of our common stock at an exercise price of $2.50 per share. The options vested and became exercisable on May 1, 2019. On September 26, 2018, we granted Mr. Mattes options to purchase up to an additional 413,023 shares of our common stock at an exercise price of $2.50 per share. Mattes, upon the close of our IPO, stock options that increased his beneficial ownership of our common stock, on a fully diluted basis after giving effect to the close of IPO and the conversion of our Series A preferred stock, to 5% of our then outstanding common stock. Mattes options to purchase 358,082 shares of our common stock at an exercise price of $5.00 per share. In August 2020, we granted Mr. Mattes options to purchase 152,000 shares of our common stock at an exercise price of $13.65 per share. Except as described above, all options granted to Mr. Mattes vest over a four-year period, with 25% of the options vesting on the one anniversary of grant and the balance vesting thereafter in 12 equal quarterly installments.
### Coleman Employment Agreement
From January 2018 to February 2019, Mr. Coleman was compensated for his services as our Chief Financial Officer at the hourly rate of $150 per hour. Effective as of February 15, 2019, we entered into an employment agreement with Mr. Coleman pursuant to which we have agreed to pay Mr. Coleman at the rate of $16,666 per month, which was amended as of December 1, 2019 to increase Mr. Colemans salary to $21,666 per month, and further amended on September 24, 2020 to increase Mr. Colemans salary to $25,000 per month. Mr. Coleman is eligible to receive a bonus of up to 30% of his base salary, commencing with calendar year 2019, based on performance parameters set by our Board, and is also eligible for participation in our incentive compensation plans. Mr. Coleman received his full bonus of $60,000 for 2019 and his full bonus of $90,000 for 2020. Mr. Colemans employment agreement entitles him to reasonable and customary health insurance and other benefits, at our expense. Mr. Colemans employment agreement is an at will agreement subject to termination by either party at any time and for any reason.
In connection with his employment agreement, we granted Mr. Coleman options to purchase up to 150,000 shares of our common stock at an exercise price of $2.50 per share. Coleman, upon the close of our IPO, stock options that increased his beneficial ownership of our common stock, on a fully diluted basis after giving effect to the close of IPO and the conversion of our SeriesA preferred stock, to 1.22% of our then outstanding common stock. Coleman options to purchase 77,883 shares of our common stock at an exercise price of $5.00 per share.
On December 20, 2019, we granted Mr. Coleman additional options to purchase 50,000 shares of our common stock at an exercise price of $5.16 per share. In August 2020, we granted Mr. Coleman options to purchase 40,000 shares of our common stock at an exercise price of $13.65 per share. All options granted to Mr. Coleman vest over a four-year period, with 25% of the options vesting on the one anniversary of grant and the balance vesting thereafter in 12 equal quarterly installments.
### Cano Employment Agreement
From December 2018 to September 2020, Mr. Cano was compensated for his services as our Director of Business Development at the rate of $250,000 per year. Effective as of September 24, 2020, we entered into an employment agreement with Mr. Cano pursuant to which we have agreed to pay Mr. Cano a base salary of $325,000, subject to an annual review by the Board. Mr. Cano will be eligible for a commission of 1% of net proceeds received by the Company, up to a maximum of $1,000,000 per calendar year, from sublicenses of patent rights, provided that with respect to any net proceeds from sublicenses for which the Company is obligated to pay a third-party a sales commission, Mr. Canos commission rate will be 0.5% of such net proceeds. Mr. Cano will also be eligible for an annual bonus of 20% of his base salary for meeting key performance requirements, quotas, and assigned objectives determined annually by the Board.
Cano is eligible to participate in all benefits, plans, and programs, which are now, or may hereafter be, available to other executive employees of the Company. Mr. Canos employment agreement contains standard provisions concerning noncompetition, nondisclosure and indemnification.
In the event Mr. Canos employment with the Company is terminated by the Company without cause, or Mr. Cano resigns for good reason, the Company shall pay Mr. Cano, in addition to all other amounts then due and payable, twelve (12) additional monthly installments of his base salary, less statutory deductions and withholdings.
In April 2019, we granted Mr. Cano options to purchase 8,500 shares of our common stock at an exercise price of $2.50 per share. In December 2019, we granted Mr. Cano additional options to purchase 30,000 shares of our common stock at an exercise price of $5.16 per share. In June 2020, we granted Mr. Cano options to purchase 30,000 shares of our common stock at an exercise price of $5.81 per share. In August 2020, we granted Mr. Cano options to purchase 10,000 shares of our common stock at an exercise price of $13.65 per share. In September 2020, we granted Mr. Cano options to purchase 78,500 shares of our common stock at an exercise price of $14.06 per share. All options granted to Mr. Cano vest over a four-year period, with 25% of the options vesting on the one anniversary of grant and the balance vesting thereafter in 12 equal quarterly installments.
Set forth below is information concerning the equity awards held by our named executive officers as of December 31, 2020.
Compensation of Directors
We do not compensate any of our executive directors for their service as a director. We have adopted a non-employee director compensation policy pursuant to which our non-employee directors receive a quarterly $8,750 cash retainer, plus an additional $1,250 per quarter for serving as a chairman of any committee of the Board. We also reimburse our independent directors for their reasonable expenses incurred in connection with attending meetings of our Board.
With regard to unexercisable options, 25% of the option award vests and first becomes exercisable on the first anniv1ersary of the date of grant, with the remaining 75% of the option award vesting in 12 equal quarterly installments thereafter.
Set forth below is a summary of the compensation we paid to our non-executive directors during the year ended December 31, 2020.
(1)
As of December 31, 2020, an entity affiliated with Dr. Fletcher held warrants and options to purchase 159,429 shares.
(2)
As of December<|endoftext|>Stock issuance created a debt discount totaling $210,581 which was fully amortized.
On August 27, 2019, the Company issued 3,600,000 shares of Class A Common Stock at a price of $1.04 per share. In conjunction with the common stock issuance, the Company issued warrants to purchase up to 3,600,000 shares of common stock at $.01 for each warrant in conjunction with its effective S-3/A Registration Statement. Net proceeds to the Company amounted to $3,409,600. Offering costs totaled $370,400, which has been recorded as a reduction of equity.
On October 11, 2019, the Company issued 70,328 shares of Class A Common Stock pursuant to prior stock purchase agreement dated May 30, 2019. The share price at issuance was $0.67.
On October 23, 2019, the Company issued 23,077 shares of Class A Common Stock pursuant to an agreement for public relations. The share price at issuance was $0.70.
On October 31, 2019, the Company issued 50,000 shares of Class A Common Stock pursuant to an agreement for investor relations. The share price at issuance was $0.74.
On April 1, 2020, the Company issued 600,000 shares of Class A Common Stock pursuant to a lender agreement. The share price at issuance was $1.07.
On May 8, 2020, the Company received 2,000,000 shares of Class A Common Stock pursuant to the agreement of Sale for the Empire Assets. The share price at return was $0.92.
On May 26, 2020, the Company issued 20,000 shares of Class A Common Stock pursuant to an agreement for investor relations. The share price at issuance was $0.94.
On June 11, 2020, the Company issued 10,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.17.
On July 6, 2020, the Company issued 40,000 shares of Class A Common Stock based upon a warrant exercise.
On July 6, 2020, the Company issued 20,000 shares of Class A Common Stock based upon a warrant exercise.
On July 6, 2020, the Company issued 100,000 shares of Class A Common Stock based upon a warrant exercise.
On July 7, 2020, the Company issued 50,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.31.
On July 24, 2020, the Company issued 40,000 shares of Class A Common Stock based upon a warrant exercise.
On July 24, 2020, the Company issued 29,900 shares of Class A Common Stock based upon a warrant exercise.
On September 9, 2020, the Company issued 2,054,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.30.
On September 18, 2020, the Company issued 22,714 shares of Class A Common Stock pursuant to a debt conversion. The share price at issuance was $1.61.
On October 7, 2020, the Company issued 71,160 shares of Class A Common Stock based upon a warrant exercise.
On October 7, 2020, the Company issued 1,162,209 shares of Class A Common Stock based upon a warrant exercise.
On October 7, 2020, the Company issued 75,000 shares of Class A Common Stock based upon a warrant exercise.
On October 7, 2020, the Company issued 83,000 shares of Class A Common Stock based upon a warrant exercise.
On October 7, 2020, the Company issued 50,000 shares of Class A Common Stock based upon a warrant exercise.
On October 8, 2020, the Company issued 72,895 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $2.12.
On October 5, 2020, the Company issued 15,000 shares of Class A Common Stock pursuant to an agreement for press relations. The share price at issuance was $1.60.
On October 9, 2020, the Company issued 30,303 shares of Class A Common Stock pursuant to an agreement for digital investor relations.
On October 9, 2020, the Company issued 10,000 shares of Class A Common Stock based upon a warrant exercise.
On October 9, 2020, the Company issued 30,000 shares of Class A Common Stock based upon a warrant exercise.
On October 9, 2020, the Company issued 25,000 shares of Class A Common Stock based upon a warrant exercise.
On October 19, 2020, the Company issued 80,000 shares of Class A Common Stock based upon a warrant exercise.
On October 19, 2020, the Company issued 25,000 shares of Class A Common Stock based upon a warrant exercise.
On October 20, 2020, the Company issued 45,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.64.
On October 21, 2020, the Company issued 27,628 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.58.
On December 8, 2020, the Company issued 8,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.98.
On December 10, 2020, the Company issued 23,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.86.
On December 14, 2020, the Company issued 60,000 shares of Class A Common Stock based upon a warrant exercise. The share price at issuance was $1.88.
On December 22, 2020, the Company issued 25,000 shares of Class A Common Stock pursuant a debt conversion.
On December 22, 2020, the Company issued 125,000 shares of Class A Common Stock pursuant a debt conversion.
On December 28, 2020, the Company issued 144,346 shares of Class A Common Stock pursuant a debt conversion.
On December 28, 2020, the Company issued 721,730 shares of Class A Common Stock pursuant a debt conversion.
### SERIES A PREFERRED STOCK
Our certificate of incorporation authorizes our board of directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series A Preferred stock, par value $0.0001 per share, covering up to an aggregate of 5,000,000 shares of Series A Preferred stock. The Series A Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the board of directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. Effective November 5, 2018, the eleven Series A Preferred holders elected to proportionally convert a total of 4,336,012 of the 4,817,792 total Series A Preferred stock outstanding into 14,453,373 common shares of the company, and as a result, 481,780 shares of Series A Preferred stock remained. On February 14, 2019, the remaining outstanding shares of Series A Preferred stock were converted into 1,509,070 common shares of the company.
Pursuant to the Series A Preferred Stock Designation, the holders of the Series A Preferred stock are entitled to three hundred thirty-three and one-third votes, on an as-converted basis, per each Series A Preferred share held of record on all matters to be voted upon by the stockholders. The holders of the Series A Preferred stock are not entitled to receive dividends.
The holders of the Series A Preferred stock are entitled to convert into common shares, at the holders discretion, at a rate of one Series A Preferred share for three and one-third common shares. Any fractional common shares created by the conversion is rounded to the nearest whole common share.
Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of the Series A Preferred stock shall be entitled to receive in preference to the holders of the Common Stock a per share amount equal to $1.65 per share.
### SERIES B PREFERRED STOCK
Our certificate of incorporation authorizes our Board of Directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series B Preferred stock, par value $0.001 per share, covering up to an aggregate of 20,000,000 shares of Series B Preferred stock. The Series B Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board of Directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights. As of December 31, 2020, and 2019, 0 shares of Series B Preferred stock are outstanding, respectively. The amount outstanding as of 2017 includes 850,000 shares of Series B Preferred stock issued to investors and 53,157 shares of Series B Preferred stock issued as part of the 8.0% annual dividend that is accrued and paid in-kind, as described below.
The holders of Series B Preferred shares are entitled to no voting rights until the holder converts any or all of their Series B Preferred shares to common shares. The holders of the Series B Preferred shall accrue and pay-in-kind with additional Series B Preferred stock a dividend based on an 8.0% annual percentage rate, compounded quarterly in arrears, for any Series B Preferred stock that is outstanding at the end of such prior quarter.
The holders of the Series B Preferred stock are entitled to convert into common shares, at the holders discretion, at a conversion price of Three Dollars Sixty Cents ($3.60) per share of common stock, subject to certain price adjustments found in the Series B Preferred stock purchase agreements.
Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of Series B Preferred shares shall have a liquidation preference to the common shares and Series A Preferred shares outstanding in the amount equal to the amount initially invested by the Series B Preferred holder in the Series B Preferred stock at the time of such investment minus the pro rata amount that has been converted into common stock or redeemed.
On November 7, 2018, all outstanding shares totaling 964,290 Series B preferred shares were converted into 267,859 common shares of the company in a cashless conversion.
### SERIES C PREFERRED STOCK
Our certificate of incorporation authorizes our Board of Directors, subject to any limitations prescribed by law, without further stockholder approval, to establish and to issue from time to time our Series C Preferred stock, par value $0.001 per share, covering up to an aggregate of 20,000,000 shares of Series C Preferred stock. The Series C Preferred stock will cover the number of shares and will have the powers, preferences, rights, qualifications, limitations and restrictions determined by the Board of Directors, which may include, among others, dividend rights, liquidation preferences, voting rights, conversion rights, preemptive rights and redemption rights.
The holders of Series C Preferred shares are entitled to vote on an as-converted basis of one share of Series C Preferred Stock voting for one vote of common stock. The holders of the Series C Preferred shall accrue and pay-in-kind with additional Series C Preferred stock a dividend based on an 10.0% annual percentage rate, compounded annually in arrears, for any Series C Preferred stock that is outstanding at the end of such prior year.
The holders of the Series C Preferred stock are entitled to convert into common shares, at the holders discretion, at a conversion price of Six Dollars ($6.00) per share of common stock, subject to certain price adjustments found in the Series C Preferred stock purchase agreements. Should the company complete an equity offering (including any offering convertible into equity of the Company) of greater than Five Million Dollars ($5,000,000) (the Underwritten Offering), then the Series C Preferred stock shall be automatically and without notice convertible into Common Stock of the company concurrently with the subsequent Underwritten Offering at the same per share offering price of the Underwritten Offering. If the Underwritten Offering occurs within twelve months of the issuance of the Series C Preferred stock to the holder, the annual dividend of 10.0% shall become immediately accrued to the balance of the Series C Preferred stock and converted into the Underwritten Offering.
Upon our liquidation, dissolution, distribution of assets or other winding up, the holders of Series C Preferred shares shall have a liquidation preference to the common shares at an amount equal to $1.00 | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Dividends declared on allocation interests to stockholders equity when they are approved by the Companys board of directors.
1847 HOLDINGS LLC
The 1,000 allocation shares are issued and outstanding and held by the Manager, which is controlled by Mr. Roberts, the Companys chief executive officer and controlling shareholder.
Series A Senior Convertible Preferred Shares
On September 30, 2020, the Company executed a certificate of designation to designate 3,157,895 of its shares as series A senior convertible preferred shares, which was amended on November 20, 2020. Following is a description of the rights of the series A senior convertible preferred shares.
### Dividends.
Dividends at the rate per annum of 14.0% of the stated value ($2.00 per share, subject to adjustment) shall accrue on the series A senior convertible preferred shares. Dividends shall be payable quarterly in arrears on each dividend payment date in cash or common shares at the Companys discretion. Dividends payable in common shares shall be calculated based on a price equal to eighty percent (80%) of the volume weighted average price (VWAP) for the common shares on the Companys principal trading market during the five (5) trading days immediately prior to the applicable dividend payment date.
Liquidation.
Subject to the rights of the Companys creditors and the holders of any senior securities or parity securities (in each case, as defined in the certificate of designation), upon any liquidation of the Company or its subsidiaries, before any payment or distribution of the assets of the Company (whether capital or surplus) shall be made to or set apart for the holders of securities that are junior to the series A senior convertible preferred shares as to the distribution of assets on any liquidation of the Company, each holder of outstanding series A senior convertible preferred shares shall be entitled to receive an amount of cash equal to 115% of the stated value plus an amount of cash equal to all accumulated accrued and unpaid dividends thereon (whether or not declared) to, but not including the date of final distribution to such holders. If, upon any liquidation of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the series A senior convertible preferred shares shall be insufficient to pay in full the preferential amount payable to the holders of the series A senior convertible preferred shares and liquidating payments on any other shares of any class or series of parity securities as to the distribution of assets on any liquidation of the Company, then such assets, or the proceeds thereof, shall be distributed among the holders of series A senior convertible preferred shares and any such other parity securities ratably in accordance with the respective amounts that would be payable on such series A senior convertible preferred shares and any such other parity securities if all amounts payable thereon were paid in full.
### Voting Rights
The series A senior convertible preferred shares do not have any voting rights; provided that, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of holders of a majority of series A senior convertible preferred shares, which majority must include Leonite so long as Leonite holds any series A senior convertible preferred shares (the Requisite Holders), voting as a separate class, shall be necessary for approving, effecting or validating any amendment, alteration or repeal of any of the provisions of the certificate of designation. In addition, so long as any series A senior convertible preferred shares are outstanding, the affirmative vote of the Requisite Holders shall be required prior to the Companys or Kyles creation or issuance of (i) any parity securities; (ii) any senior securities; and (iii) any new indebtedness other than intercompany indebtedness by Kyles in favor of the Company, except any financing transaction the use of proceeds of which the Company will use to redeem the series A senior convertible preferred shares and the warrants.
Conversion Rights
Each series A senior convertible preferred share, plus all accrued and unpaid dividends thereon, shall be convertible, at the option of the holder thereof, at any time and from time to time into such number of fully paid and nonassessable common shares determined by dividing the stated value, plus the value of the accrued, but unpaid, dividends thereon, by the conversion price of $2.00 per share; provided that in no event shall the holder of any series A senior convertible preferred shares be entitled to convert any number of series A senior convertible preferred shares that upon conversion the sum of (i) the number of common shares beneficially owned by the holder and its affiliates and (ii) the number of common shares issuable upon the conversion of the series A senior convertible preferred shares with respect to which the determination of this proviso is being made, would result in beneficial ownership by the holder and its affiliates of more than 4.99% of the then outstanding common shares of the Company. This limitation may be waived (up to a maximum of 9.99%) by the holder and in its sole discretion, upon not less than sixty-one (61) days prior notice to the Company.
1847 HOLDINGS LLC
Redemption
The Company may redeem in whole (but not in part) the series A senior convertible preferred shares by paying in cash therefore a sum equal to 115% of the stated value plus the amount of accrued and unpaid plus any other amounts due pursuant to the terms of the series A senior convertible preferred shares.
### Adjustments
In addition to standard adjustments to the conversion price in the event of any share splits, share combinations, share reclassifications, dividends paid in common shares, sales of substantially all of the Companys assets, mergers, consolidations or similar transactions, the certificate of designation contains a provision regarding adjustments to the dividend rate, stated value and conversion price as follows:
On the first day of the 12 th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by five percent (5.0%) per annum and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.
On the first day of the 24 th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding such date.
On the first day of the 36 th month following the issuance date of any series A senior convertible preferred shares, the stated dividend rate shall automatically increase by an additional five percent (5.0%) per annum, the stated value shall automatically increase by ten percent (10%) and the conversion price shall automatically adjust to the lower of the (i) initial conversion price and (ii) the price equal to the lowest VWAP of the ten (10) trading days immediately preceding the third adjustment date.
Notwithstanding the foregoing, the conversion price for purposes of the adjustments above shall not be adjusted to a number that is below $0.0075.
### Additional Equity Interest.
On the third adjustment date set forth above, the Company is required to cause Kyles to issue to the holders of series A senior convertible preferred shares, on a pro rata basis, a ten percent (10%) equity stake Kyles (the Additional Equity Interest). The Company is required to cause Kyles to grant to the holders of the series A senior convertible preferred shares upon the issuance to them of the Additional Equity Interest a right to receive an additional number of shares of common stock of Kyles if Kyles issues to any third party equity securities at a price below the acquisition price (as defined below). Such additional number of shares of common stock of Kyles to be issued in such instance shall be equal to a number of shares of common stock of Kyles which, when added to the number of shares of common stock of Kyles constituting the Additional Equity Interest, would be equal to the total number of shares of common stock which would have been issued to a holder of series A senior convertible preferred shares if the price per share of common stock of Kyles was equivalent to the price per equity security paid by such third party in Kyles. For purposes of this provision, acquisition price means the price per share of Kyles that was paid by the Company upon the acquisition of Kyles.
On September 30, 2020, the Company sold an aggregate of 2,189,835 units, at a price of $1.90 per unit, for aggregate gross proceeds of $4,160,684. In accordance with ASC 470, if debt or stock is issued with detachable warrants and/or stock, the guidance in ASC 470 requires that the proceeds be allocated to the instruments based on their relative fair values. The Company applied this guidance and recorded a deemed dividend of $2,874,478 as a result of a beneficial conversion feature. As the Company does not have any retained earnings this deemed dividend was netting against additional paid-in capital and the net accounting effect was none.
1847 HOLDINGS LLC
Common Shares
The Company is authorized to issue 500,000,000 common shares as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the Company had 4,444,013 and 3,165,625 common shares issued and outstanding, respectively. The common shares entitle the holder thereof to one vote per share on all matters coming before the shareholders of the Company for a vote.
On April 5, 2019, the Company issued 50,000 common shares to Leonite pursuant to the securities purchase agreement (see Note 13).
On May 4, 2020, the Company issued 100,000 common shares to Leonite upon conversion of $100,000 of the outstanding balance of the secured convertible promissory note resulting is a loss on conversion of debt of $175,000 (see Note 13).
On May 28, 2020, the Company issued 415,000 common shares, having a fair value of $1,037,500, to the Asiens Seller in connection with the Asiens Acquisition, which were subject to repurchase by 1847 Asien for a period of one year following the closing at a purchase price of $2.50 per share. These shares were repurchased by 1847 Asien on July 29, 2020. On August 28, 2020, 1847 Asien distributed these 415,000 shares to its stockholders, pro rata in accordance with their holdings. The Company, as the holder of 95% of the outstanding common stock of 1847 Asien, received 394,112 shares in connection with this distribution, which were then returned to the Companys treasury and cancelled (see Note 11).
On June 4, 2020, the Company issued 100,000 common shares to a service provider for services provided to the Company. The fair market value of the services amounted to $245,000.
On July 21, 2020, the Company issued 50,000 common shares to Leonite upon conversion of $50,000 of the outstanding balance of the secured convertible promissory note resulting is a loss on conversion of debt of $50,000 (see Note 13).
On September 2, 2020, the Company issued 180,000 common shares to Leonite upon exercise of its warrants (see Note 13).
The Company issued a total of 50,000 warrants to service providers for services provided to the Company. The fair market value of the services amounted to $87,550. On September 2, 2020, the warrants were exercised at $1.25 per warrant for proceeds of $62,500.
### Options
On May 11, 2020, the Company granted options to directors Paul A. Froning and Robert D. Barry to purchase 60,000 and 30,000 common shares, respectively, each at an exercise price of $2.50 per share. The options vested immediately on the date of grant and terminate on May 11, 2025.<|endoftext|>A document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investors account. This procedure requires the broker-dealer to: (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives;
FINRA sales practice requirements may also limit your ability to buy and sell our common stock, which could depress the price of our shares.
You may face significant restrictions on the resale of your shares due to state blue sky laws.
Each state has its own securities laws, often called blue sky laws, which (1)limit sales of securities to a states residents unless the securities are registered in that state or qualify for an exemption from registration, and (2)govern the reporting requirements for broker-dealers doing business directly or indirectly in the state. Before a security is sold in a state, there must be a registration in place to cover the transaction, or it must be exempt from registration. The applicable broker-dealer must also be registered in that state.
We do not know whether our securities will be registered or exempt from registration under the laws of any state. A determination regarding registration will be made by those broker-dealers, if any, who agree to serve as market makers for our common stock. We have not yet applied to have our securities registered in any state and will not do so until we receive expressions of interest from investors resident in specific states after they have viewed this Report. There may be significant state blue sky law restrictions on the ability of investors to sell, and on purchasers to buy, our securities. You should therefore consider the resale market for our common stock to be limited, as you may be unable to resell your shares without the significant expense of state registration or qualification.
Our management has determined that our disclosure controls and procedures are not effective and we have identified material weaknesses in our internal control over financial reporting.
In connection with the preparation of our financial statements for the fiscal years ended March 31, 2021 and 2020, our management concluded that our internal control over financial reporting was not effective and we identified several material weaknesses. In addition, as of March 31, 2021, our management concluded that our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting. The material weaknesses result from the following: (i) lack of proper segregation of duties and risk assessment process;
Each of the material weaknesses described above could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our annual or interim consolidated financial statements that would not be prevented or detected. We cannot assure you that any measures we may take in the future will be sufficient to remediate the material weaknesses described above or avoid potential future material weaknesses. If we are unable to report financial information timely and accurately or to maintain effective disclosure controls and procedures, our stock price could be negatively impacted and we could be subject to, among other things, regulatory or enforcement actions by the SEC.
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
We do not foresee paying cash dividends in the foreseeable future and, as a result, our investors sole source of gain, if any, will depend on capital appreciation, if any.
We do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their common stock at or above the price they paid for them.
The rights of the holders of common stock may be impaired by the potential issuance of preferred stock.
Our Board of Directors may, without stockholder approval, issue preferred stock with voting, dividend, conversion, liquidation or other rights that could adversely affect the voting power and equity interest of the holders of common stock. Preferred stock, which could be issued with the right to more than one vote per share, could be utilized as a method of discouraging, delaying or preventing a change of control. The possible impact on takeover attempts could adversely affect the price of our common stock. Although we have no present intention to issue any additional shares of preferred stock or to create any new series of preferred stock, we may issue such shares in the future.
You may experience additional dilution as a result of future equity offerings.
In order to raise additional capital, we have issued equity securities in the past and may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per unit in our previous equity offering. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions, may be lower than the price per share paid by investors in our previous equity offering.
Shares of our common stock that have not been registered under federal securities laws are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which apply to a former shell company.
Prior to the closing of the Share Exchange, we were deemed a shell company under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. Pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended (the Securities Act), sales of the securities of a former shell company, such as us, under that rule are not permitted (i) until at least 12 months have elapsed from the date on which our Current Report on Form 8-K reflecting our status as a non-shell company, was filed with the SEC; (ii) unless at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 8-K reports; or (iii) until the effectiveness of a registration statement under the Securities Act relating to our common stock. Therefore, unless we register such shares of common stock for sale under the Securities Act, most of our stockholders will be forced to hold their shares of our common stock for at least that 12-month period before they are eligible to sell those shares, and even after that period, sales may not be made under Rule 144 unless we and the selling stockholders are in compliance with other requirements of Rule 144. Further, it will be more difficult for us to raise funding to support our operations through the sale of debt or equity securities unless we agree to register such securities under the Securities Act, which could cause us to expend significant time and cash resources. Additionally, our previous status as a shell company could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future (although none are currently planned). The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of time than a non-former shell company could cause the market price of our securities to decline.
Item 1B.
Unresolved Staff Comments.
Not applicable.
Item 2.
### Description of Property.
Our principal executive office is located at Room 715, 7F, The Place Tower C, No. We also lease office space located at Room 1005, 10/F, Emperor Group Centre, 288, Hennessey Road, Wan Chai, Hong Kong, for a monthly rent of HKD23,000 (approximately US$2,963) under a lease starting from May 2021.
We do not lease or own any other properties. Our principal executive office is provided by Mr. Huihe Zheng free of charge.
Item 3.
### Legal Proceedings.
There are no pending legal proceedings to which the Company or its subsidiaries are a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of the Companys voting securities, or security holder is a party adverse to the Company or has a material interest adverse to the Company. We may from time to time be subject to legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion of our resources, including our managements time and attention.
Item 4.
Mine Safety Disclosures.
Not applicable.
### PART II
Item 5.
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
(a)
### Market Information
Our common stock is quoted on OTCQB Marketplace operated by the OTC Markets under the symbol QDMI. There has been limited trading in our shares of common stock. We cannot assure you that there will be an active market in the future for our common stock.
(b)
### Stockholders of Record
Based upon information furnished by our transfer agent, as of July 9, 2021, we had approximately 253 stockholders of record. Because some of our common stock is held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial stockholders.
(c)
### Dividends
We are permitted under the Florida law to provide funding to our subsidiaries, including YeeTah, through loans or capital contributions without restrictions on the amount of the funds. There are no restrictions or limitation on our ability to distribute earnings from our businesses, including subsidiaries, to the U.S. investors.
YeeTah is permitted under the laws of Hong Kong to provide funding to QDM HK and QDM BVI, the holding company incorporated in Hong Kong and the British Virgin Islands, respectively, through dividend distribution without restrictions on the amount of the funds. YeeTah currently intends to retain all available funds and future earnings, if any, for the operation and expansion of its business and does not anticipate declaring or paying any dividends in the foreseeable future. Any future determination related to our dividend policy will be made at the discretion of our board of directors after considering our financial condition, results of operations, capital requirements, contractual requirements, business prospects and other factors the board of directors deems relevant, and subject to the restrictions contained in | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The Board. Distributions are either in a lump sum or, based on the directors election made at the time of the deferral, in two- to 10-year installments. Once a distribution election is made, the election is irrevocable. Notwithstanding the foregoing, a participant may receive any amounts deferred by the participant in the event of an Unforeseeable Emergency as defined by the 2012 Plan.
ITEM 12.
The following table contains information about the number of our common shares that were beneficially owned on April 24, 2021, by each of our fivepercent holders, plus our directors, our named executive officers and our directors and executive officers as a group.
*
Represents less than 1.0% of the total number of common shares outstanding.
(1)
An address for each Director and Executive Officer listed is c/o MMA Capital Holdings, Inc., 3600 ODonnell Street, Suite600, Baltimore, MD 21224.
(2)
Amount of Beneficial Ownership andPercent of Classare based upon total amount of outstanding options and shares which could have been acquired as of March 1, 2021, or within 60days thereafter, pursuant to the exercise of vested stock options and/or the vesting of deferred/restricted shares.
(3)
Based on a Schedule 13G filed by Venator Management LLC on February12, 2021.
(4)
Amount includes deferred shares in lieu of fees for director services. As of March1, 2021, the number of deferred shares held by each director (in parenthesis) was: Puddester (53,070), Grant (16,756), Kay (9,953) and Kucera (642).
(5)
The shares shown include 250,000 shares owned directly by
Hunt Capital Holdings, LLC
(HCH)
, an indirect subsidiary of Hunt. Hunt is owned and controlled by members of the Hunt family and trusts for the benefit of the Hunt family. Mr. Hunt may be deemed to share voting and investment power with respect to the shares of common stock owned directly by HCH by virtue of being a member of the board of directors of Hunt and its CEO, President and Chief Investment Officer. Mr. Hunt disclaims beneficial ownership of the securities described in this footnote, except to the extent of his pecuniary interest therein.
ITEM 13.
In accordance with the Companys related party transaction policies, the Audit Committee has the responsibility to review any transactions between the Company and related persons, including the Companys directors and executive officers and their respective immediate family members.
A ny proposed transaction with a related party must be approved by a majority of the disinterested, independent members of the Audit Committee. If the counterparty is related to a member of the Audit Committee that member will recuse themselves from the vote.
Since January 1, 2017 there have been no material related party relationships or transactions to report, other than our relationship with Hunt as described below.
### Relationship to Hunt
On January 8, 2018, the Company entered into a series of material definitive agreements with affiliates of Hunt, in which the Company sold certain business lines and assets (the
Disposition
) to Hunt and entered into the Management Agreement with Hunt.
In connection with the Disposition all employees of the Company were hired by Hunt. In consideration for the external management services, the Company agreed to pay base and incentive management fees as described below under External Management Fees and Expense Reimbursement.
Details of the Management Agreement were previously disclosed in the Current Report filed on Form 8-K by the Company on January 9, 2018.
In addition, the terms of the agreements with Hunt granted Hunt the right to nominate a person to our Board. Hunt proposed James C. Hunt, its CEO, as its nominee. On January 24, 2018, the Company completed its board nominee vetting process and Mr. Hunt was granted non-voting observer status on our Board until Hunt completed its second share purchase as contemplated by such agreements. On June 26, 2018, Hunt completed its second share purchase and Mr. Hunt was elected to the Board as a Class II director. Mr. Hunt, due to his relationship with our External Manager, is not considered an independent director by the Board and is not eligible for compensation under the 2012 Plan.
The independent members of the Board, through the Audit Committee, will maintain oversight responsibility for transactions by and between the Company and affiliates of Hunt, including investment opportunities governed by our investment guidelines and Hunts allocation policy.
External Management Fees and Expense Reimbursements
In consideration for the management services being provided by the External Manager, the Company pays the External Manager a base management fee, which is payable quarterly in arrears in an amount equal to (i) 0.50% of the Companys first $500 million of GAAP Common Shareholders Equity; and (ii) 0.25% of the Companys GAAP Common Shareholders Equity in excess of $500 million. Additionally, the Company agreed to pay the External Manager an incentive fee equal to 20% of the total annual return of diluted common shareholders equity per share in excess of 7%, which excludes the effects of the Companys DTAs. The Company also agreed to reimburse the External Manager for certain allocable overhead costs including an allocable share of the costs of (i)noninvestment personnel of the External Manager and an affiliate thereof who spend all or a portion of their time managing the Companys operations and reporting as a public company (based on their time spent on these matters) and (ii)the CEO, or interim CEO, and CFO based on thepercentage of their time spent managing the Company. Reimbursement of compensation-related expenses is, however, subject to an annual cap of $2.5 million through 2019 and $3.5 million thereafter, until the Companys GAAP Common Shareholders Equity exceeds $500 million.
The current term of the Management Agreement extends to December 31, 2022 and automatically renews thereafter for additional two-year terms. Either the Company or the External Manager may, upon written notice, decline to renew or terminate the Management Agreement without cause, effective at the end of the initial term or any renewal term. If the Company declines to renew or terminates the Management Agreement without cause or the External Manager terminates for cause, the Company is required to pay a termination fee to the External Manager equal to three times the sum of the average annual base and incentive management fees, plus one times the sum of the average renewable energy business expense reimbursements and the employee cost reimbursement expense, in each case, during the prior two-year period. The Company may also terminate the Management Agreement for cause. No termination fee is payable upon a termination by the Company for cause or upon a termination by the External Manager without cause.
For the years ended December 31, 2020 and December 31, 2019, no incentive fee was earned by our External Manager. During the years ended December 31, 2020 and December 31, 2019, the Company recognized $8.3 million and $7.2 million, respectively, of management fees and expense reimbursements payable to our External Manager in its Consolidated Statements of Operations. At December 31, 2020 and December 31, 2019, $1.2 million of management fees and expense reimbursements was payable to the External Manager.
### Loans HFI and Investment in Partnerships
As consideration for the Disposition, Hunt agreed to pay the Company $57.0 million and to assume certain liabilities of the Company. The Company provided seller financing through a $57.0 million note receivable from Hunt that had an initial term of sevenyears, prepayable at any time and bearing interest at the rate of 5% per annum. On October 4, 2018, the Companys receivable from Hunt increased to $67.0 million as part of Hunts election to take assignment of the Companys agreements to acquire (i) the LIHTC business of Morrison Grove Management and (ii) certain assets pertaining to a specific LIHTC property from affiliates of Morrison Grove Management, LLC (these agreements are collectively referred hereinafter to as the
MGM Agreements
). On December 20, 2019, Hunt prepaid $13.4 million of the note receivable and as a result, the UPB of the note was $53.6 million at December 31, 2019. On January 3, 2020, the note receivable was fully repaid.
During the year ended December 31, 2019, the Company recognized $3.3 million of interest income associated with this note receivable in the Consolidated Statements of Operations. At December 31, 2019, $0.7 million of accrued interest was payable by Hunt.
On April 1, 2019, the Company purchased Hunts 30% ownership interest in Solar Development Lending, LLC (
SDL
) that pertained to an investment in a specific loan for $11.3 million, which represents the price that was projected to cause the Company and Hunt to achieve the same internal rate of return (
IRR
) on the amount of capital each had invested in the loan for the period of time that each party was invested in the loan. In this regard, upon full repayment of the loan, a post-purchase true-up payment may have been required to be made by one party to the other depending upon the actual IRR achieved by each party on the investment. Due to continuing involvement by Hunt as the transferor, the transfer did not qualify as a purchase for reporting purposes and, as a result, cash consideration paid by the Company was reported as a loan receivable that is secured by the interest in SDL that Hunt conveyed to the Company. On December 20, 2019, the Company and Hunt terminated all obligations relating to the post-purchase true-up payment and, as a result, the Company derecognized this loan receivable and increased its investment in partnership in SDL.
On December 20, 2019, the Company sold to Hunt a loan and three limited partner interests in partnerships that own affordable housing and in which our ownership interest ranged from 74.25% to 74.92%. This loan had a UPB and carrying value of $1.1 million and $0.3 million, respectively, while the three limited partner interests had a carrying value of $0.9 million at the time of sale. The Company received $3.1 million in sales proceed and recognized $1.9 million of gains in the Consolidated Statements of Operations.
### Investment in Debt Securities
On April 25, 2019, the Company received $13.1 million of net proceeds from the sale of an affordable housing property that secured one of the Companys non-performing bond investments. Hunt, as bond servicing agent, waived $0.9 million of servicing fees that were otherwise due and payable in priority to the Companys bond investment.As a result, the Company received $0.9 million of additional bond redemption proceeds that we otherwise would not have received.
ITEM 14.
KPMG is the independent registered public accounting firm that has audited our financial statements since 2007.
Audit and Audit-Related Fees
The Audit Committee is responsible for retaining and terminating the Companys independent registered public accounting firm and for pre-approving the performance of any services by the independent registered public accounting firm. In addition, the Audit Committee is responsible for monitoring the independence and performance of the Companys independent registered public accounting firm and internal audit function and for presenting its conclusions with respect to the independent registered public accounting firm to the full Board.
The Audit Committee has written policies and procedures regarding pre-approval of services to the Company by its principal independent registered public accountants. Its policy is to pre-approve all auditing services and non-audit services (subject to de minimis exceptions). All of the audit, audit-related, tax and other services for which we were billed by our principal independent public accounting firm for 2020 and 2019 were approved by the Audit Committee.
Audit and Audit-Related Fees
The audit fees and other fees billed by our independent registered public accounting firm, KPMG, for work performed during 2020 and 2019 are as follows:
PART IV
ITEM 15.
(3)Exhibit Index<|endoftext|>And incentive fees embedded in gains (losses) from trading companies owned by Frontier Diversified Fund was $27,253.
Four of the six sectors traded in the Frontier Diversified Fund were profitable in Q4 2020.
Metals were positive year-to-date (YTD) while Currencies, Energies, Agriculturals, Interest Rates and Stock Indices were negative YTD.
In terms of major CTA performance, six of the eight major CTAs in the Frontier Diversified Fund were profitable in Q4 2020. Aspect, Fort, H2O, QIM, Quest and Welton finished positive for the quarter. In terms of YTD performance Doherty, Quest and Welton were positive YTD while Aspect, Crabel, Emil Van Essen, Fort, H2O, John Locke and QIM were negative YTD.
The Frontier Long/Short Commodity Fund Class 2 NAV gained 5.38% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3 NAV gained 5.33% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 1a NAV lost 1.63% for the twelve months ended December 31, 2020, net of fees and expenses
; the Frontier Long/Short Commodity Fund Class 2a NAV gained 5.20% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3a NAV gained 5.52% for the twelve months ended December 31, 2020, net of fees and expenses.
For the twelve months ended December 31, 2020, the Frontier Long/Short Commodity Fund recorded net gain on investments of $98,339, net investment loss of $29,362, and total expenses of $33,372, resulting in a net increase in owners capital from operations attributable to controlling interests of $68,977. The NAV per Unit, Class 2, increased from $81.60 at December 31, 2019, to $85.99 as of December 31, 2020. The NAV per Unit, Class 3, increased from $85.64 at December 31, 2019, to $90.21 as of December 31, 2020. The NAV per Unit, Class 1a, decreased from $44.20 at December 31, 2019, to $0 as of December 31, 2020.
The NAV per Unit, Class 2a, increased from $52.55 at December 31, 2019, to $55.29 as of December 31, 2020. The NAV per Unit, Class 3a, increased from $55.31 at December 31, 2019, to $58.38 as of December 31, 2020. Total Class 2 subscriptions and redemptions for the twelve months were $0 and $8,467, respectively. Total Class 3 subscriptions and redemptions for the twelve months were $0 and $66,892, respectively. Total Class 1a subscriptions and redemptions for the twelve months were $0 and $11,267
, respectively. Total Class 2a subscriptions and redemptions for the twelve months were $0 and $1,193, respectively. Total Class 3a subscriptions and redemptions for the twelve months were $0 and $13,411, respectively. There were inter-class transfers of $11,267 from Class 1a to Class 3a for the period. Ending capital at December 31, 2020, is $34,273 for Class 2, $976,771 for Class 3, $0 for Class 1a, $84,857 for Class 2a and $217,402 for Class 3a.
During the periods covered by this report, the Frontier Long/Short Commodity Fund invested in one or more swaps.The swap owned by the Frontier Long/Short Commodity Fund was terminated effective December 21, 2020.
The management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps was 1.50% per annum of notional assets.The incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps was 25% of new net trading profits on a monthly or quarterly basis.
During the periods covered by this report, the management fee embedded in swaps owned by Frontier Long/Short Commodity Fund was 1.50% per annum, and the managing owner waived the entire management fee due to it from those Series in respect of such Series investment in swaps.
Based on an analysis of the management fees charged toFrontier Long/Short Commodity Fund, the effective management fee rate of the Series was lower than the management fee rate otherwise payable to the Managing Owner for the year ended December 31, 2020. For the period ended December 31, 2020, the effective management fee rate ofFrontier Long/Short Commodity Fundwas 1.83%, compared to a management fee payable to the Managing Owner of 2.00%. For the year ended December 31, 2020, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Long/Short Commodity Fund was $57,039.
Sector Attribution for the Frontier Long/Short Commodit y Fund
All of the seven sectors traded in the Frontier Long/Short Commodity Fund were profitable in Q4 2020. Energies, Base Metals, Grains, Meats, Precious Metals, Softs and Financials finished positive for the quarter. There were no negative sectors for the quarter.
Energies, Base Metals, Grains, Meats, Precious Metals and Financials were positive YTD. Softs were negative YTD.
In terms of major CTA performance, Rosetta and Welton finished positive for the quarter while JE Moody was negative for the quarter.
In terms of YTD performance, JE Moody and Welton were positive YTD while Emil Van Essen and Rosetta were negative YTD.
### Frontier Masters Fund
The Frontier Masters Fund Class 1 NAV lost 23.66% for the twelve months ended December 31, 2020, net of fees and expenses, the Frontier Masters Fund Class 2 NAV lost 22.53% for the twelve months ended December 31, 2020, net of fees and expenses, the Frontier Masters Fund Class 3 NAV lost 22.33% for the twelve months ended December 31, 2020, net of fees and expenses.
For the twelve months ended December 31, 2020 the Frontier Masters Fund recorded a net loss on investments of $360,534, net investment loss of $102,581, and total expenses of $105,057, resulting in a net decrease in owners capital from operations attributable to controlling interests of $463,115. The NAV per Unit, Class 1, decreased from $72.28 at December 31, 2019, to $55.18 as of December 31, 2020. The NAV per Unit, Class 2, decreased from $87.18 at December 31, 2019, to $67.54 as of December 31, 2020. The NAV per Unit, Class 3 decreased from $81.78 at December 31, 2019 to $63.52 as of December 31, 2020. Total Class 1 subscriptions and redemptions for the twelve months were $0 and $0, respectively. Total Class 2 subscriptions and redemptions for the twelve months were $0 and $383,278, respectively. Total Class 3 subscriptions and redemptions for the twelve months were $0 and $398,119, respectively. Ending capital at December 31, 2020, was $9,740 for Class 1, $263,938 for Class 2 and $719,849 for Class 3.
Four of the six sectors traded in the Frontier Masters Fund were profitable in Q4 2020.
Interest Rates were positive YTDwhile Metals, Currencies, Agriculturals, Energies and Stock Indices were negative.
In terms of major CTA performance, Aspect and Welton finished positive for the quarter while John Locke was negative during the quarter. In terms of YTD performance, Welton was positive while Aspect, Doherty, Emil Van Essen, John Locke and Transtrend were negative YTD.
### Frontier Balanced Fund
The Frontier Balanced Fund Class 1 NAV lost 31.82% for the twelve months ended December 31, 2020, net of fees and expenses; The Frontier Balanced Fund Class 1AP NAV lost 29.75% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Balanced Fund Class 2 NAV lost 29.75% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Balanced Fund Class 2a NAV lost 29.71% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Balanced Fund Class 3a NAV lost 29.71% for the twelve months ended December 31, 2020, net of fees and expenses.
For the twelve months ended December 31, 2020, the Frontier Balanced Fund recorded net loss on investments of $5,914,548, net investment loss of $951,500, and total expenses of $957,961, resulting in a net decrease in owners capital from operations attributable to controlling interests of $6,866,047. The NAV per Unit, Class 1, decreased from $117.23 at December 31, 2019, to $79.93 as of December 31, 2020. The NAV per Unit, Class 1AP, decreased from $137.81 at December 31, 2019, to $96.81 as of December 31, 2020. The NAV per Unit, Class 2, decreased from $185.82 at December 31, 2019, to $130.54 as of December 31, 2020. For Class 2a, the NAV per Unit decreased from $161.04 at December 31, 2019, to $113.20 as of December 31, 2020. For Class 3a, the NAV per Unit decreased from $160.50 at December 31, 2019, to $112.81 as of December 31, 2020. Total Class 1 subscriptions and redemptions for the twelve months were $0 and $2,911,348, respectively. Total Class 1AP subscriptions and redemptions for the twelve months were $0 and $54,192, respectively. Total Class 2 subscriptions and redemptions for the twelve months were $0 and $400,453, respectively. Total Class 2a subscriptions and redemptions for the twelve months were $0 and $29,800, respectively. Total Class 3a subscriptions and redemptions for the twelve months were $0 and $121,641, respectively. Ending capital at December 31, 2020, was $9,430,532 for Class 1, $108,053 for Class 1 AP, $1,958,169 for Class 2, $106,377 for Class 2a and $507,148 for Class 3a
During the periods covered by this report, the Frontier Balanced Fund invested in one or more swaps.The swap owned by the Frontier Balanced Fund was terminated effective December 21, 2020.
During the periods covered by this report, the management fee embedded in swaps owned by Frontier Balanced Fund was 1.00% per annum, and the managing owner waived the entire management fee due to it from those Series in respect of such Series investment in swaps.
Based on an analysis of the management fees charged toFrontier Balanced Fund, the effective management fee rate of the Series was higher than the management fee rate otherwise payable to the Managing Owner for the year ended December 31, 2020. For the period ended December 31, 2020, the effective management fee rate ofFrontier Balanced Fundwas 0.56%, compared to a management fee payable to the Managing Owner of 0.56%. For the year ended December 31, 2020, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Balanced Fund was $62,086.
Four of the six sectors traded in the Frontier Balanced Fund were profitable in Q4 2020.
Metals, Energies and Agriculturals were positive YTD while Currencies, Interest Rates and Stock Indices were negative YTD.
In terms of major CTA performance, Aspect, Fort, H2O, QIM, Welton and Wimmer Horizon finished positive for the quarter. Welton and Wimmer Horizon were positive YTD while Aspect, Crabel, Doherty, Emil Van Essen, Fort, H2O, John Locke and QIM were negative YTD.
### Frontier Select Fund
The Frontier Select Fund Class 1 NAV lost 12.03% for the twelve months ended December 31, 2020, net of fees and expenses; The Frontier Select Fund Class 1AP NAV lost 9.58% for the twelve months ended December 31, 2020, net of fees and expenses; the Frontier Select Fund Class 2 NAV lost 9.37% for the twelve months ended December 31, 2020, net of fees and expenses.
For the twelve months ended December 31, 2020, the Frontier Select Fund recorded net loss on investments of $181,731, net investment loss of $115,903, and total expenses of $115,903, resulting in a net decrease in owners capital from operations attributable to controlling interests of $297,634. The NAV per Unit, Class 1, decreased from $66.56 at December 31, 2019, to $58.55 as of December 31, 2020. The NAV per Unit, Class 1AP, decreased from $78.51 at December 31, 2019, to $70.99 as of December 31, 2020. The NAV per Unit, Class 2, decreased from $103.94 at December 31, 2019, to $94.20 as of December 31, 2020. Total Class 1 subscriptions and redemptions for the twelve months ended December 31, 2020, were $0 and $850,467, respectively. Total Class 1AP subscriptions and redemptions for the twelve months ended December 31, 2020, were $0 and $0, respectively. Total Class 2 subscriptions and redemptions for the twelve months ended December 31, 2020, were $0 and $15,398, respectively. Ending capital, at December 31, 2020, was $1,575,328 for Class 1, $9,821 for Class 1AP, and $67,979 | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Benefits, rent and utilities (Qualifying Expenses). Not more than 25 percent of the PPP Loan may be used for non-payroll costs. The Company believes that it used the proceeds of the PPP Loan for Qualifying Expenses in accordance with the terms of the PPP Loan. The Company submitted an application for forgiveness of the loan in December 2020. However, no assurance is provided that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part. If the loan is forgiven in part or in whole, the Company will reduce the liability by the amount forgiven and record a gain on extinguishment in the consolidated statements of operations. The carrying value of the PPP Loan is $8,139 as of December 31, 2020.
As part of the July 23, 2020 acquisition (see Note 11), the Company assumed a loan pursuant to the Paycheck Protection Program for the amount of $398. The loan has a maturity date of April 10, 2022 and a fixed interest rate of 1%. The loan was forgiven by the SBA in the fourth quarter of 2020.
In July 2020, the Company entered into convertible loan agreement with Cantor Fitzgerald Securities in the amount of $10,000 with the proceeds of the loan to be received upon completion of the Companys 2019 financial statement audit. This convertible loan agreement was amended in August 2020, to provide for the funding of $5,000 of the loan into a restricted cash account. Upon completion of the Companys 2019 financial statement audit, an additional $5,000 of loan proceeds was received in October 2020 in addition to the release of the $5,000 loan proceeds held in a restricted cash account.
The loan included a final payment fee equal to 20% of the loan proceeds which was reflected as a discount on the loan and was accreted to interest expense using the effective interest method over the term of the loan. The proceeds from the convertible loan agreement together, with the final payment fee and the accrued interest were paid in full upon the Merger. The loan accrued 12% interest per annum until the loan was repaid upon the Merger.
At the time of the Merger, Cantor Fitzgerald Securities had the right to elect to receive PTAC Common Shares in lieu of repayment of all or a portion of the loan proceeds, final payment fee and accrued interest. Cantor Fitzgerald Securities chose to receive full payment in cash rather than in PTAC Common Shares.
Upon completion of the Merger on December 23, 2020, the loan was paid off in full in the amount of $12,063, which included $10,000 principal balance, $2,000 final payment fee, and $63 of accrued interest. As a result of the merger, a contingent beneficial conversion feature became exercisable. The commitment date intrinsic value of $564 reduced the carrying value of the loan and increased additional paid in capital. The debt holder did not exercise the
### PORCH GROUP, INC
beneficial conversion feature. Therefore, the amount paid to settle the debt was first allocated to the settlement-date intrinsic value of the beneficial conversion feature associated with the loan, resulting in a net decrease in additional paid in capital of $5,772. The remaining cash payment was allocated to extinguish the debt and interest payable, resulting in a gain on extinguishment of $5,047.
### Other Promissory Notes
In connection with an acquisition on November1, 2018, the Company issued term promissory notes payable to the sellers for an aggregate principal of $1,100 and an interest rate of 2.55% per annum. The outstanding principal balance, along with accrued interest, was payable on May 1, 2020. As of December 31, 2019, the promissory notes had a carrying amount $1,059. Upon completion of the Merger on December 23, 2020, the outstanding principal of $1,077 and unpaid interest of $4 were paid in full.
In connection with an acquisition on March14, 2017, the Company assumed a promissory note payable to a founder of the acquired entity who continued as an employee of the Company following the acquisition. The promissory note has an initial principal balance of $185 and an interest rate of 6% per annum. The outstanding principal, along with accrued interest, was payable on March 31, 2020. As of December 31, 2019, the promissory notes had a carrying amount $185. Upon completion of the Merger on December 23, 2020, the outstanding principal of $185 and unpaid interest of $75 were paid in full. No gain or loss on extinguishment resulted from the payoff of the promissory note.
On December19, 2019, the Company issued a promissory note for an aggregate principal of $3,000, with a stated interest rate of 3%. In connection with the issuance of this promissory note, the holder also received 403,101 warrants to purchase SeriesC redeemable convertible preferred stock of the Company. The grant date fair value of the warrants issued was $3,000, and was deducted from the face value of the bank loans and are accreted to interest expense using the effective interest method over the term of the note or until extinguishment of the related note. Upon occurrence of an Event of Default, the Holder may declare all outstanding obligations immediately payable in cash. Following the occurrence and during the continuance of an Event of Default, interest on the Noteshall automatically be increased to 25% per annum. On January1, 2020, there was an occurrence of default resulting in the default interest rate being effective starting on January1, 2020.
The note was amended in July 2020, which resolved the conditions of default. The amendment provides that the loan plus accrued interest would be repaid upon closing of the Merger, or within one year of the amendment, with a premium payment of $1,000. The Company also provided the holder an additional 51,502 warrants to purchase Series C redeemable convertible preferred stock in connection with the amendment. The amended loan was guaranteed by the CEO of the Company with an asset pledge agreement, which the Company accounted for as a capital contribution by the CEO and a debt discount at fair value. The interest rate and other key terms of the note were not changed.
The amendment was accounted for as an extinguishment of the original note, because the amended note was concluded to be substantially different than the original note. The Company recorded a loss on debt extinguishment of $2,532. The amended note was initially recorded at its fair value of $4,233. The fair value of the guarantee of $300 was deducted from the initial fair value of the amended note and is accreted to interest expense using the effective interest method over the term of the note or until extinguishment. As of December 31, 2019, the carrying value of promissory note is $37, and is included in current portion of long-term debt. Upon completion of the Merger on December 23, 2020, the loan was paid off in full in the amount of $4,424, which included $3,381 principal balance, $1,000 final payment fee, and $43 of accrued interest.
On February 11, 2020, the Company entered into a future receivables agreement, in which the Company received consideration of $2,000 and agreed to sell 10% of all of Companys future accounts receivable from the Companys
### PORCH GROUP, INC
customers until an amount ranging between $2,300 and $2,700, depending on timing of repayment, was delivered by or on behalf of Company to the lender. Prior to the required repayment date, the Company repaid $2,000 of principal and $700 of interest, resulting in a full payoff of the agreement and no remaining carrying value as of December 31, 2020.
In connection with an acquisition on November 2, 2020, the Company issued a promissory note payable to the founder of the acquired entity. The promissory note has an initial principal balance of $750 and a stated interest rate of 0.38% per annum. The promissory note shall be paid in five equal annual installments of $150 each, plus accrued interest commencing on January 21 st
, 2021. As of December 31, 2020, the promissory notes had a carrying amount $617.
### Note 7. Equity and Warrants
Shares Authorized
As of December 31, 2020, the Company had authorized a total of
410,000,000 shares for issuance with
400,000,000 shares designated as common stock, and
10,000,000 shares designated as preferred stock
Common Shares Outstanding and Common Stock Equivalents
The following table summarizes our fully diluted capital structure at December 31, 2020:
Total shares of common stock outstanding and reserved for future issuance does not include shares that may be issued in connection with the December 31, 2020 acquisition as discussed on Note 11.
### Warrants
PTAC Warrants
### PORCH GROUP, INC
The Company may call the public warrants for redemption (excluding the private warrants), in whole, at a price of
$0.01 per warrant: at any time while the public warrants are exercisable, upon not less than
30 days prior written notice of redemption to each public warrant holder, if, and only if, the last sale price common stock equals or exceeds
$18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any
20 trading days within a
-trading day period commencing once the warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders and, if and only if, there is a current registration statement in effect with respect to the issuance of the common stock underlying such warrants at the time of redemption and for the entire
-day trading period referred to above and continuing each day thereafter until the date of redemption.
If the private warrants are held by someone other than the initial purchasers or their permitted transferees, the private warrants will be redeemable by the Company and exercisable by such holders on the same basis as the public warrants. As of December 31, 2020,
5,700,000 private warrants were held by the initial purchases or their permitted transferees and are recorded as a liability on the Consolidated Balance Sheets.
See Note 15 for exercises of a portion of PTAC warrants subsequent to December 31, 2020.
### Legacy Porch Warrants
Redeemable convertible preferred stock warrants and common stock warrants that were issued prior to the Merger (Legacy Porch Warrants) were cancelled in exchange for 702,791 and 1,705,266 shares of common stock through net share settlement, respectively.
Detail related to Legacy Porch Warrant activity for theyear ended December31, 2020, is as follows:
### PORCH GROUP, INC
### Note 8. Stock-Based Compensation
2012 and 2020 Equity Incentive Plans
Legacy Porch.coms 2012 Equity Incentive Plan (the 2012 Plan) provides for the grant of incentive and non-statutory options, stock appreciation rights, restricted stock awards (RSA) and restricted stock units (RSU) to employees, directors and consultants of the Company (Service Providers), collectively referred to as Awards.
Each Legacy Porch.com option from the 2012 Plan that was outstanding immediately prior to the Merger and held by current employees or service providers, whether vested of unvested, was converted into an option to purchase a number of shares of common stock (each such option, an Exchanged Option equal to 0.4697 of Porch Group, Inc. common stock. Except as specifically provided in the Merger Agreement, following the Merger, each Exchanged Option will continue to be governed by the same terms and conditions (including vesting and exercisability terms) as were applicable to the corresponding former Legacy Porch.com option immediately prior to the consummation of the Merger. All stock option, RSA and RSU activity was retroactively restated to reflect the Exchanged Options.
On July 29, 2020, the board of directors approved the adoption of the Porch Group, Inc. 2020 Stock Incentive Plan (the 2020 Plan), subject to approval by Porch Group, Inc.s stockholders. On December 22, 2020, the Porch Group, Inc. stockholders voted in favor of adoption of the 2020 Plan.
The aggregate number of shares of common stock reserved for future issuance under the 2020 Plan is 11,137,824. The number of shares of common stock<|endoftext|>Trading days of the fiscal year). The Chairman will receive $300,000 in total, composed of $150,000 in cash and $150,000 in restricted stock. The chairs of the Audit Committee, the Compensation Committee and the Nominating and Governance Committee will receive additional cash payments of $20,000, $15,000 and $10,000, respectively. The restricted stock grants, which grants are subject to stockholder approval of the Omnibus Incentive Plan at the Annual Meeting, will vest one year after date of grant and the stock shall not be resold for at least 18 months following the closing of the business combination.
Compensation that deviates from these arrangements may be paid in the event of resignations, vacancies and other situations resulting in service for a partial fiscal year. As permitted by SEC and Nasdaq rules, directors of the Company who are not Audit Committee members may be paid additional fees and other compensation for services to the Company on special projects and other matters distinct from service on the Board or as a member of one or more of the Boards standing committees. The compensation payable to non-employee directors, like compensation payable to employees, may be revised from time to time by the Compensation Committee.
Item 12. Security Owne rship of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth information known to the Company regarding the beneficial ownership of our common stock as of October 1, 2021 by: each person known to the Company to be the beneficial owner of more than 5% of outstanding common stock;
A person is a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to direct the voting of the security, or investment power, which includes the power to dispose of or to direct the disposition of the security, or has the right to acquire such securities within 60 days.
Unless otherwise noted, the business address of each of the following entities or individuals is c/o Vintage Wine Estates, Inc., 937 Tahoe Boulevard, Suite 210, Incline Village, NV 89451.
A total of 60,461,611 shares of common stock were issued and outstanding as of October 1, 2021.
_______
(1) Patrick Roney shares voting power and dispositive power with his wife, Laura G. Roney, over the 6,516,072 shares owned by the Roney Trust. In his capacity as the Roney Representative (as defined in the Prospectus), Patrick Roney has voting power over all shares owned by the Specified Investors pursuant to and for the purposes specified in the investor rights agreement, including for the purpose of voting for the Roney Nominees. Mr. Roney disclaims beneficial ownership of all such shares except to the extent of his pecuniary interest therein.
(2) Mark W.B. Harms and Robert L. Berner III share voting and dispositive power over (i) the 6,000,000 shares and (ii) the 8,000,000 shares underlying the warrants owned by Bespoke Sponsor Capital LP (the Sponsor). The Sponsor also has voting power over all shares owned by the Specified Investors pursuant to and for the purposes specified in the investor rights agreement, including for the purpose of voting for the Sponsor Nominees. The address of the Sponsor is c/o Bespoke Capital Acquisition Corp., 595 Burrard Street, Suite 2600, Three Bentall Centre, Vancouver, BC V7X1L3. Each of Messrs. Harms and Berner disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
(3) Jonathan Sebastiani has sole voting and dispositive power over the 684,881 shares owned by Sonoma Brands II, LP, the 410,715 shares owned by Sonoma Brands VWE Co-Invest, L.P. and the 39,350 shares owned by Sonoma Brands II Select, L.P. Mr. Sebastiani disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.
(4) Patrick Roney and his wife, Laura Roney, are co-trustees of the Roney Trust and share voting and dispositive power over the shares to be owned by the Roney Trust.
(5) Laura Roney shares voting and dispositive power with her husband, Patrick Roney, over the shares owned by the Roney Trust.
(6) Darrell D. Swank and Steven Kay are co-trustees of the Rudd Trust and share voting and dispositive power over the shares owned by the Rudd Trust. The address of the Rudd Trust is c/o LRIco Services, LLC, 2416 E. 37th St. N., Wichita, KS 67219.
(7) Includes (i) 7,600,117 shares owned by the Rudd Trust and (ii) 2,199,863 shares owned by the SLR Trust. Darrell D. Swank and Steven Kay are co-trustees of these trusts and share voting and dispositive power over the shares held by such trusts. Patrick Roney also is co-trustee of the SLR Trust, with such power over that trust. All of the trustees disclaim beneficial ownership of all such shares. The address of Mr. Swank is c/o LRIco Services, LLC, 2416 E. 37th Street N., Wichita, KS 67219. The address of Mr. Kay is 100 The Embarcadero, Penthouse, San Francisco, CA 94105-1291.
(8) Based on information contained in the Schedule 13G filed by Wasatch Advisors, Inc. on July 12, 2021, reporting sole dispositive and voting power over 14,558,244 shares. The address of such shareholder is 505 Wakara Way, 3rd Floor, Salt Lake City, UT 84108.
(9) The Major Investors are the Sponsor, the Roney Trust, Sean Roney, the Rudd Investors, Sonoma Brands II, L.P., Sonoma Brands II Select, L.P., and Sonoma Brands VWE Co-Invest, L.P.
(10) The Specified Investors are the Major Investors and all other stockholders party to the investor rights agreement, excluding Casing & Co. f/b/o Wasatch Microcap Fund.
(11) Roney Trust means the Patrick A. Roney and Laura G. Roney Trust.
(12) Rudd Trust means Marital Trust D under the Leslie G. Rudd Living Trust U/A/D 3/31/1999, as amended (as successor to the Leslie G. Rudd Living Trust U/A/D 3/31/1999, as amended).
(13) SLR Trust means the SLR Non-Exempt Trust U/A/D 4/21/2018 (as successor to the SLR 2012 Gift Trust U/A/D 12/31/2012). Patrick Roney, Darrell D. Swank and Steven Kay are co-trustees of the SLR Trust. They disclaim beneficial ownership of all shares held by such trust.
(14) Each of the Rudd Trust and the SLR Trust (collectively, the Rudd Investors) and the Roney Trust and Sean Roney (who owns 423,729 shares) (collectively, the Roney Investors) is a party to an Amended and Restated Voting Agreement effective as of June 7, 2021 (the Voting Agreement). Under the Voting Agreement, Patrick Roney may determine how all shareholders party to such agreement shall vote, act or consent.
(15) Based on information contained in the Schedule 13G filed by Paradice Investment Management LLC on June 9, 2021, reporting shared dispositive power over 3,960,400 shares and shared voting power over 2,624,118 shares. The address of such shareholder is 250 Fillmore Street, Suite 425, Denver, Colorado 80206.
Item 13. Certain Relatio nships and Related Transactions and Director Independence
In January 2016, D209, owned by the SLR No. 209 Trust, the LR Living Trust and VWE entered into a support and production agreement (the Kirkland Agreement). Under the Kirkland Agreement, D209 agreed to provide certain services related to VWEs Kirkland branded spirits including overall management of the production process and advice and consulting regarding bottling, packaging and distribution. In November 2018, for a purchase price of $658,367, VWE acquired certain assets of D209 from D209 and the LR Living Trust, including key trademarked intellectual property. As part of the purchase agreement, the parties agreed to terminate the Kirkland Agreement for $250,000 in additional payments and VWEs agreement to reimburse the SLR 209 Trust for 50% of expenses related to canceling an unrelated third-party consulting agreement such that the total payment VWE made to the LR Living Trust in finalizing the asset purchase agreement, inclusive of the purchase price was $908,367, plus the reimbursement of such expenses. In addition, VWE agreed to ongoing quarterly payments of $3 for every nine liter case of gin sold under the D209 trademarks by VWE for three calendar years following the sale (through November 2021). Such payment for case fees resulted in immaterial payments for the periods July 1, 2019 to June 30, 2020 and July 1, 2020 to June 30, 2021, respectively. Samantha Rudd is the sole trustee of the SLR No. 209 Trust and was a director of Legacy VWE. Darrell Swank is one of two co-trustees of the LR Living Trust and was a Legacy VWE director. VWE continues to make payments to the LR Living Trust pursuant to this agreement.
Kunde Family Winery Relationship
VWE acquired Kunde on April 19, 2021, whereupon the related party feature of the relationship between VWE and Kunde as separate enterprises ceased to exist. Until the acquisition, VWE provided certain administrative and management services to Kunde in return for management fees that totaled $407,000 for the year ended June 30, 2021 and $429,000 for the year ended June 30, 2020. VWE provided Kunde with certain services related to wine storage and handling of alcoholic beverages. For the years ended June 30, 2021 and 2020, Kunde paid VWE $65,000 and $649,000, respectively, for actual storage and handling services provided at VWEs warehouse.
VWE served as a pass-through for Kunde with automated invoicing of Kundes products sold to distributors. VWE invoiced distributors for Kunde-identified items. VWEs ERP automated system immediately set up the Kunde account received for Kundes portion of the transactions, as well as the payable to Kunde (as a vendor). The Kunde payable portion had an on hold flag placed on it. Upon receipt of a payment from any Kunde distributor or customer, payment of any Kunde portion was applied to Kunde on the VWE books. Once the payment was applied, the payable to Kunde on its vendor account was released from hold and a check was issued to Kunde. This was a direct pass-through of funds.
On December 31, 2020, VWE entered into a marketing and distribution arrangement with Kunde. Under that arrangement, Kunde paid VWE a commission for certain distribution sales. VWE recognized $1,625,000 in revenue from the arrangement in the three and nine month periods ended March 31, 2021, with $1,625,000 included in accounts receivable at March 31, 2021. The arrangement terminated when VWE acquired Kunde on April 19, 2021. Revenue recognized in April 2021 for the period covering April 1, 2021 through April 18, 2021 was $97,100 included in accounts receivable.
Mr. Roney, throughout this period, was President of Kunde. He also was the Chief Executive Officer and a director of Legacy VWE and he is the Chief Executive Officer and a director of the Company The Roney Trust and the Rudd Trust were significant shareholders of Kunde and were and are significant shareholders of the Company.
### Loans and Guarantees from Related Parties
In January 2018, VWE and related entities issued a promissory note, as amended, in favor of the LR Living Trust in the original principal amount of $9,000,000. This note was assigned to from the LR Living Trust to the Rudd Trust effective as of December 31, 2019. The interest rate on the loan was equal to the prime rate of interest published by the Wall Street Journal (the Prime Rate) plus 4% as computed on a 360-day year with the interest rate being adjusted for all outstanding advances as of the first day of each calendar quarter. Any amount that is not paid when due bears interest at the Prime Rate plus 5%. VWE made an interest payment during the fiscal year ended June 30, 2021 in the amount of $1,633,312 representing all accrued interest as of December 31, 2019. The principal amount of $9,000,000 and accrued interest of $920,247 was paid on May 31, 2021.
In January 2018, VWE and related entities issued a promissory note in favor of Mr. Patrick Roney in the original principal amount of $1,000,000. The interest rate on the loan was equal to the Prime Rate plus 4% as computed on a 360-day year with the interest rate being adjusted for all outstanding advances as of the first day of each calendar quarter. Any amount not paid when due bears interest at the Prime Rate plus 5%. On March 9, | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
The Companys equity incentive plan in the discretion of the Board or the Committee and to participate in the Companys employee benefit plans as in effect for employees generally. Orloff, as well as recoupment of any incentive-based compensation in accordance with the Company's recoupment policy.
Fiscal Year 2020 Equity Awards
All of the PSUs and RSUs disclosed in the Grants of Plan-Based Awards table were granted under our 2017 Incentive Plan. Our 2017 Incentive Plan was approved by shareholders in May 2017. Subject to the terms of the applicable incentive plan and the RSU award agreements, RSU awards are generally scheduled to vest as to 25% of the shares subject to the RSU award on each of the first four anniversaries of the grant date (such that all shares subject to the RSU will be vested four years from the date of grant), generally subject to the continued employment of the applicable NEO with the Company through the applicable vesting date. Subject to the terms of the applicable incentive plan and the PSU award agreements, PSUs are earned if all of the applicable performance goals are satisfied (such goals are based on three-year performance metrics) and, if the performance goals are satisfied and the PSUs are earned, the shares will "cliff" vest on the third anniversary of the date of grant of the PSUs, generally subject to the continued employment of the applicable NEO with the Company through the applicable vesting date.
The following table sets forth information regarding equity awards held by our NEOs as of December31, 2020.
(1)
The market value of the stock awards is determined by multiplying the number of shares subject to such award times $156.24, which was the closing price of the Company's common stock as of December31, 2020, the last business day of 2020.
(2)
Award of options that vest over a four-year period, with 25% vesting on the first anniversary of the date of grant and 6.25% vesting every three months thereafter, generally subject to continued employment or other service with the Company.
(3)
Award of RSUs that vested 25% on December 31, 2017, 25% on December 31, 2018, 25% on the third anniversary of the grant date and will vest 25% on the fourth anniversary of the grant date, generally subject to continued employment or other service with the Company.
(4)
RSU awards that vest over a four-year period in equal annual installments on each anniversary of the date of grant, generally subject to continued employment or other service with the Company.
(5)
In December 2020, the Committee accelerated vesting of tranches of RSUs granted in 2018, 2019 and 2020 scheduled to vest in February 2021 to December 2020.
(6)
PSU awards granted in 2019 and 2020 are eligible to be earned based on performance during the performance period ending on December 31, 2021 and December 31, 2022, respectively. To the extent earned based on performance, the PSUs will vest on the third anniversary of the grant date, generally subject to continued employment or other service with the Company. Except as noted below, amounts have been reported in this table assuming target level achievement of performance goals.
With respect to the PSUs granted in 2018, no amounts have been reflected as outstanding as vesting of the earned shares was accelerated to December 2020 at a payout of 245% of target, which reflected actual performance for the full performance period ending December 31, 2020. Refer to the "Option Exercises And Stock Vested For Fiscal 2020" table below for further information.
With respect to the PSUs granted in 2019, an additional 15% of the target award has been earned as of December 31, 2020 based on the achievement of R&D milestones.
(7)
Ms. Law's separation agreement provided for the accelerated vesting upon her August 21, 2020 departure of RSUs granted in 2017 and 2018 while unvested RSUs granted in 2019 and 2020 were forfeited. Ms. Law's PSUs granted in 2018, 2019 and 2020 will be pro-rated to the end of the month of separation and will be eligible to vest based on achievement of the applicable performance criteria upon the Committee's certification of the performance results following the applicable performance period.
$5,272,475 reported for Ms. Law's 2018 PSUs represent PSUs actually earned for the performance period ending December 31, 2020 which will vest on February 28, 2021.
### Option Exercises And Stock Vested For Fiscal 2020
The following table shows the vesting of RSUs and PSUs during the year ended December31, 2020 for each of the NEOs. None of the NEOs exercised stock options during 2020.
(1)
Includes RSUs and PSUs that vested in 2020 as follows:
The number of shares subject to RSUs that vested in 2020: Dr. Hantson: 54,712, Dr. Sarin: 11,445, Ms. Chiniara: 10,848, Mr. Goff: 15,584, Ms. Law: 19,952 and Dr. Orloff: 18,145. This is inclusive of February 2021 vesting accelerated to December 2020 as follows: Dr. Hantson: 29,290, Dr. Sarin: 5,627, Ms. Chiniara: 6,698 and Mr. Goff and Dr. Orloff: 7,312. With respect to Ms. Law, this is also inclusive of 9,914 shares for which vesting was accelerated in connection with her separation agreement.
One third of the PSUs earned for the performance period ending December 31, 2017 vested in 2020 as follows: Dr. Hantson: 31,752 and Mr. Goff: 5,300.
February 2021 vesting relating to PSUs earned based on actual performance for the performance period ending December 31, 2020 was accelerated to December 2020 as follows: Dr. Hantson: 162,707, Dr. Sarin: 15,371, Ms. Chiniara: 37,965, Mr. Goff and Dr. Orloff: 40,677.
(2)Amounts reflect the aggregate dollar amount realized upon vesting by multiplying the number of shares of stock vested by the closing price of the Company's common stock on the vesting date.
### Nonqualified Deferred Compensation
Alexion sponsors a nonqualified deferred compensation plan (NQDC Plan) which allows certain highly compensated employees, including our NEOs, to make voluntary deferrals of up to 80% of their base salary and up to 80% of their annual cash incentive award. The NQDC Plan is designed to work in conjunction with the 401(k) plan and provides for a total combined employer match of up to 6% of an employee's eligible earnings, up to the IRS annual specified contribution limits. The plan provides for immediate vesting of the match consistent with our immediate vesting of the Company match provided under our 401(k) plan. Notional accounts are maintained for each participant. Such notional accounts include employee and employer contributions and reflect the performance of investments selected by the employee or a default investment if the employee does not make a selection. These investment options include the mutual funds offered under our 401(k) plan.
The following table sets forth information regarding the nonqualified deferred compensation of each NEO during the fiscal year ended December31, 2020.
(1)
Amounts reported in this column are also included in the Summary Compensation Table under Salary.
(2)
Amounts reported in this column are also included in the Summary Compensation Table under All Other Compensation.
(3)
The aggregate balance amounts under the nonqualified deferred compensation plan include deferrals made for prior fiscal years. For individuals who were NEOs in the fiscal years in which the deferrals were made, the amount of the deferred compensation was included in such individual's compensation as reported in the Summary Compensation Table included in the proxy statement for each such fiscal year.
Potential Payments Upon Termination or Change Of Control
We have entered into certain agreements that may require us to make payments and/or provide benefits to Dr. Hantson, Dr. Sarin, Ms. Chiniara, Mr. Goff and Dr. Orloff in connection with specified terminations of employment, in each case, subject to the applicable NEOs execution and non-revocation of a general release of claims. See "Severance Payments and Benefits" and Equity Awards below for a description of these potential severance entitlements. These agreements also contain restrictive covenants and confidentiality provisions in favor of Alexion and require the NEO to assign all rights he or she may have or acquire in proprietary information.
The tables below summarize the estimated potential payments to each of Dr. Hantson, Dr. Sarin, Ms. Chiniara, Mr. Goff and Dr. Orloff assuming that one of the events described in the table occurred on December31, 2020. In calculating the amounts due to the executive in respect of his or her equity awards in connection with such event, where applicable, the table below uses the closing price of a share of our common stock on December 31, 2020, $156.24, the last business day of 2020. However, each such executive's employment was not terminated on December31,
2020 and a change in control did not occur on that date. Moreover, there can be no assurance that a termination of employment, a change in control or both would produce the same or similar results as those set forth below if either or both of them occurred on any other date or when the price of our common stock was different, or if any other assumption used in calculating the benefits set forth below is not correct in fact. Because she terminated employment with the Company prior to December 31, 2020, Ms. Law is not included in the tables below. The severance payments and benefits that Ms. Law received in connection with her termination of employment are described below.
For purposes of the following table, involuntary termination means a termination without cause, constructive termination
, or good reason termination, as applicable, in each case as those terms are defined in the applicable NEO's agreement.
(1)
Represents the cash severance amounts that would be payable as a result of the event described in the table above, based on the named executive officers base salary and target bonus amount as in effect on December 31, 2020, as applicable, or, for Dr. Hantson, based on his base salary and the average of his actual bonus amount paid in the two most recent fiscal years and without including any accrued but unpaid compensation, paid time-off or any pay in lieu of any notice periods. The cash severance amounts that would be payable to each of our named executive officers in connection with a termination of employment under various circumstances is described in more detail below.
(2)
Represents the value associated with cashing out unvested RSUs, earned PSUs and unearned PSUs, as applicable, and, that accelerate as a result of the event described in the table, based on a stock price of $156.24, which was the closing price of Alexion's common stock on December 31, 2020, the last business day of Alexion's 2020 fiscal year, as well as the value associated with any stock options held by our
51 named executive officers on December 31, 2020. Dr. Hantson's and Mr. Goff's stock options were valued based on the number of shares associated with the unvested portion of each award multiplied by the difference between $156.24, the closing price of Alexion's common stock on December 31, 2020, and the per share exercise price of the stock options. RSUs and PSUs were valued based on the number of shares associated with the unvested portion of each award multiplied by $156.24. Pursuant to their agreements, certain PSUs held by each of the named executive officers would vest to the extent determined in good faith by the Board based on achievement of the applicable performance conditions through termination of employment, as described in further detail under Equity Awards below. For purposes of this table, in connection with a change in control or death or disability termination, the value of any earned PSUs is based on the number of earned PSUs as of December 31, 2020 and any unearned PSUs (including those held by Dr. Sarin) are assumed to have vested at target levels, except for any 2019 PSUs, which are assumed to have vested at 115% of target given that an additional 15% of the target award was earned as of December 31, 2020 based on the achievement of R&D milestones. The actual amounts, if any, that will become payable with<|endoftext|>$100,943,269, a decrease of $16,671,617, or 14.17%, from $117,614,886 for the previous year. This was mainly due to the decrease in sales volume of corrugating medium paper(CMP) and offset printing paper and decrease in average selling prices (ASP) of CMP, offset printing paper and tissue paper products, partially offset by the revenue generated from face masks in year 2020.
Revenue of Offset Printing Paper, Corrugating Medium Paper and Tissue Paper Products
Revenue from sales of offset printing paper, CMP and tissue paper products for the year ended December 31, 2020 was $99,841,325, a decrease of $17,772,411, or 15.11%, from $117,613,736 for the year ended December 31, 2019. This was mainly due to the decrease in sales volume of CMP and offset printing paper and the decrease in ASP of CMP, offset printing paper and tissue paper products. Total quantities of offset printing paper, CMP and tissue paper products sold during the year ended December 31, 2020 amounted to 227,331 tonnes, a decrease of 22,813 tonnes, or 9.12%, compared to 250,144 tonnes sold during the year ended December 31, 2019.
Total quantities of CMP and offset printing paper sold decreased by 26,111 tonnes in the year of 2020 as compared to 2019. We sold 10,088 tonnes of tissue paper products in the year of 2020 as opposed to 6,790 tonnes in 2019. CMP production was suspended in mid-January to early March 2020 due to Chinese New Year and COVID-19 outbreak. We resumed full capacity of CMP production in May 2020. The production of offset printing paper was suspended during January to May 2020 and resumed in June 2020. The changes in revenue and quantity sold for the year ended December 31, 2020 and 2019 are summarized as follows:
Monthly revenue (excluding revenue of digital photo paper and tissue paper products) for the 24 months ended December 31, 2020, are summarized below:
The average selling price, or ASP, for our major products for the years ended December 31, 2020 and 2019 are summarized as follows:
The following is a chart showing the month-by-month ASPs (excluding the ASPs of digital photo paper and tissue paper products) for the 24 month period ended December 31, 2020:
### Corrugating Medium Paper
Revenue from CMP amounted to $79,160,926 (79.29% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2020, representing a decrease of $11,665,512, or 12.84%, from $90,826,438 during 2019.
We sold 196,885 tonnes of CMP in the year ended December 31, 2020 as compared to 214,147 tonnes in the year ended December 31, 2019, representing a 8.06% decrease in quantity sold.
ASP for regular CMP dropped from $427/tonne in 2019 to $404/tonne in 2020, representing a 5.39% decrease. ASP in RMB for regular CMP in 2019 and 2020 was RMB2,942 and RMB2,789, respectively, representing a 5.20% decrease. The quantity of regular CMP sold decreased by 14,753 tonnes, from 168,837 tonnes in 2019 to 154,084 tonnes in 2020.
ASP for light-weight CMP dropped from $414/tonne in 2019 to $393/tonne in 2020, representing a $5.07% decrease. ASP in RMB for light-weight CMP in 2019 and 2020 was RMB2,857 and RMB2,712, respectively, representing a 5.08% decrease. The quantity of light-weight CMP sold decreased by 2,509 tonnes, from 45,310 tonnes in 2019, to 42,801 tonnes in 2020.
Our PM6 production line, which produces regular CMP, has a designated capacity of 360,000 tonnes /year. The utilization rates for the year ended December 31, 2020 and 2019 were 42.56% and 46.68%, respectively, representing a decrease of 4.12%.
Quantities sold for regular CMP that was produced by the PM6 production line from January 2019 to December 2020 are as follows:
### Offset Printing Paper
Revenue from offset printing paper was $12,265,746 (12.29% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2020, representing a decrease of $8,170,384, or 39.98%, from $20,436,130 in 2019. We sold 20,358 tonnes of offset printing paper in the year ended December 31, 2020, compared to 29,207 tonnes in 2019, a decrease of 8,849 tonnes, or 30.30%. ASPs for offset printing paper in the year ended December 31, 2019 and 2020 was $700/tonne and $603/tonne, respectively, representing a 13.86% decrease. ASP in RMB for offset printing paper for the year ended December 31, 2019 and 2020 was RMB4,824 and RMB4,154, respectively, representing a 13.89% decrease.
Tissue Paper Products
We produce tissue paper products, including toilet paper, boxed and soft-packed tissues, handkerchief tissues and paper napkins, as well as bathroom and kitchen paper towels that are marketed and sold under the brand Qingmu. In December 2018 and November 2019, we completed the construction, installation and test of operation of our PM8 and PM9 production lines. We launched the complete line of processing base tissue paper with designated capacity of 15,000 tonnes/year, and producing finished tissue paper products with designated capacity of 15,000 tonnes/year.
Revenue from tissue paper products was $8,414,653 (8.43% of the total offset printing paper, CMP and tissue paper products revenues) for the year ended December 31, 2020, representing an increase of $2,063,485, or 32.49%, from $6,351,168 in 2019. We sold 10,088 tonnes of tissue paper products (including 305 tonnes of tissue base paper) in the year ended December 31, 2020, as compared to 6,790 tonnes in 2019, an increase of 3,298 tonnes, or 48.57%. Except for the production suspension in the first quarter of 2020, the production and sales of tissue paper products have been growing up steadily since the launch of PM8 and PM9 in December 2018 and November 2019.
### Revenue of Face Mask
On April 29, 2020, we launched a production line of non-medical single-use face masks, following the completion of raw materials preparation, trial run of the equipment and the sample products inspection. Revenue generated from selling face masks were $1,101,944 for the year ended December 31, 2020. We sold 10,301 thousand pieces of face masks in year of 2020.
Cost of Sales
Total cost of sales for CMP, offset printing paper and tissue paper products in the year ended December 31, 2020 was $94,669,389, a decrease of $9,253,025, or 8.90%, from $103,922,414 for the year ended December 31, 2019. This was mainly a result of the decrease in sales volume of CMP and offset printing paper, partially offset by the increase in sales volume of tissue paper products. Cost of sales for CMP was $74,279,241 for the year ended December 31, 2020, as compared to $81,511,234 in 2019. The decrease in the cost of sales of $7,231,993 for CMP was mainly due to the decrease in the quantities of CMP sold, partially offset by the increase in cost of recycled paper board in the year of 2020. Average cost of sales per tonne for CMP decreased by 1.05%, from $381 for the year ended December 31, 2019, to $377 in 2020. The slight decrease was mainly attributable to lower unit cost of manufacturing overhead (e.g. wages, repair and maintenance etc.) due to suspension of production in February 2020, partially offset by higher average unit purchase costs (net of applicable value added tax) of recycled paper board. Cost of sales for offset printing paper was $10,147,280 for the year ended December 31, 2020, as compared to $14,061,771 in 2019. Average cost of sales per tonne of offset printing paper increased by 3.53%, from $481 for the year ended December 31, 2019, to $498 in 2020. The increase was mainly attributable to higher average unit purchase costs (net of applicable value added tax) of recycled white scrap paper. Cost of sales for tissue paper products was $10,242,868 for the year ended December 31, 2020, as compared to $8,349,409 in 2019. Average cost of sales per tonne of tissue paper products decreased by 17.48%, from $1,230 for the year ended December 31, 2019, to $1,015 for 2020.
Changes in cost of sales and cost per tonne by product for the year ended December 31, 2020 and 2019 are summarized below:
Our average unit purchase costs (net of applicable value added tax) of recycled paper board and recycled white scrap paper for the year ended December 31, 2020 were RMB 1,582/tonne (approximately $229/tonne) and RMB 2,086/tonne (approximately $303/tonne), respectively, as compared to RMB 1,536/tonne (approximately $223/tonne) and RMB 1,855/tonne (approximately 269/tonne) for the year ended December 31, 2019, respectively. These changes (in US dollars) represent a year-over-year increase of 2.69% for the unit purchase cost of recycled paper board and a year-over-year increase of 12.64% for the unit purchase cost of recycled white scrap paper. We use domestic recycled paper (sourced mainly from the Beijing-Tianjin metropolitan area) exclusively. Although we do not rely on imported recycled paper, the pricing of which tends to be more volatile than domestic recycled paper, our experience suggests that the pricing of domestic recycled paper bears some correlation to the pricing of imported recycled paper.
The pricing trends of our major raw materials for the 24-month period from January 2019 to December 2020 are shown below:
Electricity and gas are our two main energy sources. Electricity and gas accounted for approximately 5% and 10.5% of total sales in 2020, respectively, compared to 6% and 10.3% of total sales 2019. The monthly energy cost (electricity, coal and gas) as a percentage of total monthly sales of our main paper products for the 24 months ended December 31, 2020 are summarized as follows:
### Gross Profit
Gross profit for December 31, 2020 was $5,701,985 (5.65% of the total revenue), representing a decrease of $7,977,533, or 58.32%, from the gross profit of $13,679,518 (11.63% of the total revenue) for the year ended December 31, 2019. The decrease was mainly due to (i) the decrease in quantities sold of CMP and offset printing paper and (ii) the decrease of ASP of CMP, offset printing paper and tissue paper products, partially offset by the increase in sales quantities of tissue paper products.
Corrugating Medium Paper, Offset Printing Paper and Tissue Paper Products
Gross profit for offset printing paper, CMP and tissue paper products for the year ended December 31, 2020 was $5,171,937, a decrease of $8,519,386, or 62.22%, from the gross profit of $13,691,322 for the year ended December 31, 2019. The decrease was mainly the result of the factors discussed above.
The overall gross profit margin for offset printing paper, CMP and tissue paper products decreased by 6.46 percentage points, from 11.64% for the year ended December 31, 2019, to 5.18% for the year ended December 31, 2020.
Gross profit margin for regular CMP for the year ended December 31, 2020 was 5. 42%, or 4.87 percentage points lower, as compared to gross profit margin of 10.29% for the year ended December 31, 2019. Such decrease was primarily due to decrease in ASP of regular CMP, partially offset by the decrease in unit cost of sales.
Gross profit margin for light-weight CMP for the year ended December 31, 2020 was 8.93%, or 1.20 percentage points lower, as compared to gross profit margin of 10.13% for the year ended December 31, 2019.
Gross profit margin for offset printing paper was 17.27% for the year ended December 31, 2020, a decrease of 13.92 percentage points, as compared to 31.19% for the year ended December 31, 2019. Such increase was mainly due to the increase of purchase price of recycled white scrap paper and the decrease in ASP of offset printing paper.
Gross profit margin for tissue paper products was -21.73% for the year ended December 31, 2020, an increase of 9.73 percentage points, as compared to -31.46% for the year ended December 31, 2019. The increase was mainly due to the decrease in cost of tissue base paper.
Monthly gross profit margins for our corrugating medium paper and offset printing paper for the 24-month period ended December 31, 2020 are as follows:
### Face Masks
Gross profit for face masks for the year ended December 31, 2020 was $530,049, representing a gross margin of 48.10%.
Selling, general and administrative expenses for the year ended December 31, 2020 were | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
By the Company
A change in the Incumbent Board, which occurs if the existing members of the Board on the date the Severance Plan was initially adopted by the Board (the Incumbent Board) cease to constitute at least a majority of the members of the Board, provided, however, that any new Board member shall be considered a member of the Incumbent Board for this purpose if the appointment or election (or nomination for such election) of the new Board member is approved or recommended by a majority vote of the members of the Incumbent Board who are then still in office
The following table summarizes the payment that would be payable to our NEOs as of December 31, 2020, in the event of the various termination scenarios, including termination other than for cause, termination for cause, and termination in connection with a change in control:
(1)
On December 31, 2020, the Company had employment agreements with Dr. Glenn and Messrs. Erck, Covino, Herrmann, and Trizzino, which provided for a lump sum cash severance payment equal to 18 months base salary for Mr. Erck and 12 months base salary for Dr. Glenn and Messrs. Covino, Herrmann and Trizzino if the executive is terminated without cause or leaves for good reason. All vested and exercisable stock options held by Dr. Glenn and Messrs. Covino, Herrmann and Trizzino must be exercised within three months following the termination date. All vested and exercisable stock appreciation rights held by Dr. Glenn and Messrs. Erck and Trizzino must be exercised within three months following the termination date. Mr. Erck is entitled to (i) continuation of medical, dental, and vision benefits for 18 months following the date of termination and (ii) the accelerated vesting of 50% of the unvested portion of each stock option or restricted stock grant made by the Company. Mr. Erck may exercise all outstanding vested stock options held at termination (including any accelerated options or grants) during the 12-month period following the date of termination.
(2)
In the event an NEO is terminated for cause, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date. Cause means (i) the executives willful failure (or, with respect to Mr. Covinos agreement, the executives failure) or refusal to perform in all material respects the services required to be performed by him; (ii) the executives willful failure (or, with respect to Mr. Covinos agreement, the executives failure) or refusal to carry out any proper and material direction by the or Board (or, with respect to Mr. Ercks agreement, the Board, and with respect to Mr. Herrmanns agreement, the CMO, the CEO or the Board) with respect to the services to be rendered by him or the manner of rendering such services; (iii) the executives willful misconduct or gross negligence in the performance of his duties (or, with respect to Mr. Covinos, Mr. Herrmanns and Mr. Trizzinos agreements, the executives misconduct in the performance of his duties); (iv) the executives commission of an act of fraud, embezzlement, or theft or felony involving moral turpitude; (v) the executives use of confidential information, other than for the benefit of the Company in the course of rendering services to the Company; or (vi) a breach of the executives non-competition obligations.
(3)
Under the Severance Plan, all current unvested stock options become vested and exercisable in full only upon a termination of employment following a Change in Control (a double trigger acceleration). The Severance Plan provides that all vested and exercisable stock options may be exercised within one year from the participants termination date, provided, however, that no exercise may occur later than the expiration date of the option as set forth in the applicable stock option agreement.
(4)
Bonus equals 100% of the NEOs target annual bonus award, expressed as a monthly payment, multiplied by the participants severance benefit period, expressed monthly.
(5)
Represents the value of all unvested stock options outstanding at the closing price on December 31, 2020, minus any applicable exercise price.
(6)
Reflects the premiums for health, dental, and vision coverage under the Companys group health insurance program. Amounts are based on the premiums in effect at December 31, 2020.
### Termination as a Result of Death or Disability
In the event an NEO is terminated as a result of death or disability, all outstanding equity awards granted to the executive on or after March 2016 will vest as to 50% of the unvested portion of each grant as of the termination date. Otherwise, the Company has no further obligation to the executive other than the obligation to pay any unpaid base salary and unused vacation accrued through the termination date. If the executive dies while in the employ of the Company (or within three months after the date on which the executive ceases to be an employee), vested and exercisable options may be exercised by the executives estate for one year following the executives death. If the executive becomes disabled while in the employ of the Company, vested and exercisable options may be exercised by the executive for a period of one year after the executive ceases to be an employee due to a disability.
COMPENSATION OF DIRECTORS
Compensation paid to our non-employee directors is comprised of two components: (i) cash compensation and (ii) equity awards.
### Cash Compensation
Our non-employee director cash compensation arrangement for 2020 was as follows:
Non-Employee Director Deferred Fee Policy
The Companys Director Deferred Fee Policy for its non-employee directors permits an eligible director to defer receipt of all or part of the directors cash retainer. To defer fees payable during any calendar year, a director must make an election by the end of the preceding calendar year. A director can elect to have 100% of deferred amounts credited to a cash account or a Company common stock account, or, alternatively, a director may elect to have deferred amounts credited 50% to each account. Cash accounts are credited with interest quarterly at the IRS Applicable Federal Rate for short-term debt instruments for the last month of such calendar quarter. Company Common Stock accounts are credited as if amounts were invested in notional stock units based upon the market price of Common Stock and are credited with additional notional units if dividends are paid on Common Stock. Payment of deferred amounts is to be made in cash upon the occurrence of certain events, including the directors separation from service, death of the director, or a change in control of the Company. The director may also elect to receive payment of the deferred amounts in a specified year that is not more than ten years from the year in which the directors fees were earned. A director may elect to receive payment in either a lump sum or in up to ten annual installments.
Dr. Douglas has elected to defer fees earned in the fiscal year ending December 31, 2020. The following table shows how he currently has his deferred fees credited.
### Name
Annual Retainer
Richard H. Douglas, Ph.D.
Cash account
0%
Company Common Stock account
100%
### Equity Awards
Annual Equity Awards
On June 25, 2020, the Compensation Committee granted options to purchase 6,900 shares of Common Stock to each of Dr. Douglas, Ms. King, and Messrs. Evans and McManus, and options to purchase 4,400 shares of Common Stock to Mr. Mott. Young was granted an option to purchase 15,180 shares of Common Stock. All of the aforementioned options have an exercise price of $83.54 per share and will vest in full one year from the date of grant subject to continued service on the Companys Board of Directors through the vesting date.
On June 25, 2020, the Compensation Committee granted time-vesting restricted stock units (RSUs) representing a right to receive 3,450 shares of Common Stock to each of Dr. Douglas, Mr. Evans, Ms. King and Mr. McManus. Young received RSUs representing a right to receive 7,590 shares of Common Stock. All of the aforementioned RSUs will vest in full one year from the date of grant subject to continued service on the Companys Board through the vesting date.
Equity Awards upon Appointment to the Board or a Committee
On June 13, 2020, the Board granted an option to purchase 8,000 shares of Common Stock, effective as of June 16, 2020, to Mr. Mott in connection with his appointment to the Board. The option has an exercise price of $52.15 per share and will vest in full on June 16, 2021 subject to continued service on the Companys Board through the vesting date.
On October 31, 2020, the Board granted an option to purchase 7,700 shares of Common Stock to Mr. Alton in connection with his appointment to the Board. The option has an exercise price of $80.71 per share and will vest in full one year from the date of grant, subject to continued service on the Companys Board through the vesting date.
On December 5, 2020, the Board granted an option to purchase 7,700 shares of Common Stock, effective as of December 7, 2020, to Ms. McGlynn in connection with her appointment to the Board. The option has an exercise price of $123.12 per share and will vest in full on December 7, 2021 subject to continued service on the Companys Board through the vesting date.
On December 5, 2020, the Board granted time-vesting RSUs representing the contingent right to receive 20,000 shares of Common Stock to Dr. Young, in connection with the appointment of Dr. Young as Chair of the newly established standing Research and Development Committee of the Board. The Board, upon recommendation of the Compensation Committee, with Dr. Young recused from both meetings, determined the size of the award based on Dr. Youngs substantial time commitment and impact providing Board oversight of the Companys research and development efforts, including process development, manufacturing scale-up, technology transfer and other activities related to the Companys regulatory efforts and strategy. Fifty percent (50%) of the RSUs subject to this grant vested on January 1, 2021, and the remaining fifty percent (50%) of the RSUs subject to this grant will vest on July 1, 2021, in each case subject to continued service on the Company's Board through the vesting date. Dr. Youngs prior experience has provided substantial value to the Board and management team, as Dr. Young provides oversight of efforts to resolve innumerable obstacles developing its COVID-19 vaccine at an accelerated pace. The December 2020 award made to Dr. Young reflected a unique situation related to accelerated activity and demands connected to developing the Companys COVID-19 vaccine. The Board plans to evaluate new director compensation limits later in 2021, when it will be evaluating corporate governance provisions more generally.
The Company does not pay employee directors additional compensation for service on the Board. The following table sets forth information concerning the compensation paid by the Company to each individual who served as a non-employee director at any time during fiscal year 2020:
(1)
Represents fees earned in 2020, pro-rated as applicable for a partial year of service.
(2)
Represents options granted in 2020 in respect of 2020 service on the Board. The grant date fair value was calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) Topic 718. As of December 31, 2020, the aggregate number of stock options held by each non-employee director is as follows:
(3)
Represents restricted stock units granted in 2020 in respect of 2020 service on the Board. As of December 31, 2020, the aggregate number of restricted stock units held by each non-employee director is as follows:
Mr. Alton
-
### Mr. McManus
Dr. Douglas
Dr. Modi
-
### Mr. Evans
Mr. Mott
-
### Ms. King
Dr. Young
Ms. McGlynn
-
(4)
Mr. Alton was appointed to the Board on October 31, 2020.
(5)
Dr. Douglas fees in respect of 2020 were deferred in accordance with the Non-Employee Director Deferred Fee Policy,<|endoftext|>10-K and know what types of businesses we are pursuing.
We pay our sponsor a total of $10,000 per month for office space, secretarial and administrative support and to reimburse our sponsor for any out-of-pocket expenses related to identifying, investigating and completing an initial business combination.
In addition, existing and future funds managed by Vy Capital and their respective portfolio companies may compete with us for business combination opportunities and if such opportunities are pursued by such entities, we may be precluded from pursuing such opportunities. See Item 10.
Under the rules of NYSE and our amended and restated memorandum and articles of association, shareholder approval would be required for our initial business combination if, for example: we issue (other than in a public offering for cash) ordinary shares that will either (a) be equal to or in excess of 20% of the number of ordinary shares then issued and outstanding or (b) have voting power equal to or in excess of 20% of the voting power then issued and outstanding; any of our directors, officers or substantial security holders (as defined by the rules of the NYSE) has a 5% or greater interest, directly or indirectly, in the partner business or assets to be acquired and if the number of ordinary shares to be issued, or if the number of ordinary shares into which the securities may be convertible or exercisable, exceeds either (a) 1% of the number of ordinary shares or 1% of the voting power outstanding before the issuance in the case of any of our directors and officers or (b) 5% of the number of ordinary shares or 5% of the voting power outstanding before the issuance in the case of any substantial security holders;
Our sponsor and our founding team have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares, private placement warrants and any public shares purchased during or after the Initial Public Offering in connection with (i) the completion of our initial business combination and (ii) a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the closing of the Initial Public Offering, or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre-initial business combination activity.
As a result, in addition to our initial shareholders founder shares, we would need 21,562,501, or 37.5%, of the 57,500,000 public shares sold in the Initial Public Offering to be voted in favor of an initial business combination in order to have our initial business combination approved (assuming all issued and outstanding shares are voted). In addition, our sponsor and our founding team have entered into an agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares purchased during or after the Initial Public Offering in connection with (i) the completion of our initial business combination and (ii) a shareholder vote to approve an amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering, or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre- initial business combination activity.
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule 10b5- 1 to purchase Class A ordinary shares in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule 14e-5 under the Exchange Act.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to Excess Shares, without our prior consent. Absent this provision, a public shareholder holding more than an aggregate of 15% of the shares sold in the Initial Public Offering could threaten to exercise its redemption rights if such holders shares are not purchased by us, our sponsor or our founding team at a premium to the then- current market price or on other undesirable terms.
If our initial proposed business combination is not completed, we may continue to try to complete a business combination with a different partner until 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering.
Our amended and restated memorandum and articles of association provides that we will have only 24 months from the Initial Public Offering, or 27 months from the closing of the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering, to consummate an initial business combination. If we do not consummate an initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering, we will: (i) cease all operations except for the purpose of winding up; There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to consummate an initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering.
Our sponsor and each member of our founding team have entered into an agreement with us, pursuant to which they have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares they hold if we fail to consummate an initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering (although they will be entitled to liquidating distributions from the trust account with respect to any public shares they hold if we fail to complete our initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering).
Our sponsor, executive officers and directors have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated memorandum and articles of association (A) that would modify the substance or timing of our obligation to provide holders of our Class A ordinary shares the right to have their shares redeemed in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering, or (B) with respect to any other provision relating to the rights of holders of our Class A ordinary shares or pre-initial business combination activity, unless we provide our public shareholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest earned on the funds held in the trust account and not previously released to us to pay our income taxes, if any, divided by the number of the then-outstanding public shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of proceeds held outside the trust account plus up to $100,000 of funds from the trust account available to us to pay dissolution expenses, although we cannot assure you that there will be sufficient funds for such purpose.
In order to protect the amounts held in the trust account, our sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective partner business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per public share due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our tax obligations, provided that such liability will not apply to any claims by a third party or prospective partner business who executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
We will have access to the proceeds of the Initial Public Offering held outside the trust account and the sale of the private placement warrants with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000).
Our public shareholders are entitled to receive funds from the trust account only (i) in the event of the redemption of our public shares if we do not consummate an initial business combination within 24 months from the Initial Public Offering, or 27 months from the Initial Public Offering if we have executed a letter of intent, agreement in principle or definitive agreement for an initial business combination within 24 months from the Initial Public Offering, (ii) in connection with a shareholder vote to amend our amended and restated memorandum and articles | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Would affect the substance or timing of our obligation to redeem 100% of our public shares if we do not consummate an initial business combination within 24 months from the closing of our Initial Public Offering, unless we provide our public shareholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (net of taxes payable), divided by the number of then outstanding public shares. This redemption right shall apply in the event of the approval of any such amendment, whether proposed by our sponsors, any executive officer or director, or any other person.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the $1,000,000 of proceeds held outside the trust account, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, we may request the trustee to release to us an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our Initial Public Offering, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by shareholders upon our dissolution would be $10.00.
Although we will seek to have all third parties, including, but not limited to, all vendors, service providers (excluding our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public shareholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account.
In order to protect the amounts held in the trust account, our sponsor agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amounts in the trust account to below the lesser of (i) $10.00 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per share due to reductions in the value of the trust assets, in each case less taxes payable, provided that such liability will not apply to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account nor will it apply to any claims under our indemnity of the underwriters of our Initial Public Offering against certain liabilities, including liabilities under the Securities Act.
We will seek to reduce the possibility that our sponsor will have to indemnify the trust account due to claims of creditors by endeavoring to have all third parties, including, but not limited to, all vendors, service providers (excluding our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to monies held in the trust account. We will have access to up to $1,000,000 from the proceeds of our Initial Public Offering with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000).
Our public shareholders are entitled to receive funds from the trust account only (i)in the event of the redemption of our public shares if we do not consummate an initial business combination within 24 months from the closing of our Initial Public Offering, (ii)in connection with a shareholder vote to amend our amended and restated memorandum and articles of association to modify the substance or timing of our obligation to redeem 100% of our public shares if we do not consummate an initial business combination within 24 months from the closing of our Initial Public Offering or (iii)if they redeem their respective shares for cash upon the completion of the initial business combination.
### Competition
Facilities
The cost for our use of this space is included in the $10,000 per month fee we will pay to our sponsor for office space, administrative and support services.
### Employees
Corporate Information
We were incorporated in October 2020 under the laws of the Cayman Islands. Our principal executive offices are located at Two Union Square, 601 Union St., Suite 3200, Seattle, WA 98101, and our telephone number is (206)
621-7200.
Our website address is www.frazierlifesciencesacquisition.com. The information on our website is not incorporated by reference in this Annual Report on Form
10-K or in any other filings we make with the SEC.
### Available Information
We make available on or through our website certain reports and amendments to those reports that we file with or furnish to the SEC in accordance with the Securities Exchange Act of 1934, as amended. These include our annual reports on Form
10-K, our quarterly reports on Form
10-Q, and our current reports on Form
8-K, and amendments to those reports filed or furnished pursuant to Section13(a) or 15(d) of the Exchange Act. We make this information available on or through our website free of charge as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.
A copy of our Code of Conduct and Ethics and the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are posted on our website, www.frazierlifesciencesacquisition.com, under Governance Documents.
The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding us and other issuers that file electronically with the SEC. The SECs Internet website address is [IDX]
These financial statements requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.
Only in the event we are deemed to be a large accelerated filer or an accelerated filer and no longer qualify as an emerging growth company, will we be required to comply with the independent registered public accounting firm attestation requirements on our internal control over financial reporting.
10-K, we filed a Registration Statement on Form
As an exempted company, we applied for and received, a tax exemption undertaking from the Cayman Islands government that, in accordance with Section6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, for a period of 30 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations will apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax will be payable (i)on or in respect of our shares, debentures or other obligations or (ii)by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section404 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 non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We will remain an emerging growth company until the earlier of (1)the last day of the fiscal year (a)following the fifth anniversary of the completion of our Initial Public Offering, (b)in which we have total annual gross revenue of at least $1.0billion, or (c)in which we are deemed to be a large accelerated filer, which means the market value of our ClassA ordinary shares that are held by non-affiliates exceeds $700million as of the prior June 30th, and (2)the date on which we have issued more than $1.0billion in non-convertible debt during the prior three-year period.
### S-K.
Holders (as defined in the final prospectus related to our Initial Public Offering, filed with the SEC on December10, 2020) to make a qualified electing fund (QEF) election with respect to our taxable period ended December31, 2020, as further described therein. If you are a U.S. Holder of our shares you are urged to consult your tax advisor regarding the advisability of making a QEF election and/or other elections available under the PFIC rules with respect to our ClassA ordinary shares owned by you, and the procedures necessary to validly make and maintain such elections.
10-K.
### Legal Proceedings
PART II
### Item1A. Risk Factors
10-K to issue any notes or other debt, or to otherwise incur debt following the Initial Public Offering, we may choose to incur substantial debt to complete our initial business combination.
If the net proceeds of the Initial Public Offering and the sale of the private placementunits not being held in the trust account are insufficient to allow us to operate for the 24months following the closing of the Initial Public Offering, it could limit the amount available to fund our search for a partner business or businesses and complete our initial business combination, and we will depend on loans from our sponsor or founding team to fund our search and to complete our initial business combination.
Of the net proceeds of the Initial Public Offering and the sale of the private placementunits, only $1,000,000 will be available to us initially outside the trust account to fund our working capital requirements. We believe that, upon the closing of the Initial Public Offering, the funds available to us outside of the trust account, together with funds available from loans from our sponsor, members of our founding team or any of their affiliates will be sufficient to allow us to operate for at least the 24months following the closing of the Initial Public Offering;
In the event that our offering expenses exceed our estimate of $1,250,000, we may fund such excess with funds not to be held in the trust account. In such case, unless funded by the proceeds of loans available from our sponsor, members of our founding team or any of their affiliates, the amount of funds we intend to be held outside the trust account would decrease by a corresponding amount.
Conversely, in the event that the offering expenses are less than our estimate of $1,250,000, the amount of funds we intend to be held outside the trust account would increase by a corresponding amount.
If we are required to seek additional capital, we would need to borrow funds from our sponsor, members of our founding team or<|endoftext|>Exceeds $700 million as of the prior June 30 th
If we are unable to consummate a business combination, our public shareholders may be forced to wait until July 22, 2021 (or October 22, 2021) before receiving liquidation distributions.
We have until October 22, 2021 to complete a business combination. We have no obligation to return funds to investors prior to such date unless we consummate a business combination prior thereto and only then in cases where investors have sought to convert their shares. Only after the expiration of this full time period will public shareholders be entitled to liquidation distributions if we are unable to complete a business combination. Accordingly, investors funds may be unavailable to them until after such date and to liquidate your investment, you may be forced to sell your securities potentially at a loss.
The requirement that we complete an initial business combination within a specific period of time may give potential target businesses leverage over us in negotiating a business transaction.
We have until October 22, 2021to complete an initial business combination. This risk will increase as we get closer to the time limits referenced above.
If we are unable to consummate our initial business combination within the applicable time period, we will, as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares for a pro rata portion of the funds held in the trust account and as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. In such event, the warrants will be worthless.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a group of shareholders are deemed to hold 15% or more of our ordinary shares, you will lose the ability to redeem all such shares in excess of 15% of our ordinary shares.
If we seek shareholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated memorandum and articles of association provides that a public shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), are restricted from seeking redemption rights with respect to 15% or more of the shares sold in our initial public offering (Excess Shares). However, we are not restricting our shareholders ability to vote all of their shares (including Excess Shares) for or against our initial business combination. And as a result, you will continue to hold that number of shares equal to 15% or more and, in order to dispose of such shares, are required to sell your shares in open market transactions, potentially at a loss.
We may issue ordinary or preference shares or debt securities to complete a business combination, which would reduce the equity interest of our shareholders and likely cause a change in control of our ownership.
Our amended and restated memorandum and articles of association currently authorize the issuance of up to 200,000,000 ordinary shares, par value $.0001 per share, and 2,000,000 preference shares, par value $.0001 per share. As of the December 31, 2020, there were
182,600,000 authorized but unissued ordinary shares available for issuance (after appropriate reservation for the issuance of the shares underlying the public and private warrants). We may issue a substantial number of additional ordinary shares or preference shares, or a combination of ordinary shares and preference shares, to complete a business combination. The issuance of additional ordinary shares or preference shares: may significantly reduce the equity interest of investors; may cause a change in control if a substantial number of ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and may adversely affect prevailing market prices for our ordinary shares.
If the net proceeds of our initial public offering not being held in trust are insufficient to allow us to operate until October 22, 2021we may be unable to complete a business combination.
We believe that the funds available to us outside of the trust account will be sufficient to allow us to operate until at least October 22, 2021 assuming that a business combination is not consummated during that time. However, we cannot assure you that our estimates will be accurate. Accordingly, if we use all of the funds held outside of the trust account, we may not have sufficient funds available with which to structure, negotiate or close an initial business combination. In such event, we would need to borrow funds from our sponsor, initial shareholders, officers or directors or their affiliates to operate or may be forced to liquidate. Our sponsor, initial shareholders, officers, directors and their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount that they deem reasonable in their sole discretion for our working capital needs. Each loan, such as the Note, would be evidenced by a promissory note. The notes would either be paid upon consummation of our initial business combination, without interest, or, at holders discretion, up to $1,000,000 of the notes may be converted into warrants at a price of $1.00 per warrant. On December 14, 2020, we entered into the Note with our sponsor, a convertible promissory note pursuant to which our sponsor agreed to loan us up to an aggregate principal amount of $500,000.
We cannot currently ascertain the capital requirements for any particular transaction. If the net proceeds of our initial public offering prove to be insufficient, either because of the size of the business combination, the depletion of the available net proceeds in search of a target business, or the obligation to convert into cash (or purchase in any tender offer) a significant number of shares from dissenting shareholders, we will be required to seek additional financing. To the extent that additional financing proves to be unavailable when needed to consummate a particular business combination, we would be compelled to either restructure the transaction or abandon that particular business combination and seek an alternative target business candidate. None of our officers, directors or shareholders is required to provide any financing to us in connection with or after a business combination.
Holders of warrants will not have redemption rights if we are unable to complete an initial business combination within the required time period.
If we are unable to complete an initial business combination within the required time period and we redeem the funds held in the trust account, the warrants will expire and holders will not receive any of such proceeds with respect to the warrants.
Our shareholders may be held liable for claims by third parties against us to the extent of distributions received by them.
Our amended and restated memorandum and articles of association provide that we will continue in existence only until October 22, 2021 if the proposed business combination has not been consummated by such time. If we are unable to complete an initial business combination during such time period, it will trigger our automatic winding up, liquidation and dissolution. As such, our shareholders could potentially be liable for any claims to the extent of distributions received by them pursuant to such process and any liability of our shareholders may extend beyond the date of such distribution. Accordingly, we cannot assure you that third parties, or us under the control of an official liquidator, will not seek to recover from our shareholders amounts owed to them by us.
If we are unable to consummate a transaction within the required time period, upon notice from us, the trustee of the trust account will distribute the amount in our trust account to our public shareholders. Concurrently, we shall pay, or reserve for payment, from funds not held in trust, our liabilities and obligations, although we cannot assure you that there will be sufficient funds for such purpose. If there are insufficient funds held outside the trust account for such purpose, our sponsor has agreed that it will be liable to ensure that the proceeds in the trust account are not reduced by the claims of target businesses or claims of vendors or other entities that are owed money by us for services rendered or contracted for or products sold to us and which have not executed a waiver agreement.
We and our directors and officers who knowingly and willfully authorized or permitted any distribution to be paid out of our share premium account while we were unable to pay our debts as they fall due in the ordinary course of business would be guilty of an offense and may be liable to pay a fine of US$18,292.3 and subject to imprisonment for five years in the Cayman Islands.
Unlike some other blank check companies, if we issue additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.20 per share, the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and the market value is below $9.20 per share, then the exercise price of each warrant will be adjusted such that the effective exercise price per full share will be equal to 115% of the higher of the market value and the price at which we issue the additional ordinary shares or equity-linked securities.
We are unable to currently ascertain the merits or risks of the industry or business in which we may ultimately operate.
While we are focusing and will continue to focus our search for target businesses on specific locations and industry sectors as described in the Original Filing, we are not limited to those locations and sectors and may consummate a business combination with a company in any location or industry we choose. Accordingly, there is no current basis for you to evaluate the possible merits or risks of the particular industry in which we may ultimately operate or the target business which we may ultimately acquire. To the extent we complete a business combination with a financially unstable company or an entity in its development stage, we may be affected by numerous risks inherent in the business operations of those entities. If we complete a business combination with an entity in an industry characterized by a high level of risk, we may be affected by the currently unascertainable risks of that industry. Although our management will endeavor to evaluate the risks inherent in a particular industry or target business, we cannot assure you that we will properly ascertain or assess all of the significant risk factors. We also cannot assure you that an investment in our units will not ultimately prove to be less favorable to investors than a direct investment, if an opportunity were available, in a target business.
The requirement that the target business or businesses that we acquire must collectively have a fair market value equal to at least 80% of the balance of the funds in the trust account at the time of the execution of a definitive agreement for our initial business combination may limit the type and number of companies that we may complete such a business combination with.
Pursuant to the NYSE listing rules, the target business or businesses that we | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Exercisable immediately prior to the effective date of the corporate transaction so long as the participants service has not been terminated prior to such date.
In the event of a change in control, except as otherwise provided in a participants award agreement, following a change in control (other than a change in control that also is a corporate transaction) and upon the termination of a participants service without cause within 12 months after a change in control, each award of such participant that is outstanding at such time will automatically become fully vested and exercisable immediately upon the participants termination. In addition, the stock options and shares of restricted stock issued to each of our Named Executive Officers are subject to accelerated vesting immediately upon a corporate transaction or a change in control of the Company, as defined in our amended Plan.
Under our amended Plan, a corporate transaction is generally defined as: a merger or consolidation in which we are not the surviving entity, except for the principal purpose of changing the Companys state of incorporation; the sale, transfer or other disposition of all or substantially all of our assets; the complete liquidation or dissolution of the Company; any reverse merger in which we are the surviving entity but our shares of common stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise, or in which securities possessing more than forty percent (40%) of the total combined voting power of our outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger; or acquisition in a single or series of related transactions by any person or related group of persons of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of our outstanding securities but excluding any such transaction or series of related transactions that the plan administrator determines not to be a corporate transaction (provided however that the plan administrator shall have no discretion in connection with a corporate transaction for the purchase of all or substantially all of our shares unless the principal purpose of such transaction is changing the Companys state of incorporation).
Under our amended Plan, a change of control is defined as: the direct or indirect acquisition by any person or related group of persons of beneficial ownership of securities possessing more than fifty percent (50%) of the total combined voting power of our outstanding securities pursuant to a tender or exchange offer made directly to our stockholders and which a majority of the members of our Board of Directors (who have generally been on our Board of Directors for at least 12 months) who are not affiliates or associates of the offeror do not recommend stockholders accept the offer; or a change in the composition of our Board of Directors over a period of 12 months or less, such that a majority of our Board members ceases, by reason of one or more contested elections for board membership, to be comprised of individuals who were previously directors of the Company.
Unless terminated sooner, the amended Plan will automatically terminate on December 31, 2028. Our Board of Directors has the authority to amend, suspend or terminate our amended Plan. No amendment, suspension or termination of the amended Plan shall adversely affect any rights under awards already granted to a participant. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the IRC, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to awards granted to residents therein (including the Tax Ordinance), we shall obtain stockholder approval of any such amendment to the Plan in such a manner and to such a degree as required.
### Impact of Israeli Tax Law
The awards granted to employees pursuant to Section 102 of the Tax Ordinance under the amended Plan may be designated by us as approved options under the capital gains alternative, or as approved options under the ordinary income tax alternative.
To qualify for these benefits, certain requirements must be met, including registration of the options in the name of a trustee. Each option, and any shares of common stock acquired upon the exercise of the option, must be held by the trustee for a period commencing on the date of grant and deposit into trust with the trustee and ending 24 months thereafter.
Under the terms of the capital gains alternative, we may not deduct expenses pertaining to the options for tax purposes.
Under the amended Plan, we may also grant to employees options pursuant to Section 102(c) of the Tax Ordinance that are not required to be held in trust by a trustee. This alternative, while facilitating immediate exercise of vested options and sale of the underlying shares, will subject the optionee to the marginal income tax rate of up to 50% as well as payments to the National Insurance Institute and health tax on the date of the sale of the shares or options. Under the Plan, we may also grant to non-employees options pursuant to Section 3(I) of the Tax Ordinance. Under that section, the income tax on the benefit arising to the optionee upon the exercise of options and the issuance of common stock is generally due at the time of exercise of the options.
These options shall be further subject to the terms of the tax ruling that has been obtained by Protalix Ltd. from the Israeli tax authorities in connection with the merger. Under the tax ruling, the options issued by us in connection with the assumption of Section 102 options previously issued by Protalix Ltd. under the capital gains alternative shall be issued to a trustee, shall be designated under the capital gains alternative and the issuance date of the original options shall be deemed the issuance date for the assumed options for the calculation of the respective holding period.
The following table sets forth information with respect to compensation of our non-employee directors during fiscal year 2020.
The Board of Directors approved a new compensation program for our non-employee directors, commencing as of January 1, 2020. Directors are entitled to a cash payment equal to $40,000 per year, payable quarterly, and were granted options to purchase 40,000 shares of our common stock. The options vest quarterly in 16 equal increments over a four-year period. We granted to the Chairman of the Board an option to purchase 240,000 shares of our common stock, which option vests quarterly in 16 equal increments over a four-year period. As part of the compensation program, the Chairman of the Board of Directors is not entitled to cash compensation. His compensation is limited to equity compensation.
No member of our Compensation Committee or any executive officer of the Company or of Protalix Ltd. has a relationship that would constitute an interlocking relationship with executive officers or directors of another entity. No Compensation Committee member is or was an officer or employee of ours or of Protalix Ltd. or had any relationship that constituted a related party transaction. Further, none of our executive officers serves on the Board of Directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
The following table sets forth information, as of April 15, 2021, regarding beneficial ownership of our common stock: each person who is known by us to own beneficially more than 5% of our common stock; each director; and all of our directors and executive officers collectively.
Unless otherwise noted, we believe that all persons named in the table have sole voting and investment power with respect to all shares of our common stock beneficially owned by each of them. For purposes of this table, a person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from April 15, 2021 upon exercise of options, warrants and convertible securities. Each beneficial owners percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not those held by any other person) and that are exercisable within such 60 days from such date have been exercised. The information set forth below is based upon information obtained from the beneficial owners, upon information in our possession regarding their respective holdings and upon information filed by the holders with the SEC. The percentages of beneficial ownership are based on 45,382,831 shares of our common stock outstanding as of April 15, 2021.
The address for all directors and officers is c/o Protalix BioTherapeutics, Inc., 2Snunit Street, Science Park, P.O.Box455, Carmiel 2161401, Israel.
(1)
Consists of 216,247 outstanding shares of our common stock held by EBC Holdings Ltd., an investment company wholly-owned by Mr. Bronfeld, and 75,000 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 165,000 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(2)
Consists of 447,927 outstanding restricted shares of our common stock that are subject to forfeiture and 70,000 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 90,000 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(3)
Consists of 168 outstanding shares of our common stock and 12,500 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021.
(4)
Consists of 40 outstanding shares of our common stock and 12,500 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021.
(5)
(6)
(7)
Consists of 64,000 outstanding shares of our common stock and 12,500 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021.
(8)
Consists of 18,500 outstanding shares of our common stock and 122,373 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 169,622 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(9)
Consists of 19,955 outstanding shares of our common stock and 69,248 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 118,408 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(10)
Consists of 246,146 outstanding restricted shares of our common stock that are subject to forfeiture and 30,000 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 50,000 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(11)
Consists of 24,332 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 105,439 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(12)
Consists of 1,012,983 outstanding shares of our common stock and 453,453 shares of our common stock issuable upon exercise of outstanding options within 60 days of April 15, 2021. Does not include 835,969 shares of our common stock underlying options that will not vest within 60 days of April 15, 2021.
(13)
Based on a Schedule 13G filed by Alfred Akirov on March 30, 2020. Consists of 2,513,615 outstanding shares of our common stock and 2,012,072 shares of our common stock issuable upon exercise of outstanding warrants within 60 days of April 15, 2021, in the aggregate, held by Alrov Properties<|endoftext|>A Common Stock is currently listed on the NYSE. However, we cannot assure you that shares of our Class A Common Stock will continue to be listed on the NYSE in the future. In order to continue listing our Class A Common Stock on the NYSE, we must maintain certain financial, share price and distribution levels. It is possible that our Class A Common Stock will cease to meet the NYSE listing requirements.
If NYSE delists our Class A Common Stock from trading on its exchange and we are not able to list our Class A Common Stock on another national securities exchange, our Class A Common Stock could be quoted on an over-the-counter market.
A limited availability of market quotations for our Class A Common Stock;
### Reduced liquidity for our Class A Common Stock;
A determination that our Class A Common Stock is a penny stock which will require brokers trading in the Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
and
Because our Class A Common Stock is listed on the NYSE, our Class A Common Stock qualifies as a covered security under the statute. Although the states are preempted from regulating the sale of our Class A Common Stock, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if our Class A Common Stock were no longer listed on the NYSE, our Class A Common Stock would not qualify as covered securities under the statute and we would be subject to regulation in each state in which we offer our Class A Common Stock and certain senior securities.
Securities research analysts may establish and publish their own periodic projections for us. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. While we expect research analyst coverage, if no analysts cover us, or cease coverage of us, the market price and volume for our Class A Common Stock could be adversely affected.
Our Certificate of Incorporation and the General Corporation Law of the State of Delaware (the DGCL), contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the Company Board and therefore depress the trading price of our Class A Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Company Board or taking other corporate actions, including effecting changes in management. Among other things, the Certificate of Incorporation and Bylaws include provisions regarding:
A classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Company Board;
The ability of the Company Board to issue shares of preferred stock, including blank check preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
The right of the Company Board to elect a director to fill a vacancy created by the expansion of the Company Board or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on the Company Board;
The requirement that directors may only be removed from the Company Board for cause;
The requirement that a special meeting of stockholders may be called only by the Company Board, the chairman of the Company Board or our chief executive officer, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
Controlling the procedures for the conduct and scheduling of the Company Board and stockholder meetings;
The requirement for the affirmative vote of holders of (i) (a) at least 66 23% or 80%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Certificate of Incorporation, and (ii) (a) at least 66 23%, in case of certain provisions, or (b) a majority, in case of other provisions, of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal certain provisions of our Bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;
The ability of the Company Board to amend the Bylaws, which may allow the Company Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and
Advance notice procedures with which stockholders must comply to nominate candidates to the Company Board or to propose matters to be acted upon at a stockholders meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company Board and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of the Company.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company Board or management.
In addition, as a Delaware corporation, we will generally be subject to provisions of Delaware law, including the DGCL. Although we will elect not to be governed by Section 203 of the DGCL, certain provisions of the Certificate of Incorporation will, in a manner substantially similar to Section 203 of the DGCL, prohibit certain of our stockholders (other than certain stockholders who are specified in the Investor Rights Agreement) who hold 15% or more of our outstanding capital stock from engaging in certain business combination transactions with us for a specified period of time unless certain conditions are met.
Any provision of the Certificate of Incorporation, Bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of our capital stock and could also affect the price that some investors are willing to pay for the our Class A Common Stock or Class V Common Stock (collectively, without duplication, Common Stock).
In addition, the provisions of the Investor Rights Agreement provide the stockholders party thereto with certain board rights which could also have the effect of delaying or preventing a change in control.
The Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, other employees, agents or stockholders to us or our stockholders, or any claim for aiding and abetting such alleged breach, (iii) any action asserting a claim against us or any of our current or former directors, officers, other employees, agents or stockholders (a) arising pursuant to any provision of the DGCL, the Certificate of Incorporation (as it may be amended or restated) or the Bylaws or (b) as to which the DGCL confers jurisdiction on the Delaware Court of Chancery or (iv) any action asserting a claim against us or any of our current or former directors, officers, other employees, agents or stockholders governed by the internal affairs doctrine of the law of the State of Delaware shall, as to any action in the foregoing clauses (i) through (iv), to the fullest extent permitted by law, be solely and exclusively brought in the Delaware Court of Chancery; provided, however, that the foregoing shall not apply to any claim (a) as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Delaware 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), (b) which is vested in the exclusive jurisdiction of a court or forum other than the Delaware Court of Chancery, or (c) arising under federal securities laws, including the Securities Act of 1933 (the Securities Act) as to which the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum. Notwithstanding the foregoing, the provisions of Article XII of the Certificate of Incorporation will not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended (the Exchange Act), or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum.
Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in the Certificate of Incorporation. If any action the subject matter of which is within the scope of the forum provisions is filed in a court other than a court located within the State of Delaware (a foreign action) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an enforcement action); and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholders counsel in the foreign action as agent for such stockholder.
This choice-of-forum provision may limit a stockholders ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, stockholders, agents or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of the Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.
Pursuant to the Investor Rights Agreement that we entered into with the Sponsor, certain founder members of the Sponsor and their family members (the Founder Holders), the Sponsor Representative, the Continuing Members and the independent directors of CCH at the closing of the Business Combination in connection with the Business Combination, we agreed to nominate five designees by each of the Sponsor and the Continuing Members, respectively, to serve on the Company Board for so long as each of them and their respective affiliates and specified family members beneficially own certain specified percentages of certain economic interests in us and UBH | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
30, 2020 and the fiscal year ended September 30, 2019 by each of our named executive officers (as determined pursuant to the SECs disclosure requirements for executive compensation in Item 402 of Regulation S-K).
____________
(1)
Amounts reported reflect the aggregate grant date fair value of option awards, calculated in accordance with FASB Topic 718, excluding the impact of potential forfeitures.
The compensation program for the Companys named executive officers for 2020 had three components: base salary, annual cash bonus and stock option grants.
Base Salary
There was a 3% increase for cost of living adjustments for the Companys named executive officers for calendar year 2020, as compared to calendar year 2019.
### Cash Bonus
In 2020, each of the Companys named executive officers had a target bonus, set forth as a percentage of annual base salary. The Board did not make any changes to the target bonuses of the named executive officers, as a percentage of base salary, for 2020. In 2020, target bonuses for the Companys named executive officers other than Mr. Rosas were 25% of base salary. Mr. Rosas target bonus was set at 50% of base salary pursuant to his employment agreement, as described below.
In April 2020, the Board established weighted performance targets for fiscal 2020 that it would consider in approving bonus payments for the 2020. These targets included various corporate objectives related to company financing goals, regulatory submissions, and certain research and development, and commercialization milestones. In January 2021, the Board determined that 90% of the performance targets had been met, and approved the bonus payment to Mr. Rosa at 90% of target and authorized Mr. Rosa, in his discretion, to approve and pay bonuses to Mr. Mertens and Mr. Christianson of up to 90% of target.
### Equity Grants
In November 2019, the Board granted Mr. Rosa an option exercisable for 500,000 shares, with an exercise price of $2.14 per share. 25% of the shares underlying the option vested on November 5, 2020 and the remaining 75% vest in 36 equal monthly installments beginning on December 1, 2020, subject to acceleration upon achieving certain performance milestones. As of September 30, 2020, 20% of the shares underlying the options had vested upon the achievement of performance milestones.
All Other Compensation
Except for car allowances provided to Mr. Rosa and Mr. Christianson and payment of a portion of the premiums for medical and long term disability insurance for all employees, we do not provide perquisites or personal benefits to our named executive officers.
### Employment Agreement
We have an employment agreement with our Chief Executive Officer, Mr. Rosa, and an offer letter for each of Mr. Christianson and Mr. Mertens. Each of our named executive officers has also executed our standard form of proprietary information, inventions assignment and non-competition agreement.
Mr. Rosa
Mr. Rosas employment agreement (Amended Employment Agreement) was effective on August 4, 2017, continues through the third anniversary and automatically renews for an additional one-year period at the end of the initial term and each anniversary thereafter, provided that Mr. Rosa notifies the Board of such renewal at least 30 days prior to the expiration of the initial term or any renewal terms and the Board does not notify Mr. Rosa of its intention not to renew the Amended Employment Agreement.
The Amended Employment Agreement also entitles Mr. Rosa to, among other benefits, the following compensation: (i) an opportunity to participate in any stock option, performance share, performance unit or other equity based long-term incentive compensation plan commensurate with the terms and conditions applicable to other senior executive officers; and (ii) participation in welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent available generally or to our other senior executive officers. Mr. Rosa is entitled to receive a target award value, determined in accordance with the policies and practices generally available to other senior executive officers, for an annual cash bonus and if determined by the Board or a committee of the Board, a long-term incentive bonus. Mr. Rosa is entitled to retain all shares of Common Stock he held as of the commencement date. Mr. Rosa is also additionally entitled to certain severance benefits.
Pursuant to the Amended Employment Agreement, regardless of the manner in which Mr. Rosas service terminates, Mr. Rosa is entitled to receive amounts earned during his term of service, including salary and other benefits. The Company is permitted to terminate Mr. Rosas employment for the following reasons: (i) death or disability, (ii) Termination for Cause (as defined below) or (iii) for any other reason or no reason. Mr. Rosa is permitted Termination for Good Reason (as defined below) of his employment. In addition, he may terminate his employment upon written notice to the Company 30 days prior to the effective date of such termination.
In the event of Mr. Rosas death during the employment period or a termination due to his disability, his beneficiaries or legal representatives shall be provided the sum of (i) any annual base salary earned, but unpaid, for services rendered to the Company on or prior to the date on which the employment period ends and (ii) certain other benefits provided for in the employment agreement (the Unconditional Entitlements). In the event of Mr. Rosas Termination for Cause by the Company or the termination of Mr. Rosas employment as a result of his resignation other than a Termination for Good Reason, Mr. Rosa shall be provided the Unconditional Entitlements.
In the event of a Termination for Good Reason by Mr. Rosa or the exercise by the Company of its termination rights to terminate Mr. Rosa other than by Termination for Cause, death or disability, Mr. Rosa shall be provided the Unconditional Entitlements and, subject to such officer signing and delivering to the Company and not revoking a general release of claims in favor of the Company and certain related parties, the Company shall provide Mr. Rosa a severance amount equal to the aggregate annual base salary he would have earned from the day after his termination date through the end of the employment period and a prorated portion of his cash bonus for the year in which the termination date occurs, provided, however, in no event would the severance amount be less than 12 months or more than 18 months of his annual base salary, continued health insurance coverage for 12 months following his termination date, provided that such coverage shall cease if Mr. Rosa becomes eligible to receive health insurance coverage from another employer group health plan, vesting of all stock options in accordance with the stock option award documents, subject to the same conditions that would be applicable to Mr. Rosa if he remained employed through the end of the employment period and continued vesting of equity awards in accordance with the terms of the award agreements, provided, however, Mr. Rosa would have 90 days from the termination date to exercise any vested options (the Conditional Benefits).
In the event of a change in control during the employment period or within two years after a change in control, if the Company terminates Mr. Rosa other than due to Mr. Rosas death or disability or a Termination for Cause, or Mr. Rosa effects a Termination for Good Reason, the Company will pay to Mr. Rosa, in a lump sum in cash within 30 days after the termination date, the aggregate of: (i) the Unconditional Entitlements; and (ii) the amount equal to the product of 1.5 times the sum of (y) Mr. Rosas annual base salary, and (z) the greater of the target bonus for the then current fiscal year under the 2016 Equity Incentive Plan and 2017 Equity Incentive Plan or any successor annual bonus plan and the average annual bonus paid to or for the benefit of Mr. Rosa for the prior three full years (or any shorter period during which Mr. Rosa had been employed by the Company). In addition, the Company shall provide Mr. Rosa the Conditional Benefits minus Mr. Rosas severance amount.
Under the Amended Employment Agreement, Termination for Cause means a termination of Mr. Rosas employment by the Company due to (A) an act or acts of dishonesty undertaken by Mr. Rosa and intended to result in substantial gain or personal enrichment to Mr. Rosa at the expense of the Company, (B) unlawful conduct or gross misconduct that is willful and deliberate on Mr. Rosas part and that, in either event, is materially injurious to the Company, (C) the conviction of Mr. Rosa of, or Mr. Rosas entry of a no contest or nolo contendere plea to, a felony, (D) breach by Mr. Rosa of his fiduciary obligations as an officer or director of the Company, (E) a persistent failure by Mr. Rosa to perform his duties and responsibilities of his employment under the Amended Employment Agreement, which failure is not remedied by Mr. Rosa within 30 days after his receipt of written notice from the Company of such failure, provided, however, the Company is not obligated to provide written notice and opportunity to cure if the action or conduct is not reasonably susceptible to cure; or (F) material breach of any terms and conditions of the Amended Employment Agreement, any contract or agreement between Mr. Rosa and the Company, or of any Company policy, or of any statutory duty he owes to the Company, which breach has not been cured by Mr. Rosa within ten days after written notice thereof to Mr. Rosa from the Company.
Under the Amended Employment Agreement, Termination for Good Reason means a termination of Mr. Rosas employment by Mr. Rosa within 30 days of the Companys failure to cure, in accordance with the procedures set forth below, any of the following events: (A) a reduction in his annual base salary as in effect immediately prior to such reduction by more than 10% without his written consent, unless such reduction is made pursuant to an across the board reduction applicable to all senior executives of the Company; (B) a material reduction in his duties, position and responsibilities as in effect immediately prior to such reduction without his written consent; provided, however, that a mere change in title or reporting relationship following a Change in Control by itself will not constitute Good Reason for Executives resignation, and further provided that the acquisition of the Company and subsequent conversion of the Company to a division or unit of the acquiring entity will not by itself result in a reduction of duties, position or responsibility; or (C) a material breach of any material provision of the Amended Employment Agreement by the Company. A termination by Mr. Rosa shall not be treated as a Termination for Good Reason if Mr. Rosa consented in writing to the occurrence of the event giving rise to the claim of Termination for Good Reason or unless Mr. Rosa shall have delivered a written notice to the Board within 45 days of Mr. Rosas having actual knowledge of the occurrence of one of such events stating that Mr. Rosa intends to terminate his employment by Termination for Good Reason and specifying the factual basis for such termination, and such event, if capable of being cured, shall not have been cured within 21 days of the receipt of such notice.
### David Rosa
For a discussion of payments to Mr. Rosa upon termination or change in control under his Amended Employment Agreement, see
### Employment Agreement Mr. Rosa
2017 Equity Incentive Plan
In April 2017, the board of directors of the Company adopted and the stockholders approved the 2017 Equity Incentive Plan. The 2017 Equity Incentive Plan is designed to provide a vehicle under which a variety of stock-based and other awards can be granted to the Companys employees, consultants and directors, which align the interests of award recipients with those of our<|endoftext|>Initial business combination.
We may issue notes or other debt securities, or otherwise incur substantial debt, to complete our initial business combination, which may adversely affect our financial condition and thus negatively impact the value of our stockholders investment in us.
Although we have no present commitments to issue any notes or other debt securities, or to otherwise incur outstanding debt, we may choose to incur substantial debt to complete our initial business combination. If we incur any indebtedness without a waiver from the lender of any right, title, interest or claim of any kind in or to any monies held in the trust account, the incurrence of debt could have a variety of negative effects, including: default and foreclosure on our assets if our operating revenues after our initial business combination are insufficient to repay our debt obligations;
using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our shares of common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
We may only be able to complete one business combination with the proceeds of our initial public offering, which will cause us to be solely dependent on a single business, which may have a limited number of products or services.
The net proceeds from our IPO together with the funds received from the sale of the private placement warrants provided us with $176.0million that we may use to complete our initial business combination.
We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously. By consummating our initial business combination with only a single entity, our lack of diversification may subject us to numerous economic, competitive and regulatory developments. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities, which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be solely dependent upon the performance of a single business, property or asset, or dependent upon the development or market acceptance of a single or limited number of products or services.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.20 per share.
While short-term U.S. Central banks in Europe and Japan pursued interest rates below zero in recent years,
and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event that we are unable to complete our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their prorate share of the proceeds held in the trust account, plus any interest income, net of taxes paid or payable (less, in the case we are unable to complete our initial business combination, $100,000 of interest). Negative interest rates could reduce the value of the assets held in trust such that the per-share redemption amount received by public stockholders may be less than $10.20 per share.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholder may be less than $10.20 per public share.
Although we will seek to have all vendors, service providers (excluding our independent registered public accounting firm), prospective partner businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements, they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account.
Upon redemption of our public shares, if we have not consummated an initial business combination within 18months from the closing of our IPO or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the $10.20 per public share initially held in the trust account, due to claims of such creditors. Pursuant to the letter agreement filed as an exhibit to this Annual Report on Form
10-K our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i)$10.20 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.20 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act.
If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete the initial business combination.
We may attempt to consummate our initial business combination with a private company about which little information is available.
By definition, very little public information exists about private companies, and we could be required to make our decision on whether to pursue a potential initial business combination on the basis of limited information, which may result in our initial business combination with a company that is not as profitable as we suspected, if at all.
We may not be able to maintain control of a target business after our initial business combination.
We may structure our initial business combination to acquire less than 100% of the equity interests or assets of a target business, but we will only consummate such business combination if we will become the majority stockholder of the target (or control the target through contractual arrangements in limited circumstances for regulatory compliance purposes) or are otherwise not required to register as an investment company under the Investment Company Act or to the extent permitted by law we may acquire interests in a variable interest entity, in which we may have less than a majority of the voting rights in such entity, but in which we are the primary beneficiary. Even though we may own a majority interest in the target, our stockholders prior to the business combination may collectively own a minority interest in the post-business combination company, depending on valuations ascribed to the target and us in the business combination transaction. In this case, we acquire a 100% controlling interest in the target. However, as a result of the issuance of a substantial number of new shares, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares subsequent to such transaction. Accordingly, this may make it more likely that we will not be able to maintain our control of the target business.
Although our
management team will endeavor to evaluate the risks inherent in a particular target business and its operations, we may not be able to properly ascertain or assess all of the significant risk factors until we complete our business combination.
Holders of warrants will not participate in liquidating distributions if we are unable to complete an initial business combination within the required time period.
If we are unable to complete an initial business combination within the required time period and we liquidate the funds held in the trust account, the warrants will expire and holders will not receive any of such proceeds with respect to the warrants. The foregoing may provide a financial incentive to public stockholders to vote in favor of any proposed initial business combination as each of their warrants would entitle the holder to receive or purchase additional shares of common stock, resulting in an increase in their overall economic stake in us. If a business combination is not approved, the warrants will expire and will be worthless.
First, if a registration statement covering the shares of ClassA common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement, exercise warrants on a cashless basis in accordance with Section3(a)(9) of the Securities Act or another exemption. Third, if we call the public warrants for redemption under certain circumstances, holders may exercise warrants on a cashless basis. In the event of an exercise on a cashless basis, a holder would pay the warrant exercise price by surrendering the warrants for that number of shares of ClassA common stock equal to the lesser of (A)the quotient obtained by dividing (x)the product of the number of shares of ClassA common stock underlying the warrants, multiplied by the excess of the fair market value of our ClassA common stock (defined above) over the exercise price of the warrants by (y)the fair market value and (B) 0.361 per whole warrant, and the number of shares of our ClassA common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised the warrant for cash.
An investor will only be able to exercise a warrant for cash if the issuance of common stock upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the holder of the warrants.
No public warrants will be exercisable for cash and we will not be obligated to issue shares of common stock unless the shares of common stock issuable upon such exercise have been registered or qualified or deemed
to be exempt under the securities laws of the state of residence of the holder of the warrants. If the common stock issuable upon exercise of the warrants are not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, the warrants may be deprived of any value, the market for the warrants may be limited and they may expire worthless if they cannot be sold.
If we call our public warrants for redemption when the price per share of ClassA common stock equals or exceeds $18.00 after the criteria for such redemption have been satisfied, our management will have the option to require any holders that wishes to exercise their warrant (including any warrants held by our sponsor and/or its permitted transferees) to do so on a cashless basis. If our | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Into a loan and security agreement (the Agreement) with Steward Capital Holdings LP (the Steward Capital) wherein Steward Capital made available to us a loan in the aggregate principal amount of up to $10,000,000 (the Loan). On March 9, 2018, the Company and Steward Capital, pursuant to the Agreement, entered into a Secured Term Promissory Note for $5,000,000, having a maturity date of September 9, 2019 (Tranche A). The Note bears interest at a per annum rate equal to the greater of (a) 11.25% or (b) 11.25% plus the Prime Rate, less 3.25%. The Agreement also includes payments of $25,000 in loan commitment fees and $100,000 (1%) of the funding in loan facility charges. The loan commitment fees and $50,000 in loan facility charges associated with Tranche A were recorded as debt discount and amortized over the life of the Loan. There is also an end of term charge of $250,000. The end of term charge was being recorded as accreted costs over the term of the Loan. The Note is secured by substantially all of the assets of the Company.
On October 9, 2018, the Company and Steward Capital, pursuant to the Agreement, entered into a second Secured Term Promissory Note for $5,000,000 having a maturity date of April 9, 2020 (the Second Note) to complete the Agreement for $10,000,000. The Second Note bears interest at a per annum rate equal to the greater of (a) 11.25% or (b) 11.25% plus the Prime Rate, less 3.25%. Pursuant to the terms of the Agreement, the Company is required to pay a $50,000 loan facility charge.
ONDAS HOLDINGS INC.
###
On June 18, 2019, the Company and Steward Capital entered into a letter of agreement to amend the Agreement (the First Amendment) to (i) extend and amend the maturity date, as defined in Section 1.1 of the Agreement, to read in its entirety means September 9, 2020 (the Maturity Date); (ii) waive the repayment requirement to Steward Capital under Section 2.3 of the Agreement, in connection with the then proposed public offering of the Company as described in the Companys Registration Statement on Form S-1, as amended, originally filed on April 12, 2019, and (iii) waive the restriction by Steward Capital on the prepayment of Indebtedness under Section 7.4 of the Agreement. In connection with the waivers, extension and amendment, the Company agreed to pay to Steward Capital, upon the earlier of (a) the completion of the public offering as set forth in Section 2.3 of the Agreement and (b) ten (10) days following the Companys receipt of Stewards written demand therefor, a fee equal to three percent (3%) of the current outstanding principal balance of the Loan (as defined in the Agreement), neither of which have occurred at the time of this filing. The Company concluded that the modifications created by the First Amendment resulted in a troubled debt restructuring under Accounting Standard CodificationDebt (Topic 470) as it was determined that a concession was granted by Steward Capital.
On October 28, 2019, the Company and Steward Capital entered into a letter of agreement to amend the Agreement, as amended (the Second Amendment) wherein the parties agreed to (i) extend and amend the due date for all accrued and unpaid interest starting September 2, 2019 to the Maturity Date and (ii) extend and amend the due date for the 3% fee payable to Steward Capital in connection with the First Amendment and waiver dated June 2019 to be payable on the Maturity Date. In connection with the extensions and amendments, the Company issued Steward Capital 120,000 shares of the Companys common stock valued at $300,000 on December 15, 2019. The value was recorded as debt discount and amortized over the life of the Loan.
The Agreement also contains covenants which included certain restrictions with respect to subsequent indebtedness, liens, loans and investments, asset sales and share repurchases and other restricted payments, subject to certain exceptions. The Agreement also contained financial reporting obligations. An event of default under the Agreement includes, but is not limited to, breach of covenants, insolvency, and occurrence of any default under any agreement or obligation of the Company. In addition, the Agreement contained a customary material adverse effect clause which states that in the event of a material adverse effect, an event of default would occur, and the lender has the option to accelerate and demand payment of all or any part of the loan. A material adverse effect is defined in the Agreement as a material change in our business, operations, properties, assets or financial condition or a material impairment of its ability to perform all obligations under its Agreement.
On September 4, 2020, the Company and Steward Capital entered into the Second Amendment to the Loan and Security Agreement (the Second Amendment) to (i) extend the Maturity Date to September 9, 2021 (the Extended Maturity Date) and agree to convert all accrued interest into the note, resulting in a new principal balance of $11,254,236, (ii) make all accrued and unpaid interest from September 9, 2020 through the date of maturity due on the Extended Maturity Date, (iii) on or before October 1, 2020, Company shall issue 40,000 shares of Companys stock to Steward valued at $9.75 per share, or total of $390,000 (issued on September 30, 2020) and (iv) make the fee of 3% of the outstanding principal balance of the loan, or $300,000 (as defined in the First Amendment) due at the updated maturity date of September 9, 2021.
On December 9, 2020, the Company made a $5,000,000 payment to Steward Capital, applying $4,679,958 to principal and $320,042 to accrued interest. On December 31, 2020, the principal balance was $7,003,568, net of debt discount of $120,711 and accreted cost of $550,000. As of December 31, 2019, the principal balance was $10,000,000, net of debt discount of $252,933 and accreted cost of $359,828. On December 31, 2020 and 2019, accrued interest was $44,579 and $437,569, respectively, and included in accrued expenses and other current liabilities in the balance sheet in the accompanying consolidated financial statements. Interest expense for the years ended December 31, 2020 and 2019 was $1,181,288 and $1,349,782, respectively.
ONDAS HOLDINGS INC.
###
Energy Capital, LLC
On October 1, 2018, we entered into a loan and security agreement (the
### Loan and Security
Agreement) with
Energy Capital, LLC (Energy Capital) wherein Energy Capital made available to us an aggregate principal amount of up to $10,000,000 (the Loan). Between January 29 and August 13, 2019, the Company and Energy Capital entered into a series of secured term promissory notes (the Promissory Notes) for an aggregate of $10,000,000.
The advance proceeds were utilized primarily for operating capital and inventory. The principal amount outstanding under the Promissory Notes bear interest at a per annum rate equal to the greater of (a) 11.25% or (b) 11.25% plus the Prime Rate (as published by the Wall Street Journal (National Edition)), less 3.25%. The Promissory Notes contain customary events of default and affirmative and negative covenants for transactions of this nature. Upon an event of default, Energy Capital has the right to require the Company to prepay the outstanding principal amount of the Promissory Notes plus all accrued and unpaid interest. All amounts outstanding under the Promissory Notes are secured by a lien on the Companys assets, subject to terms of outstanding debt obligations, and become due and payable on the earlier to occur of September 30, 2019 or the completion by the Company of a capital raise with minimum proceeds to the Company of $20 million.
On April 2, 2019, the Company and Energy Capital entered into a First Amendment to Loan and Security Agreement (the First Amendment) to (i) amend the notice provisions of an Advance Request under the Loan Agreement from at least five (5) business days to at least one (1) business day before the Advance Date, (ii) increase the amount of the Advance from up to $1,000,000 a month to up to $1,500,000 a month, and (iii) change the definition of the term Maturity Date from the earlier of September 30, 2019 or 10 business days following the date of an Underwritten Public Offering to September 30, 2020. The Promissory Notes, with an aggregate of $10,563,104 principal and interest outstanding, were converted into 4,225,242 Units on September 27, 2019 (see NOTE 9 for additional details), and the debt owed under the Promissory Notes was extinguished. As a result, the Promissory Notes terminated pursuant to their terms.
NOTE 8 NOTES PAYABLE AND OTHER FINANCING AGREEMENTS
On September 14, 2017, the Company and an individual entered into a convertible promissory note with unilateral conversion preferences by the individual (the Convertible Promissory Note). On July 11, 2018, the Companys Board approved certain changes to the Convertible Promissory Note wherein the conversion feature was changed from unilateral to mutual between the individual and the Company.
On both December 31, 2020 and 2019, the total outstanding balance of the convertible promissory note (the Note) was $300,000. The maturity date of the Note is based on the payment of 0.6% of quarterly gross revenue until 1.5 times the amount of the Note is paid. Accrued interest on December 31, 2020 and 2019 was $36,329 and $31,243, respectively. Interest expense for both years ended December 31, 2020 and 2019 was $15,000.
On September 27, 2019, the holder of the Note was granted a warrant to purchase 140,678 shares of common stock of the Company. The fair value of this warrant was recorded as financing costs in the accompanying consolidated financial statements. See NOTE 9 for further details.
On May 4, 2020, the Company applied for a loan pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), as administered by the U.S. Small Business Administration (the SBA). The loan, in the principal amount of $666,091 (the PPP Loan), was disbursed by Wells Fargo Bank, National Association (Lender) on May 6, 2020, pursuant to a Paycheck Protection Program Promissory Note and Agreement (the Note and Agreement).
The program was later amended by the Paycheck Protection Flexibility Act of 2020 whereby debtors were granted a minimum maturity date of the five-year anniversary of the funding date and a deferral of ten months from the end of the covered period. The PPP Loan bears interest at a fixed rate of 1.00% per annum. Monthly principal and interest payments, less the amount of any potential forgiveness (discussed below), will commence after the sixteen-month anniversary of the funding date. The Company did not provide any collateral or guarantees for the PPP Loan, nor did the Company pay any facility charge to obtain the PPP Loan. The Note and Agreement provides for customary events of default, including those relating to failure to make payment, bankruptcy, breaches of representations and material adverse effects. The Company may prepay the principal of the PPP Loan at any time without incurring any prepayment charges.
ONDAS HOLDINGS INC.
###
All or a portion of the PPP Loan may be forgiven by the SBA upon application to the Lender by the Company within 10 months after the last day of the covered period. The Lender will have 90 days to review borrowers forgiveness application and the SBA will have an additional 60 days to review the Lenders decision as to whether the borrowers loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, and covered utilities, and certain covered mortgage interest payments during the twenty-four-week period beginning on the date of the first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $100,000, prorated annually. Not more than 40% of the forgiven amount may be for non-payroll costs. Although the Company currently believes that its use of the PPP Loan will meet the conditions for forgiveness of the PPP Loan, the Company cannot assure that the PPP Loan will be<|endoftext|>Partner at Parthenon Capital. However, each expressly disclaims beneficial ownership of such securities, except to the extent of his or its pecuniary interest therein. The address for the foregoing persons is c/o Parthenon Capital Partners, Four Embarcadero Center, Suite 3610, San Francisco, California 94111.
(4)
Mr. Hsiehs holdings consists of (i) 8,116,899 shares of Class C common stock held by The JLSSAA Family Trust, (ii) 4,311,760 shares of Class C common stock held by JLSA, LLC, (iii) 48,959,976 shares of Class C common stock held by Trilogy Mortgage Holdings, Inc. and (iv) 112,555,432 shares of Class C common stock held by Trilogy Mortgage Investors Six, LLC. Mr. Hsieh is deemed to have beneficial ownership and voting and investment power over the securities held by JLSA, LLC and Trilogy Mortgage Holdings, Inc.
(5)
Except for affiliates of Anthony Hsieh, shares of Class C common stock held for the benefit of other Executive Officers or Directors are done so through intermediate holding entities, namely Trilogy Management Investors Six, LLC (TMI 6), Trilogy Management Investors Seven, LLC (TMI 7), and Trilogy Management Investors Eight, LLC (TMI 8). These entities (collectively Management TMIs) are controlled and managed by Mr. Hsieh, who holds an economic interest in TMI 6 only.
(6)
Mr. Golson and Mr. Dodson serve as Directors of the company in their capacity as representatives of Parthenon Capital and its affiliates. See footnote 3 for further detail.
Item 13.
LD Holdings paid management fees of
$1.0 million to a Unitholder of LD Holdings during the year ended December31, 2020. LD Holdings employed certain employees that provided services to a Unitholder whose salaries totaled
$0.2 million the for the year ended December31, 2020.
Registration Rights Agreement and Stockholders Agreement
We are party to a Registration Rights Agreement, dated February 11, 2021, under which we may be required to register the sale of shares of our ClassA Common Stock held by the Parthenon Stockholders and Hsieh Stockholders. The registration rights agreement also requires us to make available and keep effective shelf registration statements permitting sales of shares into the market from time to time over an extended period. In addition, the Parthenon Stockholders and the Hsieh Stockholders have the ability to exercise certain demand registration rights and/or piggyback registration rights in connection with registered offerings requested by any of such holders or initiated by us.
Additionally, we are party to a Stockholders Agreement with the Parthenon Stockholders and Hsieh Stockholders (and their respective permitted transferees thereunder party thereto from time to time). Pursuant to the Stockholders Agreement, the Parthenon Stockholders have (i) the right to designate two nominees for election to our board of directors so long as such group owns at least 15% of the total voting power of our common stock, and (ii) otherwise one nominee for election to our board of directors so long as such group owns at least 5% of the total voting power of our common stock. Additionally, the Hsieh Stockholders, have (i) the right to designate two nominees for election to our board of directors so long as such group owns at least 5% of the total voting power of our common stock, and (ii) upon the Parthenon Stockholders ceasing to own more than 15% of the total voting power of our common stock, the Hsieh Stockholders shall have the right to designate an additional nominee to the our board of directors so long as (a) such nominee is independent under the NYSE listing standards and (b) the Hsieh Stockholders own greater than 25% of the total voting power of our common stock.
### Tax Receivable Agreement
The Continuing LLC Members may from time to time (subject to the terms of the Holdings LLC Agreement regarding exchange rights) exchange an equal number of Holdco Units and shares of ClassB and Class C Common Stock for cash or for shares of ClassA Common Stock of loanDepot, Inc. on a one-for-one basis, at our election. LD Holdings (and each of its subsidiaries classified as a partnership for federal income tax purposes) intends to make an election under Section754 of the Code effective for the 2021 taxable year and each subsequent taxable year in which an exchange of Holdco Units and shares of ClassB and Class C Common Stock for shares of ClassA Common Stock occurs. Our purchase of Holdco Units from the Exchanging Members in connection with our initial public offering and the exchanges of Holdco Units and shares of ClassB and Class C Common Stock for shares of ClassA Common Stock are expected to result, with respect to loanDepot, Inc., in increases in the tax basis of the assets of LD Holdings that otherwise would not have been available. These increases in tax basis may reduce the amount of tax that loanDepot, Inc. would otherwise be required to pay in the future. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets.
We are part to a tax receivable agreement with the Parthenon Stockholders, Parthenon affiliates owning Holdco Units and certain of the Continuing LLC Members, as part of the consideration received by such Continuing LLC Members in exchange for the sale of Holdco Units to loanDepot, Inc., that will provide for the payment from time to time by loanDepot, Inc. to such parties or their permitted assignees of 85% of the amount of the benefits, if any, that loanDepot, Inc. realizes or under certain circumstances (such as a change of control) is deemed to realize as a result of (i)the aforementioned increases in tax basis, (ii)any incremental tax basis adjustments attributable to payments made pursuant to the tax receivable agreement and (iii)any deemed interest deductions arising from payments made by us under the tax receivable agreement. These payment obligations are obligations of loanDepot, Inc. and not of LD Holdings. For purposes of the tax receivable agreement, subject to certain exceptions noted below, the benefit deemed realized by loanDepot, Inc. generally will be computed by comparing the actual income tax liability of loanDepot, Inc. (calculated with certain assumptions) to the amount of such taxes that loanDepot, Inc. would have been required to pay had there been no increase to the tax basis of the assets of LD Holdings as a result of our purchase of Holdco Units from the Exchanging Members in connection with our initial public offering and the exchanges of Holdco Units and had loanDepot, Inc. not derived any tax benefits in respect of payments made under the tax receivable agreement. The term of the tax receivable agreement will continue until all such tax benefits have been utilized or deemed utilized or expired, unless we materially breach any of our material obligations under the agreement, elect an early termination of the agreement or undergo a change of control. Estimating the amount of payments that may be made under the tax receivable agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the tax receivable agreement, will vary depending upon a number of factors, including: the timing of any subsequent exchanges of Holdco Unitsfor instance, the increase in any tax deductions will vary depending on the fair value, which may fluctuate over time, of the depreciable or amortizable assets of LD Holdings at the time of each exchange; the price of shares of our ClassA Common Stock at or around the time of the exchangethe increase in any tax deductions, as well as the tax basis increase in other assets, of LD Holdings is affected by the price of shares of our ClassA Common Stock at the time of the exchange; the extent to which such exchanges are taxableif an exchange is not taxable for any reason, increased deductions will not be available; the amount and timing of our incomeloanDepot, Inc. generally will be required to pay 85% of the deemed benefits as and when deemed realized; and the allocation of basis increases among the assets of LD Holdings and certain tax elections affecting depreciation.
Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreement, we expect that the tax savings associated with the purchase of Holdco Units from the Exchanging Members in connection with future exchanges of Holdco Units and ClassB Common Stock as described above would aggregate to approximately $737.6 million over 15years from the date of our initial public offering based on an initial public offering price of $14.00 per share of our ClassA Common Stock, and assuming all future exchanges would occur one year after our initial public offering. Under such scenario, we would be required to pay to the Parthenon Stockholders, Parthenon affiliates owning Holdco Units and certain of the Continuing LLC Members or their permitted assignees approximately 85% of such amount, or approximately $627.0 million, over the 15year period from the date of the initial public offering. We note, however, that the analysis set forth above assumes no material changes in the relevant tax law. We are not able to predict the specific effect of such future tax legislation on this analysis.
If LD Holdings does not have taxable income, loanDepot, Inc. generally is not required to make payments under the tax receivable agreement for that taxable year because no benefit actually will have been realized. Nevertheless, any tax benefits that do not result in realized benefits in a given tax year likely will generate tax attributes that may be utilized to generate benefits in previous or future tax years and the utilization of such tax attributes will result in payments under the tax receivable agreement. There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, (a)the payments under the tax receivable agreement exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement and/or (b)distributions to loanDepot, Inc. by LD Holdings are not sufficient to permit loanDepot, Inc. to make payments under the tax receivable agreement after it has paid its taxes and other obligations. loanDepot, Inc.s obligations pursuant to the tax receivable agreement will rank pari passu with its other general trade credit obligations. The payments under the tax receivable agreement are not conditioned upon any recipients continued ownership of us or LD Holdings.
The effects of the tax receivable agreement on our consolidated balance sheet upon purchase or exchange of Holdco Units are as follows: we will record an increase in deferred tax assets for the estimated income tax effects of the increase in the tax basis of the assets owned by loanDepot, Inc. based on enacted federal, state and local income tax rates at the date of the exchange or purchase. To the extent we estimate that we will not realize the full benefit represented by the deferred tax asset, based on an analysis of expected future earnings, we will reduce the deferred tax asset with a valuation allowance; we will record an increase in liabilities for 85% of the estimated realizable tax benefit resulting from (i)the increase in the tax basis of the purchased or exchanged interests as noted above and (ii)certain other tax benefits subject to the tax receivable agreement; and we will record an increase to additional paid-in capital in an amount equal to the difference between the increase in deferred tax assets and the increase in liability due to the Parthenon Stockholders and certain of the Continuing LLC Members under the tax receivable agreement. The amounts to be recorded for both the deferred tax assets and the liability for our obligations under the tax receivable agreement have been estimated. All of the effects of changes in any of our estimates after the date of the exchange or purchase will be included in our net income. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
And June 30, 2021.
Significant Concentrations
Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and restricted cash. The Company maintains its cash and cash equivalents at high-quality financial institutions. For the fiscal years ended June 30, 2021 and 2020, cash deposits exceeded the amount of federal insurance provided on such deposits. As of June 30, 2021 and 2020, the Company had cash, and cash equivalents with a single financial institution with a balance of $41.0 million and $10.0 million, respectively. The Company has never experienced any losses related to its investments in cash and cash equivalents.
REZOLUTE, INC.
Note 15
Subsequent Events
### Equity Issuances under EDA
For the period from July 1, 2021 through August 31, 2021, the Company sold 138,388 shares of its common stock pursuant to the EDA discussed in Note 7 for net proceeds of approximately $1.5million.
LPC Purchase Agreement
In August 2021, the Company entered into a purchase agreement(the Purchase Agreement)and a registration rights agreement (the "RRA") with LPC, which provides that the Company may sell to LPC up to $20.0 million of shares (the Purchase Shares) of its common stock. The Company concurrently filed a prospectus supplement with the SEC to register the shares issuable under the Purchase Agreement. The aggregate number of shares that the Company can sell to LPC under the Purchase Agreement may not exceed 1,669,620 shares of common stock, subject to certain exceptions set forth in the Purchase Agreement.
LPCs initial purchase consisted of 95,708 Purchase Shares at a purchase price of approximately $10.45 per share for a total purchase price of $1.0 million and the Company issued the commitment shares for 33,799 shares of common stock to LPC as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement. Subject to the terms of the Purchase Agreement, the Company has the right, in its sole discretion, to present LPC with a purchase notice (a Regular Purchase Notice), directing LPC to purchase up to 25,000 Purchase Shares (a Regular Purchase), which amounts may be increased under certain circumstances. LPCs committed obligation under any single Regular Purchase generally will not exceed $2.0 million. The Purchase Agreement provides for a purchase price per Purchase Shares for each Regular Purchase (the Purchase Price) equal to the lesser of (i) the lowest sale price of the common stock on the Nasdaq Capital Market (NCM) on the purchase date of such shares; and (ii) the average of the three lowest closing sale prices for the common stock traded on the NCM during the ten consecutive business days ending on the business day immediately preceding the purchase date of such shares.
In addition, on any date on which the Company submits a Regular Purchase Notice for the maximum amount allowed for such a Regular Purchase to LPC, the Company also has the right, in its sole discretion, to present LPC with an accelerated purchase notice (an Accelerated Purchase Notice), directing LPC to purchase an amount of Purchase Shares (an Accelerated Purchase), which number of Purchase Shares will not exceed the lesser of (i)300% of the number of shares purchased pursuant to such Regular Purchase Notice and (ii)30% of the total volume of shares of the common stock traded on the NCM during the Accelerated Purchase period. The Purchase Price per Purchase Share for each such Accelerated Purchase will be equal to the lesser of 97% of (i) the volume-weighted average price of the common stock on the NCM during the applicable Accelerated Purchase period on the applicable Accelerated Purchase date; and (ii) the closing sale price of the common stock on the NCM on the applicable Accelerated Purchase date.
Pursuant to the RRA, the Company agreed to maintain effectiveness of the registration statement and the related prospectus supplement within prescribed deadlines set forth in the RRA. In addition, the Company is required to use its reasonable best efforts to secure and maintain its listing of the Purchase Shares on the Nasdaq Capital Market. LPC has no obligation to purchase shares under the Purchase Agreement unless the Company complies with the terms of the RRA.
### PART IV
Item 15.
(a)(1) Financial Statements
Reference is made to Item 8 of Part II for the Companys consolidated financial statements filed as part of this Report.
All financial statement schedules are omitted because they are not applicable, or the amounts are immaterial, not required, or the required information is presented in the financial statements and notes thereto included in Item 8 of Part II of this Report.
(a)(3) Exhibits
Certain of the agreements filed as exhibits to this Report contain representations and warranties by the parties to the agreements that have been made solely for the benefit of the parties to the agreement. These representations and warranties: may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements; may apply standards of materiality that differ from those of a reasonable investor; and were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any other time. Investors should not rely on them as statements of fact.
The following exhibits of Rezolute, Inc. (formerly AntriaBio, Inc.) are filed or incorporated by reference as part of this Report.For exhibits that are incorporated by reference, we have indicated the document previously filed with the SEC in which the exhibit was included.
Exhibit No.
Description
1.1
Equity Distribution Agreement, dated December 18, 2020, by and between Rezolute, Inc. and Oppenheimer & Co. Inc.
(incorporated by reference to Exhibit 1.2 of the Registration Statement on Form S-3 filed on December 18, 2020)
2.1
Agreement and Plan of Merger dated as of June 18, 2021, by and between Rezolute, Inc. and Rezolute Nevada Merger Corporation
(incorporated by reference to Exhibit 2.1 of the Companys Form 8-K filing on June 21, 2021)
3.1
Delaware Certificate of Merger, effective as of June 18, 2021
(incorporated by reference to Exhibit 3.1 of the Companys Form 8-K filing on June 21, 2021)
3.2
Nevada Articles of Merger, effective as of June 18, 2021
(incorporated by reference to Exhibit 3.2 of the Companys Form 8-K filing on June 21, 2021)
3.3
Amended and Restated Articles of Incorporation of Rezolute Nevada Merger Corporation
(incorporated by reference to Exhibit 3.3 of the Companys Form 8-K filing on June 21, 2021)
3.4
Amended and Restated Bylaws of Rezolute Nevada Merger Corporation*
4.1
### Form of Financing Warrant
(incorporated by reference to Exhibit 4.1 of the Company's Form 8-K filing on April 3, 2018
)
4.2
Form of Common Stock Purchase Warrant by and between the Company and the Investor identified therein ( incorporated by reference to Exhibit 4.1 the Companys 8-K filing on October 13, 2020
)
10.1
Second Amended and Restated Employment Agreement with Nevan Elam, dated February 23, 2015
10.2
Second Amended and Restated Employment Agreement with Sankaram Mantripragada, dated February 23, 2015
10.3
### AntriaBio, Inc. 2014 Stock and Incentive Plan
(incorporated by reference to Appendix B to the Companys Definitive Information Statement on Schedule 14C filed on April 10, 2014)
10.4
AntriaBio, Inc. 2015 Non Qualified Stock Option Plan
10.5
AntriaBio, Inc. 2016 Non Qualified Stock Option Plan
(incorporated by reference to the Companys Form 8-K filing on November 4, 2016)
10.6
AntriaBio, Inc. 2016 Non Qualified Stock Option Plan, as Amended
(incorporated by reference to the Companys Form 10-K on September 21, 2017)
10.7
2019 Non Qualified Stock Option Plan
(incorporated by reference to Exhibit 10.3 of the Companys Form 8-K filing on August 6, 2019)
10.8
Development and License Agreement with ActiveSite Pharmaceuticals, Inc.
(incorporated by reference to the Companys Form 8-K filing on August 7, 2017)
10.9
Form of Purchase Agreement with Lincoln Park Capital Fund, LLC
10.10
Form of Registration Right Agreement with Lincoln Park Capital Fund, LLC
10.11
### Common Stock Purchase Agreement
(incorporated by reference to the Companys Form 10-Q filing on February 14, 2018)
10.12
### License Agreement with Xoma (US) LLC
(incorporated by reference to the Companys 10-Q filing on February 14, 2018)
10.13
Amendment No. 2 to the Stock Purchase Agreement with Xoma (US) LLC
(incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q filing on February 14, 2019)
10.14
Amendment No. 2 to the License Agreement with Xoma (US) LLC
(incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q filing on February 14, 2019)
10.15
Purchase Agreement for Shares of Series AA Preferred Stock with Genexine, Inc. and Handok, Inc.
(incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q filing on February 14, 2019)
10.16
First Amendment to the 2016 Non-Qualified Stock Option Plan
(incorporated by reference to Exhibit C to the Companys Schedule 14A definitive proxy statement filing on April 5, 2019)
10.17
Employment Agreement between Keith Vendola and the Company dated July 31, 2019
(incorporated by reference to the Company's Form 8-K filing on August 6, 2019)
10.18
Master Services Agreement with Genexine, Inc. and Handok, Inc., effective as of July 1, 2019
(incorporated by reference to Exhibit 10.1 of the Companys Form 10-Q filing on November 14, 2019)
10.19
Amendment No. 3 to the License Agreement with Xoma (US) LLC
(incorporated by reference to Exhibit 10.1 of the Companys Form 10-Q filing on May 14, 2020)
10.20
License Agreement with Handok, Inc. entered into on September 15, 2020
(incorporated by reference to Exhibit 10.21 of the Companys Form 10-K filing on October 13, 2020)
10.21
Securities Purchase Agreement, dated as of October 8, 2020, by and between Rezolute. Inc. and the investors identified therein ( incorporated by reference to Exhibit 10.1 to the Companys Form 8-K filing on October 13, 2020
)
10.22
Registration Rights Agreement, dated as of October 8, 2020, by and between Rezolute, Inc., and the Investors identified therein ( incorporated by reference to Exhibit 10.2 of the Companys Form 8-K filing on October 13, 2020
)
10.23
Loan and Security Agreement, dated as of April 14, 2021 by and among Rezolute, Inc., SLR Investment Corp, as collateral agent and lender, and the other lenders named therein
(incorporated by reference to Exhibit 10.1 of the Companys Form 10-Q filing on May 17, 2021)
10.24
Exit Fee Agreement, dated as of April 14, 2021 by and among Rezolute, Inc., SLR Investment Corp, as collateral agent and lender, and the other lenders named therein
(incorporated by reference to Exhibit 10.2 of the Companys Form 10-Q filing on May 17, 2021)
10.25
### Rezolute, Inc. 2021 Equity Incentive Plan
(incorporated by reference to Exhibit 4.2 of the Registration Statement on Form S-8 filed on July 28, 2021)
21.1
Listing of Subsidiaries*
23.1
Consent of Plante & Moran, PLLC*
31.1
Certifications of Chief Executive Officer and Principal Financial Officer as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**
32.1
Certifications of Chief Executive Officer and Principal Financial Officer as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**
101.INS
XBRL Instance Document*
101.SCH
101.CAL
XBRL Taxonomy Extension Calculation Linkbase*
101.DEF
XBRL Taxonomy Extension Definition Linkbase*
101.LAB
XBRL Taxonomy Extension Label Linkbase*
101.PRE
XBRL Taxonomy Extension Presentation Linkbase*
*
Filed with the Original Filing.
**
### Filed herewith.
In accordance with SEC Release 33-8238, Exhibit 32.1 is being furnished and not filed.
Item 16. Form 10-K Summary.
Not applicable<|endoftext|>Governance policies, including the Company's Corporate Governance Guidelines, Corporate Code of Business Conduct and Ethics and Financial Code of Ethics for Senior Officers, as well as the charters for the committees of the Board (Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee) may also be viewed at the Company's website. The Code of Ethics for the Chief Executive Officer and Senior Financial Officers applies to our principal executive officer, principal financial officer, principal accounting officer and certain other senior officers. We intend to disclose any amendments to or waivers from our Code of Ethics for the Chief Executive Officer and Senior Financial Officers by posting such information on our website at www.targethospitality.com
, within four business days following the date of the amendment or waiver. Copies of such documents will be sent to shareholders free of charge upon written request to the corporate secretary at the address shown on the cover page of this repor t.
### Item 11. Executive Compensation
The information required by Item 11 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders under the headings Executive Compensation, Director Compensation, and Compensation Committee Interlocks and Insider Participation.
Item 12.
Security Ownership of Certain Beneficial Owners and Management Related Shareholder Matters
The information required by Item 12 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders under the heading Security Ownership of Certain Beneficial Owners and Management.
### Item 13.
The information required by Item 13 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders under the headings Certain Relationships and Related Party Transactions and Director Independence.
Item 14.
The information required by Item 14 hereby is incorporated by reference to such information as set forth in the Company's Definitive Proxy Statement for the 2021 Annual Meeting of Shareholders under the heading Audit Fee Disclosure.
Part IV
### Item 15.Exhibits
Exhibit No.
Exhibit Description
2.1
Agreement and Plan of Merger, among Platinum Eagle Acquisition Corp., Topaz Holdings Corp., Arrow Bidco, LLC and Algeco Investments B.V., dated as of November 13, 2018 (incorporated by reference to the corresponding exhibit to Platinum Eagles Registration Statement on Form S-4 (File No. 333-228363), filed with the SEC on November 13, 2018).
2.3
Amendment to Agreement and Plan of Merger, among Platinum Eagle Acquisition Corp., Topaz Holdings LLC, Arrow Bidco, LLC, Algeco Investments B.V. and Algeco US Holdings LLC, dated as of January 4, 2019 (incorporated by reference to the corresponding exhibit to Amendment No. 2 to Platinum Eagles Registration Statement on Form S-4 (File No. 333-228363), filed with the SEC on January 4, 2019).
2.5
Asset Purchase Agreement, dated as of June 19, 2019, by and among Superior Lodging, LLC, Superior Lodging Orla South, LLC, Superior Lodging Kermit, LLC, WinCo Disposal, LLC, the Members of WinCo Disposal, LLC, Superior Lodging, LLC, as the representative of the Sellers and Target Logistics Management, LLC (incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K, filed with the SEC on June 21, 2019).
3.1
Certificate of Incorporation of Target Hospitality Corp. (incorporated by reference to Exhibit 3.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
3.2
Amended and Restated Bylaws of Target Hospitality Corp. (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K, filed with the SEC on November 6, 2020).
3.3
Certificate of Validation of Platinum Eagle Acquisition Corp. (incorporated by reference to Exhibit 3.1 to the Companys Quarterly Report on Form 10-Q, filed with the SEC on August 10, 2020)
4.1
Form of Specimen Common Stock Certificate of Target Hospitality Corp. (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
4.2
Form of Warrant Certificate of Target Hospitality Corp. (incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
4.3
Warrant Agreement between Platinum Eagle Acquisition Corp. and Continental Stock Transfer & Trust Company, dated as of January 11, 2018 (incorporated by reference to Exhibit 4.1 to Platinum Eagles Current Report on Form 8-K, filed with the SEC on January 18, 2018).
4.4
Indenture dated March 15, 2019, by and among Arrow Bidco, the guarantors party thereto and Deutsche Bank Trust Company Americas, as trustee and collateral agent (incorporated by reference to Exhibit 4.4 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
4.5*
Description of the Companys Securities
10.1
ABL Credit Agreement dated March 15, 2019, by and among Arrow Bidco, LLC, Topaz Holdings LLC, Target Logistics Management, LLC, RL Signor Holdings, LLC and each of their domestic subsidiaries, and the lenders named therein (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.2
Earnout Agreement dated March 15, 2019 by and among the Company and the Founder Group (as defined therein) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.3
Escrow Agreement dated March 15, 2019 by and among the Company, the Founder Group and the escrow agent named therein (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.4
Amended and Restated Registration Rights Agreement dated March 15, 2019 by and among the Company, Arrow Seller, the Algeco Seller and the other parties named therein (incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.5
Amended and Restated Private Placement Warrant Purchase Agreement among Platinum Eagle Acquisition Corp., Platinum Eagle Acquisition LLC, Harry E. Sloan and the other parties thereto, dated as of January 16, 2018 (incorporated by reference to Exhibit 10.14 to Platinum Eagles Current Report on Form 8-K, filed with the SEC on January 18, 2018).
10.6+
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.7+
Target Hospitality 2019 Incentive Award Plan (incorporated by reference to Exhibit 10.7 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.8+
Employment Agreement with James B. Archer (incorporated by reference to Exhibit 10.8 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.9+
Employment Agreement with Heidi D. Lewis (incorporated by reference to Exhibit 10.10 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.10+
Amendment No. 1 to Employment Agreement with Heidi D. Lewis.(incorporated by reference to Exhibit 10.21 to the Companys Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 13, 2020).
10.11+
Employment Agreement with Troy Schrenk (incorporated by reference to Exhibit 10.11 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
10.12+
Form of Executive Nonqualified Stock Option Award Agreement (2019 Awards) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on May 24, 2019).
10.13+
Form of Executive Restricted Stock Unit Agreement (2019 Awards) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on May 24, 2019).
10.14+
Employment Agreement with Eric Kalamaras (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on August 15, 2019).
10.15+
Employment Agreement with Jason Vlacich (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K/A, filed with the SEC on August 15, 2019).
10.16+
Form of Executive Restricted Stock Unit Agreement (2020 Awards) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on March 6, 2020).
10.17+
Form of Executive Nonqualified Stock Option Award Agreement (2020 Awards) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 6, 2020).
10.18+
Form of Restricted Stock Unit Agreement (Non-Employee Directors 2020) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on May 21, 2020).
10.19+
Amendment No. 1 to Employment Agreement with Troy Schrenk (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 1, 2021).
10.20+
Form of Restricted Stock Unit Agreement (Executives 2020 Salary Reduction) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on April 2, 2020).
10.21+
Form of Restricted Stock Unit Agreement (Non-Employee Directors 2020 Retainer Reduction) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on April 2, 2020).
10.22+
Form of Salary Program Termination Agreement (Executives with Employment Agreements) (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on October 2, 2020).
10.23+
Form of Director Retainer Program Termination Agreement (Non-Employee Directors) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on October 2, 2020).
10.24+
Executive Restricted Stock Units Termination Agreement, dated August 5, 2020, by and between the Company and James B. Archer (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K, filed with the SEC on August 7, 2020).
10.25+
Form of Executive Restricted Stock Unit Agreement (2021 Awards) (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K, filed with the SEC on March 1, 2021.
10.26+
Form of Executive Stock Appreciation Rights Award Agreement (2021 Awards) (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K, filed with the SEC on March 1, 2021).
14.1
Code of Ethics for the Chief Executive Officer and Senior Financial Officers, effective March15, 2019 (incorporated by reference to Exhibit 14.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
21.1
Subsidiaries of the registrant (incorporated by reference to Exhibit 21.1 to the Companys Current Report on Form 8-K, filed with the SEC on March 21, 2019).
23.1*
Consent of Ernst & Young LLP
31.1*
Certification of Chief Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act
31.2*
Certification of Chief Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
32.1**
Certification of Chief Executive Officer Pursuant to 18 USC.
32.2**
Certification of Chief Financial Officer Pursuant to 18 USC.
101.INS
XBRL Instance Document
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
-----------------
* Filed herewith
** The certifications furnished in Exhibit 32.1 and 32.2 hereto are deemed to accompany this Form 10-K/A and will not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
A majority of the votes cast by public stockholders, we would need 17,250,001 of public shares sold in the Initial Public Offering to be voted in favor of a transaction (assuming all outstanding stock is voted) in order to have such initial business combination approved). We expect that our initial stockholders and their permitted transferees will own at least 20% of our outstanding common stock at the time of any such stockholder vote.
If we are able to consummate an initial business combination, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay and the payment of the deferred underwriting commissions. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets, after payment of the deferred underwriting commissions, to be less than $5,000,001 (so that we do not then become subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination.
At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights, and therefore we will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption.
Our Sponsor, officers and directors have agreed that we must complete our initial business combination within 24 months from the closing of the Initial Public Offering. For example, the outbreak of COVID-19 continues to grow both in the United States and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; , in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our Warrants will expire worthless.
The securities in which we invest the proceeds held in the Trust Account could bear a negative rate of interest, which could reduce the interest income available for payment of taxes or reduce the value of the assets held in trust such that the per-share redemption amount received by stockholders may be less than $10.00 per share.
The net proceeds of the Initial Public Offering and certain proceeds from the sale of the Private Placement Warrants, in the amount of $345,000,000, are held in an interest-bearing Trust Account. The proceeds held in the Trust Account may only be invested only in U.S. While short-term U.S. In the event of very low or negative yields, the amount of interest income (which we may use to pay our taxes, if any) would be reduced. In the event that we are unable to complete our initial business combination, our public stockholders are entitled to receive their pro-rata share of the proceeds then held in the Trust Account, plus any interest income (less up to $100,000 of interest to pay dissolution expenses). If the balance of the Trust Account is reduced below $345,000,000 as a result of negative interest rates, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If we seek stockholder approval of our initial business combination, our Sponsor, directors, officers, advisors or any of their affiliates may elect to purchase shares or Public Warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public float of our securities.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our Sponsor, directors, officers, advisors or any of their affiliates may purchase shares or Public Warrants in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. The purpose of such purchases could be to vote such shares in favor of the initial business combination and thereby increase the likelihood of obtaining stockholder approval of the initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of Public Warrants could be to reduce the number of Public Warrants outstanding or to vote such Public Warrants on any matters submitted to the Public Warrant holders for approval in connection with our initial business combination.
To liquidate your investment, therefore, you may be forced to sell your public shares or Public Warrants, potentially at a loss.
(ii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision relating to stockholders' rights or pre-initial business combination activity; In addition, if we have not completed our initial business combination within 24 months from the closing of the Initial Public Offering for any reason, compliance with Delaware law may require that we submit a plan of dissolution to our then existing stockholders for approval prior to the distribution of the proceeds held in our Trust Account. Holders of Public Warrants will not have any right to the proceeds held in the Trust Account with respect to the warrants. Accordingly, to liquidate your investment, you may be forced to sell your public shares or Public Warrants, potentially at a loss.
Our units, Class A common stock and Public Warrants are listed on the NYSE. Generally, we must maintain a minimum number of holders of our securities. For instance, in order for our Class A common stock to be listed upon the consummation of our initial business combination, at such time, our share price would generally be required to be at least $4.00 per share, our total market capitalization would be required to be at least $200,000,000, the aggregate market value of publicly-held shares would be required to be at least $100,000,000 and we would be required to have at least 400 round lot holders.
If the NYSE delists any of our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect such securities could be quoted on an over-the-counter market.
Our units, our Class A common stock and Public Warrants are listed on the NYSE, and as a result are covered securities.
Since the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be used to complete an initial business combination with a target business, which at the time of the Initial Public Offering had not been selected, we may be deemed to be a blank check company under the United States securities laws. However, because we have net tangible assets in excess of$5,000,000 and timely file Current Reports on Form 8-K, including an audited balance sheet of the company demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419.
If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in the Initial Public Offering, which we refer to as the Excess Shares, without our prior consent. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your shares in open market transactions, potentially at a loss.
While we believe there are numerous target businesses we could potentially acquire our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. Furthermore, if we are obligated to pay cash for the shares of Class A common stock which our public stockholders redeemed and, in the event we seek stockholder approval of our initial business combination, we make purchases of our Class A common stock, potentially reducing the resources available to us for our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account, and our Warrants will expire worthless.
If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering, we may be unable to complete our initial business combination.
Managements plans to address this need for capital through the Initial Public Offering and potential loans from certain of our affiliates are discussed in the section of this Form 10-K/A titled Managements Discussion and Analysis of Financial Condition and Results of Operations.
We believe that, the funds available to us outside of the Trust Account together with funds available from loans from our Sponsor, will be sufficient to allow us to operate for at least the 24 months following the closing of the Initial Public Offering; however, we cannot assure you that our estimate is accurate and our Sponsor is under no obligation to advance funds to us in such circumstances.
If the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants not being held in the Trust Account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we may depend on loans from our Sponsor or management team to fund our search, to pay our taxes and to complete our initial business combination.
None of our Sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to, or invest in, us in such circumstances. If we have not completed our initial business combination, within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. Consequently, our public stockholders may receive only approximately $10.00 per share on the liquidation of our Trust Account<|endoftext|>Accrued but unused vacation pay due and outstanding. Mr. Sealock may terminate the employment agreement for Good Reason (as defined in the employment agreement) in the event of a Change of Control (as defined in the employment agreement) upon 15 business days notice to us. Upon termination of employment for Just Cause (as defined in the employment agreement), Mr. Sealock would be entitled to any base salary due and owing up to the date of termination, all expenses properly incurred up to the date of termination in the carrying out of his duties and any accrued but unused vacation pay due and outstanding.
For the purposes of the employment agreement with Mr. Sealock, the term Just Cause is defined as: (i) any matter that would constitute lawful just cause for dismissal from employment at common law; (ii) conviction of the executive of a criminal offence involving dishonesty or fraud or which is likely to injure our business or reputation; (iii) misappropriation of any of our property or assets; (iv) any breach by the executive of any term of his employment or the employment agreement which has not been cured within ten days of notice to the executive of such breach; (v) any information, reports, documents or certificates being intentionally furnished by the executive to our Board or any committee thereof which the executive knows to be either false or misleading either because they include or fail to include material facts; or (vi) failure to perform his duties in a diligent and reasonable manner.
The term Good Reason (which only applies to Change of Control event) is defined as: (i) a significant change (other than a change that is clearly consistent with a promotion) in his position or duties, responsibilities, title or office held by him with us; (ii) a material reduction of his salary, benefits or any other form of remuneration or any change in the basis upon which the executives salary, benefits or any other form of remuneration payable by us is determined or any failure by us to increase his salary, benefits or any other forms of remuneration payable by us in a manner consistent with practices in effect from time to time with respect to our senior executives, whichever is more favorable to him; (iii) any failure by us to continue in effect any benefit, bonus, profit sharing, incentive, remuneration or compensation plan, stock ownership or purchase plan, pension plan or retirement plan in which Mr. Sealock is participating or entitled to participate from time to time, or our taking any action or failing to take any action that would adversely affect his participation in or reduce his rights or benefits under or pursuant to any such plan, or our failing to increase or improve such rights or benefits on a basis consistent with practices with respect to our senior executives, whichever is more favorable to him; (iv) any breach by us of any material provision of the employment agreement; (v) the failure by us to obtain, in a form satisfactory to Mr. Sealock, an effective assumption of our obligations under the employment agreement by any successor to us; or (vi) the good faith determination by Mr. Sealock that we have requested he misrepresent information to external parties, vendors, shareholders or any other party.
The term Change of Control is defined as: (i) the sale to a person or acquisition by a person not affiliated with us of net assets from us having a value greater than 50% of the fair market value of our net assets determined on a consolidated basis prior to such sale; (ii) any change in the holding, direct or indirect, of our shares by a person not affiliated with us as a result of which such person, or a group of persons, or persons acting in concert, or persons associated or affiliated with any such person or group, are in a position to exercise effective control over us; (iii) any reconstruction, reorganization, recapitalization, consolidation, amalgamation, arrangement, merger, transfer, sale or other transaction involving us where all of our shareholders immediately prior to such transaction hold greater than 50% of the common shares of the Company or of the continuing corporation following completion of the transaction; or (iv) any event or transaction which our Board, in its discretion, deems to be a Change of Control.
Pursuant to a Technology Transfer Agreement, effective November 7, 2011, whereby we acquired from Vladimir Podlipskiy certain intellectual property rights relating to extracting bitumen from oil sands (the Acquired Technology), we also agreed to employ Mr. Podlipskiy to oversee and operate the Acquired Technology with the compensation of $120,000.00 per year for as long as the Acquired Technology is utilized by us. In consideration for the Acquired Technology, we issued to Mr. Podlipskiys designee 100,000 shares of our common shares and agreed to issue an additional 1,900,000 shares of our common shares on the date when our extraction facility at the TMC Mineral Lease in Vernal, Utah is assembled and tested. We further agreed to pay Mr. Podlipskiy upon the construction of a second plant utilizing the Acquired Technology and any plants thereafter using the Acquired Technology a royalty fee of 2% of gross sales if the price of heavy oil is below $60.00 per barrel; 3.5% of gross sales if the price of heavy oil is between $70.00 and $79.99 and 4% of gross sales if the price of heavy oil is greater than $80.00.
### Director Compensation
The following table sets forth information for the fiscal year ended August 31, 2019 regarding the compensation of our directors who at August 31, 2019 were not also named executive officers.
2.
On June 6, 2018, Mr. Schneider, Mr. Dennewald and Dr. Bailey were each awarded ten-year share purchase options exercisable over 1,000,000 common shares at an exercise price of CDN$1.00 per share, these share purchase options vest annually over a three year period.
Dr. Bailey is paid a monthly fee of $5,000 for serving as President of the Company.
4.
As of August 31, 2019, the following are the aggregate number of option and stock awards held by each of our directors who were not also named Executive Officers:
(a)
(i) on November 30, 2017, Mr. Dennewald was awarded an option to purchase 475,000 common shares of which all are vested; (ii) on June 6, 2018, Mr. Dennewald was awarded an option to purchase 1,000,000 common shares of which 500,000 are vested and the remaining 500,000 will vest equally on June 6, 2020 and 2021.
(b)
(i) on November 30, 2017, Mr. Schneider was awarded an option to purchase 475,000 common shares of which all are vested; (ii) on June 6, 2018, Mr. Schneider was awarded an option to purchase 1,000,000 common shares of which 500,000 are vested and the remaining 500,000 will vest equally on June 6, 2020 and 2021.
(c)
(i) on November 30, 2017, Mr. Bailey was awarded an option to purchase 475,000 common shares of which all are vested; (ii) on June 6, 2018, Mr. Bailey was awarded an option to purchase 1,000,000 common shares of which 500,000 are vested and the remaining 500,000 will vest equally on June 6, 2020 and 2021.
The share purchase options issued to directors on November 30, 2017 were valued at grant date using a Black Scholes valuation model.
The share purchase options issued to directors on June 6, 2018 were valued at grant date using a Black Scholes valuation model.
### Compensation Committee Interlocks
Not Applicable
Item 12. Security Ownership Of Certain Beneficial Owners And Management.[to be updated]
The following table sets forth as of December 13, 2019, the number and percentage of the outstanding shares of common shares which, according to the information supplied to us, were beneficially owned by (1) each person who is currently a director, (2) each executive officer, (3) all current directors and executive officers as a group, and (4) each person who, to our knowledge, is the beneficial owner of more than 5% of the outstanding common shares.
*
Less than 1%
(1)
The business address for each officer and director listed above is: Petroteq Energy Inc., 15315 Magnolia Blvd., #120, Sherman Oaks, California 91403.
(3)
Is comprised of 7,506,286 common shares held directly, 124,096 common shares held through the Alexander & Polina Blyumkin Trust and 1,608,661 common shares held indirectly through five entities in which Mr. Blyumkin has a controlling interest.
(4)
Is comprised of 70,267 common shares and share purchase options exercisable for 1,000,000 common shares, of which 500,000 are vested and 0 which vest within the next 60 days.
(5)
Is comprised of 163,831 common shares and share purchase options exercisable for 1,475,000 common shares, of which 975,000 are vested and 0 which vest within the next 60 days.
(6)
Is comprised of 7,079 common shares.
(7)
Is comprised of 16,667 common shares and share purchase options exercisable for 1,000,000 common shares, of which 500,000 are vested and 0 which vest within the next 60 days.
(9)
Is comprised of 49,650 common shares and share purchase options exercisable for 1,475,000 common shares, of which 975,000 are vested and 0 which vest within the next 60 days.
(10)
Is comprised of 15,000,000 common shares. The registered address of Momentum Asset Partners LLC is 5 Sierra Gate Plaza, Roseville, CA 95678, USA. Roman Topilov exercises voting and/ordispositive power with respect to the common shares beneficially owned by Momentum Asset Partners LLC.
(11)
Is comprised of 30,000,000 common shares. The registered address of Petrollo LP Corp. is 401 Ryland Street, Suite 200A, Reno, Nevada, 89502. Elena Housherr exercises voting and/ordispositive power with respect to the common shares beneficially owned by Petrollo LP Corp.
Item 13.
Except as disclosed in this section and under Item 6. Executive Compensation there were no related party transactions during the current year or the prior year.
### Director Independence and Related Transactions
Our Board of Directors is comprised of Aleksander Blyumkin, Gerald Bailey, Robert Dennewald, David Sealock and Travis Schneider, of which only Messrs. Dennewald and Schneider are deemed to be independent within the meaning of the TSX Ventures Exchange Corporate Finance Manual (the TSXV Manual) and applicable Canadian securities regulations.
The Board of Directors has appointed only one standing committee, the Audit Committee. The Board members comprising our Audit Committee are Alex Blyumkin, Travis Schneider and Robert Dennewald, of which only Messrs. Dennewald and Schneider are deemed to be independent within the meaning of the TSXV Manual and applicable Canadian securities regulations.
The Audit Committee meets at least four times per year.
On September 4, 2018, the Company entered into a Debt Settlement Agreement with the Chairman of the Board whereby it agreed to convert $249,285 of advances made into 336,871 common shares at a conversion price of $0.74 per share.
On November 8, 2018 the Company entered into a debt settlement agreement with Robert Dennewald, a director of the Company, whereby the Company issued 28,880 shares of common stock in settlement of $23,393 of travel related payables.
On September 19, 2019, the Chairman of the Board subscribed for 696,153 shares of common stock for gross proceeds of $90,500.
As of August 31, 2019, and August 31, 2018, the Company did not owe the Chairman of the Board, or any of the private companies controlled by the Chairman of the Board, any funds.
Item 14.
Hay and Watson serves as our independent registered public accounting firm.
The following table sets forth the aggregate fees including expenses billed to us for the years ended August 31, 2019 and 2018 by our auditors:
(1)
Audit fees and expenses were for professional services rendered for the audit and reviews of the consolidated financial statements of the Company, professional services rendered for issuance of consents and assistance with review of documents filed with the SEC.
(2)
Taxation preparation fees were fees for professional services rendered to file our federal and state tax returns.
(3)
We incurred fees to our independent auditors of $20,000 and $0 for audit related fees | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Our IPO, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial Business Combination within the prescribed time period.
Our sponsor, officers and directors have agreed, pursuant to a letter agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i)that would modify the substance or timing of our obligation to redeem 100% of our public shares if we do not complete our initial Business Combination by January 25, 2022 or (ii)with respect to any other provision relating to stockholders rights or pre-initial Business Combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of ClassA common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses relating to the administration of the trust account divided by the number of then outstanding public shares.
We expect that all costs and expenses associated with implementing our plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $1,115,282 of proceeds held outside the trust account as of December 31, 2020, although we cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing our plan of dissolution, to the extent that there is any interest accrued in the trust account not required to pay franchise and income taxes as well as expenses relating to the administration of the trust account on interest income earned on the trust account balance, we may request the trustee to release to us an amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If we were to expend all of the net proceeds of our IPO and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per-share redemption amount received by stockholders upon our dissolution would be approximately $10.20. We cannot assure you that the actual per-share redemption amount received by stockholders will not be substantially less than $10.20.
Although we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest and claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the trust account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent auditors) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.20 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes as well as expenses relating to the administration of the trust account, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act. As a result, if any such claims were successfully made against the trust account, the funds available for our initial Business Combination and redemptions could be reduced to less than $10.20 per public share.
In the event that the proceeds in the trust account are reduced below (i) $10.20 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest which may be withdrawn to pay taxes as well as expenses relating to the administration of the trust account, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. Accordingly, we cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.20 per public share.
As of December 31, 2020, following completion of our IPO, we had access to up to approximately $1.1 million, with which to pay any such potential claims (including costs and expenses incurred in connection with our liquidation, currently estimated to be no more than approximately $100,000).
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our Business Combination within 15 months from the closing of our IPO may be considered a liquidating distribution under Delaware law.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public sharesin the event we do not complete our Business Combination by January 25, 2022, is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution. If we are unable to complete our Business Combination within 15 months from the closing of our IPO, we will: (i)cease all operations except for the purpose of winding up, (ii)as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses relating to the administration of the trust account (less up to $100,000 of interest released to us to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii)as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Accordingly, it is our intention to redeem our public shares as soon as reasonably possible following January 25, 2022and, therefore, we do not intend to comply with those procedures.
Further, our sponsor may be liable only to the extent necessary to ensure that the amounts in the trust account are not reduced below (i) $10.20 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account, due to reductions in value of the trust assets, in each case net of the amount of interest withdrawn to pay taxes as well as expenses relating to the administration of the trust account and will not be liable as to any claims under our indemnity of the underwriters of our IPO against certain liabilities, including liabilities under the Securities Act.
Our public stockholders will be entitled to receive funds from the trust account only (i)in the event of the redemption of our public shares if we do not complete our Business Combination by January 25, 2022, subject to applicable law, (ii)in connection with a stockholder vote to approve an amendment to our amended and restated certificate of incorporation (x)to modify the substance or timing of our obligation to redeem 100% of our public shares if we have not consummated an initial Business Combination within 15 months from the closing of our IPO or (y)with respect to any other provisions relating to stockholders rights or pre-initial Business Combination activity, or (iii)our completion of an initial Business Combination, and then only in connection with those shares of our common stock that such stockholder properly elected to redeem, subject to certain limitations.
Our amended and restated certificate of incorporation contains certain requirements and restrictions relating to our IPO that apply to us until the completion of our initial Business Combination. These provisions cannot be amended without the approval of the holders of 65% of our common stock. Our sponsor and permitted transferees, who collectively beneficially own 20% of our common stock, will participate in any vote to amend our amended and restated certificate of incorporation and will have the discretion to vote in any manner they choose. Specifically, our amended and restated certificate of incorporation provides, among other things, that:
If we are unable to complete our initial Business Combination by January 25, 2022, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our franchise and income taxes as well as expenses relating to the administration of the trust account (less up to $100,000 of interest released to us to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law;
Prior to our initial Business Combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the trust account or (ii) vote on any initial Business Combination;
Although we do not intend to enter into a Business Combination with a target business that is affiliated with our sponsor, our directors or our officers, we are not prohibited from doing so. In the event we enter into such a transaction, we, or a committee of independent directors, will obtain an opinion from an independent investment banking firm that is a member of FINRA or an independent accounting firm that such a Business Combination is fair to our company from a financial point of view;
If a stockholder vote on our initial Business<|endoftext|>Of future events, the soundness of our systems, the possibility of human error, and the risk of fraud.
If significant deficiencies or other material weaknesses are identified in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements and the trading price of our common stock and ability to obtain any necessary equity or debt financing could suffer. This would likely have an adverse effect on the trading price of our common stock and our ability to secure any necessary additional equity or debt financing.
### Risks Relating to our Equity Line with L2 Capital
Resales of shares purchased by L2 Capital under the Equity Purchase Agreement may cause the market price of our common stock to decline.
Subject to the terms and conditions of the Equity Purchase Agreement we entered into with L2 Capital, LLC (L2 Capital) on July 23, 2018, we have the right to put, or sell, up to $5,000,000 worth of shares of our common stock to L2 Capital. Unless terminated earlier, L2 Capitals purchase commitment will automatically terminate on the earlier of (i) the date on which L2 Capital shall have purchased shares under the Equity Purchase Agreement for an aggregate purchase price of $5,000,000, (ii) July 23, 2020, or (iii) written notice of termination by the Company to L2 Capital (which shall not occur at any time that L2 Capital holds any of the Put Shares). This arrangement is also sometimes referred to herein as the Equity Line. The common stock to be issued to L2 Capital pursuant to the Equity Purchase Agreement will be purchased at a price equal to L2 Capital will pay a purchase price equal to 85% of the Market Price, which is defined as the lowest one (1) traded price of the common stock on the OTC Marketplace, as reported by Bloomberg Finance L.P., during the five consecutive trading days following the date on which the put shares are delivered to L2 Capital (the Clearing Date), or beginning on the Clearing Date if the respective Put Shares are received as DWAC Shares in L2 Capitals brokerage account prior to 11:00 a.m. ET (the Valuation Period). L2 Capital will have the financial incentive to sell the shares of our common stock issuable under the Equity Purchase Agreement in advance of or upon receiving such shares and to realize the profit equal to the difference between the discounted price and the current market price of the shares. This may cause the market price of our common stock to decline.
The foregoing description of the terms of the Equity Purchase Agreement does not purport to be complete and is subject to and qualified in its entirety by reference to the Equity Purchase Agreement itself.
Puts under Equity Purchase Agreement may cause dilution to existing stockholders.
From time to time during the term of the Equity Purchase Agreement, and at our sole discretion, we may present L2 Capital with a put notice requiring L2 Capital to purchase shares of our common stock. As a result, our existing stockholders will experience immediate dilution upon the purchase of any of the shares by L2 Capital. L2 Capital may resell some, if not all, of the shares that we issue to it under the Equity Purchase Agreement and such sales could cause the market price of our common stock to decline significantly. To the extent of any such decline, any subsequent puts would require us to issue and sell a greater number of shares to L2 Capital in exchange for each dollar of the put amount. Under these circumstances, the existing stockholders of our company will experience greater dilution. The effect of this dilution may, in turn, cause the price of our common stock to decrease further, both because of the downward pressure on the stock price that would be caused by a large number of sales of our shares into the public market by L2 Capital, and because our existing stockholders may disagree with a decision to sell shares to L2 Capital at a time when our stock price is low, and may in response decide to sell additional shares, further decreasing our stock price. If we draw down amounts under the Equity Line when our share price is decreasing, we will need to issue more shares to raise the same amount of funding.
There is no guarantee that we will satisfy the conditions to the Equity Purchase Agreement.
Although the Equity Purchase Agreement provides that we can require L2 Capital to purchase, at our discretion, up to $5,000,000 worth of shares of our common stock in the aggregate, our ability to put shares to L2 Capital and obtain funds when requested is limited by the terms and conditions of the Equity Purchase Agreement, including restrictions on when we may exercise our put rights, restrictions on the amount we may put to L2 Capital at any one time, which is determined in part by the trading volume of our common stock, and a limitation on our ability to put shares to L2 Capital to the extent that it would cause L2 Capital to beneficially own more than 9.99% of the outstanding shares of our common stock.
We may not have access to the full amount available under the Equity Purchase Agreement with L2 Capital.
Our ability to draw down funds and sell shares under the Equity Purchase Agreement requires that a registration statement be declared effective and continue to be effective registering the resale of shares issuable under the Equity Purchase Agreement. The registration statement of which this prospectus is a part registers the resale of 22,500,000 shares of our common stock issuable under the Equity Line. Our ability to sell any additional shares under the Equity Purchase Agreement will be contingent on our ability to prepare and file one or more additional registration statements registering the resale of such additional shares. These registration statements (and any post-effective amendments thereto) may be subject to review and comment by the staff of the Securities and Exchange Commission, and will require the consent of our independent registered public accounting firm. Therefore, the timing of effectiveness of these registration statements (and any post-effective amendments thereto) cannot be assured. Even if we are successful in causing one or more registration statements registering the resale of some or all of the shares issuable under the Equity Purchase Agreement to be declared effective by the Securities and Exchange Commission in a timely manner, we may not be able to sell the shares unless certain other conditions are met. For example, we might have to increase the number of our authorized shares in order to issue the shares to L2 Capital. Increasing the number of our authorized shares will require board and stockholder approval. Accordingly, because our ability to draw down any amounts under the Equity Purchase Agreement with L2 Capital is subject to a number of conditions, there is no guarantee that we will be able to draw down all of the proceeds of $5,000,000 under the Equity Purchase Agreement.
### ITEM 1B. UNRESOLVED STAFF COMMENTS
This information is not required for smaller reporting companies.
ITEM 2. PROPERTIES
51 st street, #208, New York, NY 10022
### ITEM 3. LEGAL PROCEEDINGS
Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
On February 13, 2017, Baum Glass & Jayne PLLC (Plaintiff) obtained a default judgment against the Company in the amount of $27,083.74. The amount was included in accounts payable as of December 31, 2018 and 2017. The management is having discussions with respect to the timing and structure of the settlement.
See NOTE 13- SUBSEQUENT EVENTS for current status on this arrangement.
The Company has filed an answer, including the defenses of defective service of process and statute of limitations, and the case is currently pending. Because this case has not progressed beyond a motion to dismiss, and any pending outcome is currently unknown the Company has not accrued any amount related to this lawsuit. Management does not view this as being a potential liability. This claim relates to events in the 2010-2012 time line, discussions with management at that time, indicates there is no basis for their claims.
### ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
Our common stock trades on the OTC Marketplace operated by the OTC Markets Group, Inc., or OTC, under the ticker symbol CZNI.
Our shares are subject to Section 15(g) and Rule 15g-9 of the Securities and Exchange Act, commonly referred to as the penny stock rule. The rule defines penny stock to be any equity security that has a market price less than $5.00 per share, subject to certain exceptions. These rules may restrict the ability of broker-dealers to trade or maintain a market in our common stock and may affect the ability of shareholders to sell their shares. Broker-dealers who sell penny stocks to persons other than established customers and accredited investors must make a special suitability determination for the purchase of the security. Accredited investors, in general, include individuals with assets in excess of $1,000,000 (not including their personal residence) or annual income exceeding $200,000 or $300,000 together with their spouse, and certain institutional investors. The rules require the broker-dealer to receive the purchasers written consent to the transaction prior to the purchase and require the broker-dealer to deliver a risk disclosure document relating to the penny stock prior to the first transaction. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, and current quotations for the security. Finally, monthly statements must be sent to customers disclosing recent price information for the penny stocks.
### Registered Holders
As at December 31, 2020, there were approximately 117 record holders of our common stock.
Dividends
Holders of the Companys common stock are entitled to receive such dividends as may be declared by our Board of Directors. No dividends on the Companys common stock have ever been paid, and the Company does not anticipate that dividends will be paid on its common stock in the foreseeable future.
No securities are authorized for issuance by the Company under equity compensation plans.
During the year ended December 31, 2020, we issued securities that were not registered under the Securities Act, and were not previously disclosed in a Current Report on Form 8-K as listed below. Except where noted, all of the securities discussed in this Item 5 were issued in reliance on the exemption under Section 4(a)(2) of the Securities Act.
ITEM 6. SELECTED FINANCIAL DATA
NONE
ITEM 7.
The following discussion and analysis of the results of operations and financial condition for the years ended December 31, 2020 and 2019 should be read in conjunction with our consolidated financial statements and the notes to those consolidated financial statements that are included elsewhere in this Annual Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See Forward-Looking Statements.
### Compensation Expense
Compensation expense for the twelve months ended December 31, 2020 and 2019 was $120,000. This is for the base salary of our Chief Executive, Conrad R. Huss
General and Administrative expense for the year ended December 31, 2019 was $166,255 compared to $425,698 for the year ended December 31, 2018. The break-out of General and Administrative expense is as follows;
### Line-item analyses follow:
Consulting fees were $189,000 higher during the current period due to a new consulting contract being entered into as of April 1, 2020 at $25,000 per month.
Reconciliation of debt balances was $257,324. Upon reconciling the balances of amounts owed to Oasis Capital, LLC, it was determined that | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Of record are entitled to one vote for each share held on all matters to be voted on by shareholders and vote together as a single class, except as required by law. Unless specified in the Companies Law, our amended and restated memorandum and articles of association or applicable stock exchange rules, the affirmative vote of a majority of our ordinary shares that are voted is required to approve any such matter voted on by our shareholders.
As of March30, 2021, there are warrants outstanding to acquire and aggregate of 2,130,000 ordinary shares. We will not be obligated to deliver any ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the ordinary shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the ordinary share underlying such unit.
Once the warrants become exercisable, we may call the warrants for redemption (excluding the private placement warrants but including any outstanding warrants issued upon exercise of the unit purchase option issued to the underwriters or their designees): in whole and not in part; upon not less than 30 days prior written notice of redemption (the 30-day redemption period) to each warrant holder; and if, and only if, the reported last sale price of the ordinary shares equal or exceed $16.50 per share (as adjusted for share splits, share capitalizations, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date we send to the notice of redemption to the warrant holders.
We will provide our public shareholders with the opportunity to redeem all or a portion of their ordinary shares upon the completion of our initial business combination either (i)in connection with a shareholder meeting called to approve the business combination or (ii)by means of a tender offer. The decision as to whether we will seek shareholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion, and will be based on a variety of factors such as the timing of the transaction, whether the terms of the transaction would require us to seek shareholder approval under the law or stock exchange listing requirement or whether we were deemed to be a foreign private issuer (which would require that we conduct a tender offer under SEC rulesrather than seeking shareholder approval). Under NASDAQ rules, asset acquisitions and stock purchases would not typically require shareholder approval while direct mergers with our company where we do not survive and any transactions where we issue more than 20% of our issued and outstanding ordinary shares (unless we are deemed to be a foreign private issuer at such time) or seek to amend our amended and restated memorandum and articles of association would require shareholder approval. We intend to conduct redemptions without a shareholder vote pursuant to the tender offer rulesof the SEC unless shareholder approval is required by law or stock exchange listing requirement or we choose to seek shareholder approval for business or other legal reasons. So long as we obtain and maintain a listing for our securities on the NASDAQ, we will be required to comply with NASDAQ rules.
We will provide our public shareholders with the opportunity to redeem all or a portion of their ordinary shares upon the completion of our initial business combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination, including interest (which interest shall be net of taxes payable) divided by the number of then issued and outstanding public shares, subject to the limitations described herein. The amount in the trust account is initially anticipated to be approximately $1
0.15 per public share (subject to increase of up to an additional $0.30 per public share in the event that our sponsor elects to extend the period of time to consummate a business combination). Our sponsor, officers and directors have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares, private placement shares and any public shares they may hold in connection with the completion of our initial business combination.
Our amended and restated memorandum and articles of association provides that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 either immediately prior to or upon consummation of our initial business combination (so that we are not subject to the SECs penny stock rules). In the event the aggregate cash consideration we would be required to pay for all ordinary shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, and all ordinary shares submitted for redemption will be returned to the holders thereof.
Our sponsor, officers and directors have agreed that we will have only 12 months from the closing of our initial public offering (July28, 2020) (or up to 21 months from the closing of our initial public offering if we extend the period of time to consummate a business combination,) to complete our initial business combination. If we are unable to complete our initial business combination within such 12-month (or up to 21-month) time period, we will: (i)cease all operations except for the purpose of winding up, (ii)as promptly as reasonably possible but not more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest (less up to $50,000 of interest to pay dissolution expenses (which interest shall be net of taxes payable) divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public shareholders rights as shareholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii)as promptly as reasonably possible following such redemption, subject to the approval of our remaining shareholders and our Board of Directors, liquidate and dissolve, subject in each case to our obligations under Cayman Islands law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 12-month (or up to 21- month) time period.
### Corporate Information
We are an emerging growth company, as defined in Section2(a)of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.
In addition, Section107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section7(a)(2)(B)of the Securities Act for complying with new or revised accounting standards.
We will remain an emerging growth company until the earlier of (1)the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (b)in which we have total annual gross revenue of at least $1.07 billion, or (c)in which we are deemed to be a large accelerated filer, which means the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the prior June30 th
We will remain a smaller reporting company until the last day of the fiscal year in which (1)the market value of our ordinary shares held by non-affiliates exceeds $250 million as of the prior June30th, or (2)our annual revenues exceed $100 million during such completed fiscal year and the market value of our ordinary shares held by non-affiliates exceeds $700 million as of the prior June30.
We are currently a foreign private issuer as defined in Rule405, but are voluntarily choosing to register and report using domestic forms. We are required to determine our status as a foreign private issuer for the 2021 fiscal year as of the last day of our second quarter, or June30, 2021. On such date, if we no longer qualify as a foreign private issuer (as set forth in Rule3b-4 of the Exchange Act), we will then become subject to the U.S. domestic issuer rulesas of the first day of our 2021 fiscal year, or January1, 2022. As a result, should we determine on June30, 2021 that we are no longer a foreign private issuer, after December31, 2021 we will be subject to the U.S. domestic issuer rulesand we will have the option of conducting redemptions like other blank check companies in conjunction with a proxy solicitation pursuant to the proxy rulesand not pursuant to the tender offer rules. For so long as we are deemed to be a foreign private issuer, we will conduct redemptions in accordance with the SECs tender offer rules.
Exempted companies are Cayman Islands companies wishing to conduct business outside the Cayman Islands and, as such, are exempted from complying with certain provisions of the Companies Law. As an exempted company, we have received a tax exemption undertaking from the Cayman Islands government that, in accordance with Section6 of the Tax Concessions Law (2018 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to us or our operations and, in addition, that no tax to be levied on profits, income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable (i)on or in respect of our shares, debentures or other obligations or (ii)by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by us to our shareholders or a payment of principal or interest or other sums due under a debenture or other obligation of us.
We are a Cayman Islands exempted company incorporated on May14, 2018. Our executive offices are located at 505 Eshan Road, Floor 6, Pudong New District, Shanghai, 200120, and our telephone number is (86) 21-2025 7919.
### Item 1A RISK FACTORS
On April12, 2021, the SEC issued a statement (the Statement) discussing the accounting implications of certain terms that are common in warrants issued by special purpose acquisition companies (SPACs). In light of the Statement and guidance in ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity, the Companys management evaluated the terms of the Warrant Agreement entered into in connection with the Companys initial public offering and concluded that the Companys public warrants and private placement warrants (together, the Warrants) include provisions that, based on the Statement, preclude the Warrants from being classified as components of equity.
Following the issuance of the SEC Statement, our management and our audit committee concluded that, in light of the SEC Statement, it was appropriate to restate our previously issued audited financial statements<|endoftext|>Will be required to make monthly payments of principal and interest commencing at the end of the interest-only period.
The Company is obligated to pay the Lenders (i) a non-refundable facility fee in the amount of 1.00% of each term loan that is funded (the Facility Fee), and (ii) a final fee equal to 4.75% of the aggregate amount of the term loans funded (the Final Fee). As of June 30, 2021, the Company incurred debt discounts for an aggregate of $1.7 million that consisted of $0.5 million for financial advisory and legal fees, an aggregate of $0.8 million for the Facility Fee and the Final Fee, and an aggregate of $0.4 million as an exit fee accounted for as an embedded derivative and a prepayment fee related to the term A loan. The Final Fee is payable upon the earliest to occur of (i)the Maturity Date, (ii)the acceleration of the term loans, and (iii)the prepayment of the term loans. The total debt discount of $1.7 million related to the term A loan is being accreted to interest expense using the effective interest method which results in an overall current effective interest rate of 12.6% as of June 30, 2021.
Concurrently with the execution of the Loan Agreement, the Company entered into an exit fee agreement (the Exit Fee Agreement) that provides for a fee of 4.00% of the funded principal balance of each term loan in the event certain transactions (defined as Exit Events) occur prior to April 13, 2031. Exit Events include, but are not limited to, sales of substantially all assets, certain mergers, change of control transactions, and issuances of common stock that result in new investors owning more than 35% of the Companys shares. As of April 14, 2021, the Company allocated a portion of the proceeds from the term A loan to recognize a liability for the fair value of this embedded derivative for approximately $354,000. Fair value was determined based on the Companys strategic corporate development plans it has performed a detailed evaluation of the different types of Exit Events that could occur and using a discounted rate equivalent to the effective rate for the term A loan. Fair value of this embedded derivative is assessed at the end of each reporting period with changes in fair value recognized as a nonoperating gain or loss. As of June 30, 2021, there was a change in fair value of $5,869 recorded as a non-operating loss on change in fair value of embedded derivative.
The Company has the option to prepay all, but not less than all, of the outstanding principal balance of the term loans. In the event of a voluntary or mandatory prepayment prior to the Maturity Date, the Company will incur a prepayment fee ranging from 1.00% to 3.00% of the outstanding principal balance.
The Companys obligations under the Loan Agreement are secured by a first-priority security interest in substantially all the Companys assets, including its intellectual property. This security interest will not be released until all obligations are repaid, including a requirement to pay an Exit Fee of $0.6 million for certain fundamental transactions that may occur through April 13, 2031. The Loan Agreement contains customary representations, warranties and covenants and also includes customary events of default, including payment defaults, breaches of covenants, and a default upon the occurrence of a material adverse change affecting the Company. Upon the occurrence of an event of default, a default interest rate of an additional 5.00% per annum may be applied to the outstanding loan balance, and the Lenders may declare all outstanding obligations immediately due and payable and exercise all their rights and remedies as set forth in the Loan Agreement.
REZOLUTE, INC.
As of June 30, 2021, the Company had outstanding contractual obligations under the Loan Agreement consisting of the principal balance of $15.0 million and the Final Fee of $0.7 million for a total of $15.7 million. After deducting the unaccreted discount of $1.7 million, the net carrying value was $14.0 million as of June 30, 2021. Future minimum principal payments and the net carrying value of the term A loan is as follows as of June 30, 2021 (in thousands):
Note 6
As discussed in Note 7, the Company reduced the number of its authorized shares of common stock from 500.0 million shares to 10.0 million shares as of February 17, 2021. At the time of this change, the Company had approximately 8.4 million shares of common stock issued and outstanding, plus approximately 2.4 million shares that were required to be reserved for issuance pursuant to the Companys stock option plans and outstanding warrant agreements. Accordingly, a total of 10.8 million shares were required to be authorized, which resulted in a deficiency of approximately 0.8 million shares that were unavailable to settle outstanding stock options and warrants as of February 17, 2021. Since the Company could have been required to settle in cash for up to 0.8 million shares, liability classification for these instruments was required beginning on February 17, 2021.
The Companys accounting policy provided for selection of the stock options and warrant agreements with the earliest issuance dates to compute the estimated fair value of the financial instruments associated with the authorized share deficiency. These stock options and warrants were generally those with the highest exercise prices that were least likely to be exercised. The fair value of such stock options and warrants amounted to $3.6 million, which was reclassified from shareholders equity to a derivative liability as of February 17, 2021. As a result of the expiration of stock options and warrants for approximately 0.1 million shares from February 2021 through May 2021, the authorized share deficiency was reduced to approximately 0.7 million shares as of May 26, 2021, when the Companys shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares.
Presented below is a summary of the derivative liability associated with the stock options and warrants that were subject to the Companys accounting policy as of February 17, 2021 and May 26, 2021 (in thousands, except per share amounts):
REZOLUTE, INC.
Due to the reduction in fair value of the derivative liability from $3.6 million as of February 17, 2021 to $1.8 million as of May 26, 2021, the Company recognized a non-cash change in fair value of approximately $1.8 million in the accompanying consolidated statements of operations for the fiscal year ended June 30, 2021. The primary factor that resulted in this gain was a reduction in the market price in the Company's common stock from $11.99 per share on February 17, 2021 to $7.69 per share on May 26, 2021 when the authorized share deficiency was cured. Fair value of the stock options and warrants set forth above was determined using the BSM option-pricing model with the following weighted-average assumptions as of February 17, 2021 and May 26, 2021:
Note 7
### SHAREHOLDERs Equity
Changes in Authorized Capital Stock
For the period from April 24, 2019 through February 16, 2021, the Company was authorized to issue 500.0 million shares of common stock and 20.0 million shares of preferred stock. On February17, 2021, the Company filed a certificate of correction (the Charter Revision) with the Secretary of State of Delaware that changed the number of authorized shares of common Stock from 500.0 million shares to 10.0 million shares. The Charter Revision also reduced the number of authorized shares of preferred stock from 20.0 million shares to 0.4 million shares on February17, 2021.
In connection with the Reincorporation Merger discussed in Note 1, the Companys shareholders approved an increase in authorized shares from 10.0 million shares to 40.0 million shares of common stock as of June 18, 2021. Accordingly, as of June 30, 2021 the Company is authorized to issue 40.0 million shares of common stock and 0.4 million shares of preferred stock.
### Reverse Stock Split
As discussed in Note 1, the Company effected a Reverse Stock Split on October9, 2020.
Equity Distribution Agreement
On December 18, 2020, the Company and Oppenheimer & Co. Inc. (the Agent) entered into an EDA that provides for an at the market offering for the sale of up to $50.0 million in shares of the Companys common stock (the Placement Shares) through the Agent. The Agent is acting as sales agent and is required to use commercially reasonable efforts to sell all of the Placement Shares requested to be sold by the Company, consistent with the Agents normal trading and sales practices, on mutually agreed terms between the Agent and the Company. The EDA will terminate when all of the Placement Shares have been sold, or earlier upon the election of either the Company or the Agent.
The Company has no obligation to sell any of the Placement Shares under the EDA. The Company intends to use the net proceeds, if any, from Placement Shares sold under the EDA for general corporate purposes, including working capital. Under the terms of the EDA, the Company agreed to pay the Agent a commission equal to 3.0% of the gross sales price of the Placement Shares plus certain expenses incurred by the Agent in connection with the offering. Through June 30, 2021, no shares were sold pursuant to the EDA and no commissions were incurred. As of June 30, 2021, deferred offering costs incurred by the Company amounted to an aggregate of $0.2 million that is included under the caption deferred offering costs and other in the accompanying consolidated balance sheet.
### Fiscal 2021 Equity Financing
On September 15, 2020, the Company entered into financial advisory agreements to undertake a private placement of equity or equity equivalent securities (the Fiscal 2021 Equity Financing). Pursuant to the financial advisory agreements, the Company agreed to pay transaction fees to the financial advisors for an aggregate of 6.0% of the gross proceeds plus out-of-pocket expenses. In addition, for any financing completed within 60 days of the closing of the Fiscal 2021 Equity Financing, the financial advisors were entitled to additional transaction fees equal to 6.0% of the gross proceeds. As of June 30, 2021, the advisory agreements were no longer active.
REZOLUTE, INC.
On October 9, 2020, the Company completed the Fiscal 2021 Equity Financing through the sale of units (the Units) consisting of (i) approximately 2.5 million shares of common stock, and (ii) warrants entitling the holders to purchase approximately 0.8 million shares of common stock. The warrants are exercisable at $19.50 per share for a period of seven years, may be exercised on a cash or cashless basis at the election of the holders, and holders are entitled to share in any dividends or distributions payable to holders of common stock on an as-converted basis (the Participating Warrants).
The Units were issued for a purchase price of $16.50 per unit, resulting in gross proceeds of $41.0 million. Pursuant to the financial advisory agreements, the Company paid transaction fees of $2.5 million, and costs for professional fees and other offering costs amounted to approximately $1.1 million. After deducting the financial advisory fees and other offering costs, the estimated net proceeds amounted to approximately $37.4 million. Pursuant to the terms of the Fiscal 2021 Equity Financing, the Company executed the Reverse Stock Split of fifty shares into one share as discussed in Note 1 and agreed to enable trading of its common stock on the Nasdaq Capital Market, whereby the Companys listing application was approved by Nasdaq on November 3, 2020. The Company also entered into a registration rights agreement (RRA), pursuant to which the Company agreed to use commercially reasonable efforts to register (i) the shares of common stock included in the Units, and (ii) the shares of common stock issuable upon exercise of the warrants. The Company successfully registered the Units on November 27, 2020.
### Fiscal 2020 Private Placement
In connection with a Series AA Preferred Stock financing in January 2019, the Company granted call options to Handok, Inc. and Genexine, Inc. (collectively, H&G) whereby upon the | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
26, 2018, or such other date as Camber and N&B shall agree upon in writing.
Assumption Agreement
On September 26, 2018, Camber entered into an Assumption Agreement (the
### Assumption Agreement
) with IBC Bank; CE Operating; N&B Energy, which entity is affiliated with Richard N. Azar, II, Cambers former Chief Executive Officer and former director (
Azar
), and Donnie B. Seay, Cambers former director (
### Seay
); Azar;
RAD2
); Seay;
### Guarantors
Pursuant to the Assumption Agreement, N&B Energy agreed to assume all of Cambers liabilities and obligations owed to IBC Bank under Cambers prior note, loan agreement and related documents with IBC Bank (the
Loan Documents
), the amount due under and in connection which was secured by (a) an Oil and Gas Mortgage, Security Agreement, Financing Statement and Assignment of Production (Oklahoma) dated August 25, 2016, covering all of Cambers right, title and interest in and to certain oil, gas and mineral leases and/or minerals, mineral interests and estates located in Lincoln, Payne, and Logan Counties, Oklahoma; (b) an Oil and Gas Mortgage, Security Agreement, Financing Statement and Assignment of Production (Oklahoma) dated August 1, 2018, covering all of Cambers right, title, and interest in and to certain oil, gas, and mineral leases and/or mineral interests and estates located in Okfuskee County, Oklahoma (collectively, the
### Orion Interests
); and (c) the Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement dated as of August 25, 2016, covering Cambers mineral interests located in Glasscock County, Texas (collectively, the
West Texas Properties
).
Additionally, pursuant to the Assumption Agreement, IBC Bank approved the transactions contemplated by the Sale Agreement and the assumption by N&B Energy of all of the amounts and liabilities which Camber owed to IBC Bank (the
### IBC Obligations
) and N&B Energy agreed to assume all of the IBC Obligations. Finally, pursuant to the Assumption Agreement, IBC Bank released and forever discharged Camber and CE Operating and each of their current and former officers, directors, and stockholders, from all covenants, agreements, obligations, claims and demands of any kind, whether in law or at equity, which IBC Bank then had, arising out of or related to the amounts which Camber owed to IBC Bank under the Note, Loan Agreement or mortgages and/or under such documents or agreements, and further agreed to release the lien which IBC Bank then held on the West Texas Properties.
N&B Energy Sale Agreement Closing
On September 26, 2018, the transactions contemplated by the Sale Agreement closed and N&B Energy assumed all of the IBC Obligations (pursuant to the Assumption Agreement described above) and paid Camber $100 in cash, and Camber transferred ownership of the Disposed Assets to N&B Energy.
Notwithstanding the sale of the Disposed Assets, Camber retained its assets in Glasscock County and Hutchinson Counties, Texas and also retained a 12.5% production payment (effective until a total of $2.5 million has been received) and a 3% overriding royalty interest in its prior Okfuskee County, Oklahoma assets;
As a result of the Assumption Agreement and the Sale Agreement, Camber reduced its liabilities by $37.9 million and its assets by approximately $12.1 million.
### Discover Transactions
On October 5, 2017, Camber and Discover Growth entered into a Stock Purchase Agreement, amended on March 2, 2018 (as amended, the
October 2017 Purchase Agreement
) pursuant to which Camber agreed to sell, pursuant to the terms thereof, 1,683 shares of its Series C Preferred Stock for $16 million (a 5% original issue discount to the face value of such shares), subject to certain conditions set forth therein.
During the years ended March 31, 2020 and 2019, the Company sold 525 shares and 1,577 shares, respectively, of Series C Preferred Stock to Discover and Discover Growth, pursuant to the terms of various Stock Purchase Agreements, for total consideration of $5 million and $15 million, respectively. From April 1, 2020 through the date of this Report, the Company sold 630 shares of Series C Preferred Stock to Discover in consideration for $6 million.
During the year ended March 31, 2019, Discover converted 404 shares of the Series C Preferred Stock with a face value of $4.04 million, and a total of 3,794 shares of common stock were issued, which includes additional shares for conversion premiums and true ups in connection with those conversions through March 31, 2019.
During the year ended March 31, 2020, Discover and Discover Growth, which purchased shares of Series C Preferred Stock from us in December 2018 and which subsequently transferred all of its shares of Series C Preferred Stock to Discover, converted 11 shares of the Series C Preferred Stock with a face value of $110,000, and a total of 4,899,442 shares of common stock were issued, which includes additional shares for conversion premiums and true ups in connection with those conversions through March 31, 2020.
The Series C Preferred Stock holder (Discover) did not convert any shares of Series C Preferred Stock into common stock during the period from January 1, 2020 to March 31, 2020.
and
As of June 24, 2020, the 2,951 outstanding shares of Series C Preferred Stock can convert, pursuant to their terms, into 77,243,823 shares of our common stock, which number includes 181,600 shares of common stock convertible upon conversion of all of the outstanding shares of outstanding Series C Preferred Stock at a conversion price of $162.50 per share (based on the $10,000 face amount of the Series C Preferred Stock) and approximately 77,062,223 shares of common stock for premium shares due thereunder (based on the current dividend rate of 24.95% per annum), and a conversion price of $0.6688 per share (the last conversion price provided in a conversion notice provided by Discover), which may be greater than or less than the conversion price that currently applies to the conversion of the Series C Preferred Stock pursuant to the terms of the Designation, which number of premium shares may increase significantly from time to time as the trading price of our common stock decreases, upon the occurrence of any trigger event under the Designation of the Series C Preferred Stock and upon the occurrence of certain other events, as described in greater detail in the Designation of the Series C Preferred Stock.
On April 6, 2016, Camber entered into a Securities Purchase Agreement with Discover, pursuant to which Camber issued a redeemable convertible subordinated debenture, with a face value of $530,000, initially convertible into shares of common stock at a conversion price equal to $101,562.50 per share. The debenture matures in seven years and accrues interest at a rate of 6.0% per annum. Due to the prior decline in the price of Cambers common stock and that a trigger event occurred on June 30, 2016 as a result of the delay in filing Cambers Annual Report on Form 10-K for the year ended March 31, 2016, the premium rate on the debenture increased from 6% to 34% and the conversion discount became (a) 85% of the lowest daily volume weighted average price during the measuring period (60 days prior to and 60 days after the last date that Discover receives the last of the shares due), less $78,125 per share of common stock which resulting value is not to exceed (b) 85% of the lowest sales price on the last day of such period less $78,125 per share.
On October 31, 2018, Discover converted the entire $495,000 remaining balance of principal owed under the terms of a convertible debenture, into an aggregate of 642 shares of common stock, including 5 shares of common stock issuable upon conversion of the principal amount thereof (at a conversion price of $101,562.50 per share), and 637 shares in connection with conversion premiums due thereon (at an initial conversion price, as calculated as provided in such debenture, of $1,912.50 per share). Subsequent to the October 31, 2018 conversion date, Discover was due an additional shares of common stock in connection with true ups associated with the original issuance, as a result of the conversion price of the conversion premiums falling to $31.25 per share pursuant to the terms of the convertible debenture. As a result, from April 1, 2019 to March 31, 2020, Discover was issued 29,073 shares of common stock as true-ups in connection with the October 31, 2018 conversion of the $495,000 remaining balance of principal owed under the terms of a convertible debenture.
### October 2018 Purchase Agreement
On October 29, 2018 and effective October 26, 2018, Camber and Discover, entered into a Stock Purchase Agreement (as amended from time to time, the
October 2018 Purchase Agreement
).
Under the terms of the October 2018 Purchase Agreement, Discover purchased 369 shares of Series C Preferred Stock on the closing date of the agreement, October 29, 2018, for $3.5 million.
Provided that Camber has not materially breached the terms of the October 2018 Purchase Agreement, Camber may at any time, in its sole and absolute discretion, repurchase from Discover all, but not less than all, of the then outstanding shares of Series C Preferred Stock sold pursuant to the agreement by paying to Discover 110% of the aggregate face value of all such shares.
Camber also agreed to provide Discover a right of first offer to match any offer for financing Camber may receive from any person while the shares of Series C Preferred Stock sold pursuant to the October 2018 Purchase Agreement are outstanding, except for debt financings not convertible into common stock, which are excluded from such right to match.
Finally, Camber agreed that if it issues any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to Discover, then it would notify Discover of such additional or more favorable term and such term, at Discovers option, may become a part of the transaction documents with Discover.
The October 2018 Purchase Agreement includes customary provisions requiring that Camber indemnify Discover against certain losses;
### November 2018 Purchase Agreement
On November 23, 2018 and effective November 23, 2018, Camber and Discover entered into a Stock Purchase Agreement, which was amended on December 3, 2018 (as amended to date, and from time to time, the
November 2018 Purchase Agreement
).
Under the terms of the November 2018 Purchase Agreement, Discover purchased 263 shares of Series C Preferred Stock, in consideration for $2.5 million on December 4, 2018.
Pursuant to the November 2018 Purchase Agreement, as long as Discover holds any shares of Series C Preferred Stock, Camber agreed that it would not issue or enter into or amend an agreement pursuant to which it may issue any shares of common stock, other than (a) for restricted securities with no registration rights, (b) in connection with a strategic acquisition, (c) in an underwritten public offering, or (d) at a fixed price; or issue or amend any debt or equity securities convertible into, exchangeable or exercisable for, or including the right to receive, shares of common stock (i) at a conversion price, exercise price or exchange rate or other price that is based upon or varies with, the trading prices of or quotations for the shares of common stock at any time after the initial issuance of the security, or (ii) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of the security or upon the occurrence of specified or contingent events directly or indirectly related to the business of Camber or the market for the common stock.
Additionally, provided that Camber has not materially breached the terms of the November 2018 Purchase Agreement, Camber may at any time, in its sole and absolute discretion, repurchase from Discover all, but not less than all, of the then outstanding shares of Series C Preferred Stock sold pursuant to the agreement by paying to Discover 110% of the aggregate face value of all such<|endoftext|>This Amendment No. 1) amends our Annual Report on Form 10-K for the fiscal year ended March 31, 2020, originally filed on July 16, 2021 (the Original Filing). 1 to include the information required by Part III and not included in the Original Filing as we did not file a definitive proxy statement within 120 days of our fiscal year ended March 31, 2020. We are also filing currently dated certifications of our Chief Executive Officer (Exhibits 31.1, 31.2, and 32.1), as required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002.
No changes have been made to the Original Filing other than the furnishing of the exhibits as set forth in Item 15 herein. This Amendment No. 1 continues to speak as of the Original Filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the Original Filing date, and does not modify or update in any way disclosures made in the Form 10-K.
### PART III
Item 10.
EKIMAS Corporation (AdvanSource) is currently comprised of one director. Our director and named executive officer, his age and position, as well as certain biographical information of this individual, is set forth below. The age of the individual is provided as of July 16, 2021.
### Name
Age
Position
### Michael F. Adams
Director and Chief Executive Officer
There are no family relationships between our director and executive officer.
### Michael F. Adams
Mr. Adams has been our director since May 1999. Mr. Adams was appointed as our President and Chief Executive Officer on August 7, 2006. From April 1, 2006 until August 7, 2006, Mr. Adams was our Vice President of Regulatory Affairs and Business Development. Prior to April 2006, Mr. Adams was the Vice President of PLC Systems, Inc. Prior to joining PLC Systems in September 2000, Mr. Adams was Vice President of Assurance Medical, Inc. Prior to joining Assurance Medical in June 1999, Mr. Adams was the Chief Operating Officer and Vice President of Regulatory Affairs and Quality Assurance of CardioTech from June 1998 to May 1999. From November 1994 through June 1998, Mr. Adams served as the Vice President of Cytyc Corporation. Mr. Adams received a BS from the University of Massachusetts.
Our Board has concluded that Mr. Adams is an appropriate person to represent management on our Board of Directors given his position as our Chief Executive Officer, his tenure with us, which dates back to June 1998, his professional credentials, and his standing in the medical community, including expertise in regulatory and operational matters as they relate to the development, production, marketing and sales of medical devices.
On October 9, 2020, Mr. On October 11, 2020, Mr. Michael L. On October 13, 2020, Mr. William J. ONeill, Jr.
On October 14, 2020, the Board appointed Mr. Michael F. Adams, our chief executive officer, to serve as the sole director.
Stockholder Communications with the Board of Directors
Pursuant to procedures set forth in our bylaws, our nominating committee will consider stockholder nominations for directors if we receive timely written notice, in proper form, of the intent to make a nomination at a meeting of stockholders. To be timely, the notice must be received within the time frame identified in our bylaws. To be in proper form, the notice must, among other matters, include each nominees written consent to serve as a director if elected, a description of all arrangements or understandings between the nominating stockholder and each nominee and information about the nominating stockholder and each nominee. These requirements are detailed in our bylaws, which were filed as Appendix D to our definitive proxy statement on Schedule 14A as filed with the SEC on August 30, 2007. A copy of our bylaws will be provided upon written request to the Chief Executive Officer at EKIMAS Corporation, 95 Washington Street, Canton, MA 02021.
We have adopted a Code of Ethics that allows for us to ensure that our disclosure controls and procedures remain effective. Our Code also defines the standard of conduct expected by our chief executive officer and director. A copy of our Code of Ethics will be furnished without charge to any person upon written request. Requests should be sent to: Chief Executive Officer, EKIMAS Corporation, 95 Washington Street, Canton, MA 02021.
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our securities to file reports of ownership and changes in ownership with the SEC. Based solely on a review of copies of such forms submitted to us, we believe that all persons subject to the requirements of Section 16(a) filed such reports on a timely basis in fiscal 2020.
### Corporate Governance and Guidelines
Our Board of Directors has long believed that good corporate governance is important to ensure that we manage our company for the long-term benefit of stockholders. During the past year, our Board of Directors has continued to review our governance practices in light of the Sarbanes-Oxley Act of 2002 and recently revised SEC rules and regulations. We intend to implement internal corporate governance guidelines and practices and will make such guidelines and practices available on its website at www.rocketfuelblockchain.com, when implemented.
We currently have no separate audit, compensation, or nominating committees. The entire Board oversees our (i) audits and auditing procedures; (ii) compensation philosophies and objectives, establishment of remuneration levels for our executive officer, and implementation of our incentive programs; and (iii) identification of individuals qualified to become Board members and recommendation to our shareholders of persons to be nominated for election as directors.
Item 11.
### Executive Compensation
Summary Compensation Table
The following table provides information concerning compensation for services rendered to us in all capacities for the fiscal years ended March 31, 2020 and 2019 by our named executive officer and former named executive officer.
(1)
All other compensation of Mr. Adams is composed of approximately i) $18,000 and $13,000 for premiums paid by us for medical and dental insurance, and ii) $2,000 and $3,000 in premiums paid by us for disability and life insurance during the fiscal years ended March 31, 2020 and 2019, respectively. All other compensation also included a $650,000 change in control payment resulting from the Asset Sale having a closing date of January 31, 2020. The change in control payment was made in February 2020.
(2)
All other compensation of Ms. Carroll is composed of approximately i) $17,000 and $13,000 for premiums paid by us for medical and dental insurance, ii) $2,000 and $3,000 in premiums paid by us for disability and life insurance and iii) $3,000 and $3,000 for 401k matching contributions during the fiscal years ended March 31, 2020 and 2019, respectively.
Employment Agreements and Change in Control Provision
We entered into an employment agreement with Michael F. Adams on September 13, 2006, effective August 7, 2006 (the Adams Agreement).
Adams to serve as our President & Chief Executive Officer. Pursuant to the terms of the Adams Agreement, as amended on July 10, 2007, Mr. Adams annual base salary was initially set at $290,000, effective April 1, 2007. Adams salary to be reviewed annually by the Board of Directors and the opportunity to receive an annual bonus payment in an amount, if any, to be determined by the Compensation Committee of the Board. In May 2010, the Compensation Committee of the Board of Directors approved an increase in Mr. Adams annual base salary to $320,000, retroactive to April 1, 2010. In August 2019, the Compensation Committee of the Board of Directors approved an increase in Mr. Adams annual base salary to $325,000. In December 2019, the Board of Directors approved a bonus to be awarded to Mr. Adams in the approximate amount of $151,000. There was no bonus awarded to Mr. Adams during the fiscal year ended March 31, 2019.
The Adams Agreement provided for, among several normal and customary terms and conditions for employment agreements, a change in control provision in the event of certain occurrences, including but not limited to, our entering into an agreement for the sale or disposition by us of all or substantially all of our assets. Given that the Asset Sale qualified as a change in control as set forth in the Adams Agreement, Mr. Adams was eligible for a change in control payment of $650,000, which payment was made in February 2020. Although Mr. Adams employment agreement was terminated on January 31, 2020, the Asset Sale closing date, as provided for in the Adams Agreement, Mr. Adams continued as tour chief executive officer and sole director pursuant to a consulting agreement agreed to by the then members of the Board of Directors.
None.
During the year ended March 31, 2020, the following option awards by the named executive officer and former named executive officer were exercised.
(1)
The aggregate dollar amount realized by the named executive officer upon the exercise of the options is determined by multiplying the number of shares issued upon exercise by the difference between the market price of the underlying securities on the exercise date and the exercise price of the options.
(2)
Shares issued to Mr. Adams upon exercise of options granted pursuant to the 2003 Stock Option Plan (the 2003 Plan).
(3)
Shares issued to Mr. Adams upon exercise of options granted pursuant to the 2017 Non-Qualified Equity Incentive Plan (the 2017 Plan). Mr. Adams was granted options exercisable into 2,500,000 shares of our common stock which were exercised (i) for cash consideration resulting in the issuance of 2,083,333 shares of our common stock; and (ii) on a cashless basis whereby the remaining 416,667 shares of our common stock exercisable upon a cash exercise resulted in the issuance of 291,667 shares of our common stock upon the cashless exercise.
(4)
Shares issued to Ms. Carroll upon exercise of options granted pursuant to the 2003 Plan.
(5)
Shares issued to Ms. Carroll upon exercise of options granted pursuant to the 2017 Plan. Ms. Carroll was granted options exercisable into 1,250,000 shares of our common stock which were exercised on a cashless basis, as provided for in the 2017 Plan, resulting in the issuance of 950,000 shares of our common stock.
### Item 12.
The following table sets forth the beneficial ownership of shares of our common stock, as of July 16, 2021, of (i) each person known by us to beneficially own five percent (5%) or more of such shares; (ii) each of our directors and current executive officer named in the Summary Compensation Table; and (iii) our current executive officer and directors as a group. Except as otherwise indicated, all shares are beneficially owned, and the persons named as owners hold investment and voting power.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. Under this rule, certain shares may be deemed to be beneficially owned by more than one person, if, for example, persons share the power to vote or the power to dispose of the shares. In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares, for example, upon exercise of an option or warrant, within 60 days of July 16, 2021. 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, and only such person, by reason of such acquisition rights.
(1)
Unless otherwise indicated, the business address of the stockholders named in the table above is EKIMAS Corporation, Inc. 95 Washington Street, Canton, MA 02021.
(2)
Based on 28,262,371 outstanding shares as of July 16, 2021.
### Item 13.
On April 26, 2016, we issued a Promissory Note to Khristine Carroll, our Executive VP of Commercial Operations in the principal amount of $25,000 (the Carroll Note). The Carroll Note was initially due on May 25, 2016 and, per mutually agreement by the parties, extended | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
4 and 5).
The Company anticipates that the $406,381 outside of the Trust Account as of December 31, 2020, will be sufficient to allow the Company to operate for at least the next 12 months, assuming that a Business Combination is not consummated during that time.
On April 12, 2021, the Staff of the Securities and Exchange Commission together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Statement). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a Business Combination, which terms are similar to those contained in the warrant agreement, dated as of September 8, 2020, between the Company and Continental Stock Transfer & Trust Company, a New York corporation, as warrant agent (the Warrant Agreement). As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 7,623,600 Public Warrants, (ii) the 3,105,900 Private Warrants, and (iii) the 209,476 Underwriter Warrants (See Note 4, Note 5, and Note 8).
The Companys management and the audit committee of the Companys Board of Directors concluded that it is appropriate to restate the Companys previously issued audited balance sheet as of September 11, 2020 as previously reported in its Form 8-K, the Companys previously issued unaudited financial statements as of September 30, 2020 and for the period from June 2, 2020 (inception) through September 30, 2020, as previously reported in its Form 10-Q, and the audited financial statements as of December 31, 2020 and for the period from June 2, 2020 (inception) through December 31, 2020, as previously reported in its Form 10-K.
Basis of Presentation
### Use of Estimates
Cash and Cash Equivalents
At December 31, 2020, the assets held in the Trust Account were held in treasury funds.
Concentration of Credit Risk
At December 31, 2020, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
###
Net Loss Per Common Stock
Below is a reconciliation of the net loss per common stock:
### Offering Costs
The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (SAB) Topic 5A - Expenses of Offering. Offering costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the IPO. Offering costs associated with warrant liabilities is expensed, and offering costs associated with the Class A common stock are charged to the stockholders equity.
The fair value of the Companys assets and liabilities, which qualify as financial instruments under the FASB ASC 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the balance sheet.
### Fair Value Measurements
US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:
and
###
### Income Taxes
### Risks and Uncertainties
The impact of the COVID-19 outbreak on the Companys financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions.
Pursuant to the IPO on September 11, 2020, the Company sold 7,500,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock, and one warrant to purchase one share of Class A common stock. Each warrant will entitle the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment.
Warrants
Each warrant entitles the holder thereof to purchase one share of the Companys Class A common stock at a price of $11.50 per share, subject to adjustment as discussed herein. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the Companys board of directors and, in the case of any such issuance to the Companys sponsor or its affiliates, without taking into account any founder shares held by the Companys sponsor or its affiliates, prior to such issuance) (the Newly Issued Price), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Companys common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination (such price, the Market Value) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described below under Redemption of warrants will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
The warrants will become exercisable on the later of 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO if the Company extends the period of time to consummate a Business Combination) or 30 days after the completion of its initial Business Combination, and will expire five years after the completion of the Companys initial Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus is current. In the event that a registration statement is not effective for the exercised warrants, the purchaser of a unit containing such warrant will have paid the full purchase price for the unit solely for the share of Class A common stock underlying such unit.
Once the warrants become exercisable, the Company may call the warrants for redemption (excluding the Private Placement Warrants but including any outstanding warrants issued upon exercise of the unit purchase option issued to the representative and/or its designees): in whole and not in part; and if, and only if, the reported last sale price of the ClassA common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders.
If the management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering their warrants for that number of shares of Class A common stock equal to the quotient obtained by dividing (x) the product of the number of shares of Class A common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value (defined below) by (y) the fair market value. The fair market value shall mean the average reported last sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or the Companys recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise prices.
### Note 5 Private Placement
Simultaneously with the closing of the IPO, the Company consummated the Private Placement with the Companys Sponsor purchasing an aggregate of 3,075,000 warrants at a price of $1.00 per warrant, for an aggregate purchase price of $3,075,000. The Private Placement Warrants are identical to the warrants sold in the IPO except that the Private Placement Warrants, so long as they are held by the Sponsor or their permitted transferees, (i) will not be redeemable by the Company, (ii) may not (including the Class A common stock issuable upon exercise of these warrants), subject to certain limited exceptions, be transferred, assigned or sold by the holders until 30 days after the completion of the Companys initial Business Combination, (iii) may be exercised by the holders on a cashless basis and (iv) will be entitled to registration rights.
The Private Placement Warrants will be non-redeemable and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement Warrants are held by holders other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units being sold in the IPO. In addition, for as long as the Private Placement Warrants are held by the underwriters or their designees or affiliates, they may not be exercised after five years from the Effective Date.
On June 24, 2020, the Company issued an unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured and due at the earlier of December 31, 2020 or the closing of the IPO. The loan would be repaid upon the closing of the IPO out of the offering proceeds not held in the Trust Account. On September 11, 2020, the Company had drawn down $175,000 under the promissory note with the Sponsor to pay for offering expenses. On September 14, 2020, the Company repaid $175,000 to the Sponsor.
### Due to Related Parties
As of December 31, 2020, related parties paid an aggregate of $1,816 on behalf of the Company to pay for formation costs.
Related Party Loans
The Company will have until 15 months from the closing of the IPO to consummate an initial Business Combination. However, if the Company anticipates that it may not be able to consummate its initial Business Combination within 15 months, the Company may extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total of up to 21 months to complete a Business Combination). In order to extend the time available for the Company to consummate its initial Business Combination, the Companys Sponsor or its affiliates or designees, upon five days advance notice prior to the applicable deadline, must deposit into the Trust Account $750,000, or up to $862,500 if the underwriters over-allotment option is exercised in full ($0.10 per share in either case) on or prior to the date of the applicable deadline, for each three month extension (up to an aggregate of $1,500,000 (or up to $1,725,000 if the underwriters over-allotment option is exercised in full), or $0.20 per share, if the Company extends for the full six months). Any such loans will be non-interest bearing and payable upon the consummation of the Companys initial Business Combination. If the Company completes its initial Business Combination, the Company would repay such loaned amounts out of the proceeds of the Trust Account released to the Company. If the Company does<|endoftext|>Subject to adjustment in the discretion of the committee based on individual performance.
(5)
Actual bonus amounts reflect committee-approved bonuses taking into account formula target percentages, segment profit performance and individual performance during the year.
(6)
Mr.Bourdon began service on 9/8/20 and was not entitled to receive a formula ICP bonus for 2020. Under the terms of his employment agreement, he received a negotiated sign-on cash bonus of $500,000 which was paid in two equal installments on 9/18/20 and 12/31/20. Mr.Bourdon also received a discretionary bonus of $100,000 under the ICP based on his individual performance during 2020.
(7)
Mr.Haddock began service on 2/3/20 and his formula ICP bonus was prorated based on the portion of the year that he served. The base salary and target percentages and amounts set forth above are non-prorated figures, while the actual bonus amount was prorated. Mr.Haddock received an additional bonus of $525,000 outside of the ICP for the successful divestiture of Magellan Complete Care as of 12/31/20.
(8)
Mr.Rubins bonus represents a full year bonus following his retirement as chief financial officer on 9/8/20 and subsequent termination at the end of his transition period on 12/31/20.
### Equity Awards
In 2020 we provided our NEOs with equity awards under our 2016 Management Incentive Plan (the
2016 MIP
). The equity awards are designed to act as a long-term incentive vehicle to promote a focus on longer term goals, to build stockholder value and to retain our senior executives. Our equity awards for our NEOs, when added to base salary and annual bonus under the ICP, are targeted at or above the 50th percentile, depending on performance, of total compensation in the marketplace consensus prepared by the committees compensation consultant. Our policy is to grant annual equity awards on the third business day of March, shortly after the filing of our annual report on Form10-K. We may also grant equity awards at other times during the year when we hire new executives or when an executives role is expanded. For new hires like Messrs.Murray, Haddock and Bourdon, we grant sign-on equity awards on the first business day of the first month following the start of employment. See
### Equity Award Procedures Generally below.
Consideration of annual equity awards is made as part of the annual review of other compensation components, and is based on both competitive market analyses and individual and company performance assessments. The annual equity awards to Messrs.Murray, Kamal and Rubin and our other executive officers were approved by the committee on the recommendation of the chief executive officer and were subject to adjustment at its discretion.
Mr.Murray began serving as president and chief operating officer on December9, 2019, shortly after entering into an employment agreement with the company on December3, 2019. Under the terms of his employment agreement, Mr.Murray was to receive sign-on equity awards consisting of PSUs with a value of $1,500,000, non-qualified stock options with a value of $750,000 and RSUs with a value of $750,000. The number of sign-on PSUs awarded on January2, 2020 was 14,006, vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; 25,346 non-qualified stock options exercisable at $76.64 per share and vesting over a three-year period, determined by using a Black-Scholes valuation formula; and 9,786 RSUs vesting over a three-year period, determined based on the closing price of our stock on the grant date.
Mr.Haddock began serving as general counsel on February3, 2020, shortly after entering into an employment agreement with the company. Under the terms of his employment agreement, Mr.Haddock was to receive sign-on equity awards consisting of PSUs with a value of $750,000 and RSUs with a value of $750,000. Mr.Haddock was awarded these sign-on awards on March2, 2020 which included 10,605 PSUs vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; and 12,710 RSUs vesting over a three-year period, determined based on the closing price of our stock on that date.
Mr.Bourdon began serving as chief financial officer on September8, 2020, shortly after entering into an employment agreement with the company. Under the terms of his employment agreement, Mr.Bourdon was to receive sign-on equity awards consisting of PSUs with a value of $500,000 and RSUs with a value of $500,000. Mr.Bourdon was awarded these sign-on awards on October1, 2020 which included 4,362 PSUs vesting at the end of three years and based on a fair market value determined by using a Monte Carlo simulation of TSR for our stock compared against an index of health care companies; and 6,575 RSUs vesting over a three-year period, determined based on the closing price of our stock on the grant date.
Our annual equity awards for 2020 to our NEOs were made on March4, 2020 and consisted of PSUs and RSUs with a grant value of 50% and 50%, respectively, of the aggregate value of the award to each executive. The annual PSUs granted in 2020 vest 100% after three years from the grant date based on the companys TSR performance during the three-year period extending from January1, 2020 to December31, 2022 compared with the TSR of the companies included in the S&P Health Care Services Industry Index as of January1, 2020, and the annual RSUs vest ratably over three years. PSUs and RSUs also automatically vest if the employment of our NEOs is terminated by us without cause or by the executive for good reason in either case following a change in control of the company. See
Compensation of Named Executive Officers on Change in Control and Other Termination of Employment below.
The committee determines annual equity awards to our NEOs based on the following:
(1)
The value of the equity award is based on a percentage of the individuals base salary, taking into account several factors including the persons performance in the prior year, the nature of the executives role, his or her potential contribution to the long-term success of the company, and the importance of retaining and incentivizing that executive to achieve long-term results.
(2)
The number of shares associated with equity awards is calculated by dividing 50% of the total value of the award by a per share value yielded by a Monte Carlo simulation of performance outcomes for PSUs and 50% of the total value of the award by the closing price reported on Nasdaq on the date of grant for RSUs.
The committee believes that determining an equity award based on a percentage of each executives base salary and performance is consistent with best practices and is the most appropriate basis on which to make equity awards, properly size the awards, recognize past performance and create incentives for future performance. The committee also considered the long-term incentive award data available to it in the peer groups and consensus analyses provided by the compensation consultant. The following table shows the base salary rate in effect as of January1, 2020 (where applicable) and the target value of each of the NEOs annual equity awards in 2020 as a percentage of that base salary:
2020 Annual Equity Award Targets
(1)
Represents the rate of base salary effective as of 1/1/20 except where otherwise indicated. Base salary rates were subsequently increased as of 4/1/20 for Messrs.Kamal and Rubin. See
Base Salary above.
(2)
PSUs are valued using a Monte Carlo simulation model and RSUs are valued using the closing price of our stock on the date of the award. For further information on how these values were determined, see below.
(3)
Mr.Bourdon began service on 9/8/20 and was not eligible for an annual equity award in 2020. However, he received a negotiated sign-on equity award under the terms of his employment agreement with a value equal to $1,000,000.
(4)
Mr.Haddock began service on 2/3/20 and was not eligible for an annual equity award in 2020. However, he received a negotiated sign-on equity award under the terms of this employment agreement with a value equal to $1,500,000.
Our equity awards to our NEOs in recent years have emphasized PSUs whose value is tied to our TSR over a three-year performance period as compared to the S&P Health Care Services Industry Index. If TSR performance relative to the index is below median, NEOs will receive fewer shares at the end of the performance period, and if the companys TSR is below threshold levels, they will not receive any shares. In 2020 we awarded RSUs in addition to the PSUs, instead of the stock options that we have awarded in prior years, because we wanted to emphasize retention of our key executives and align our mix of equity instruments more closely with our competitors.
The following table summarizes the equity awards made to the NEOs during 2020, including sign-on equity awards to Messrs.Murray, Haddock and Bourdon as described above:
2020 Equity Awards
(1)
PSUs were valued at $72.09 for the annual awards on 3/4/20.
(2)
RSUs were valued at the closing price of our stock on the date of the award. Annual awards made on 3/4/20 to Messrs.Fasola, Murray, Kamal and Rubin were valued at $60.07 and the sign-on award to Mr.Murray on 1/2/20 was valued at $76.64, the sign-on award to Mr.Haddock on 3/2/20 was valued at $59.01, and the sign-on award to Mr.Bourdon on 10/1/20 was valued at $76.05.
(3)
Options were valued at $29.59 per share using a Black-Scholes valuation model. For a description of the assumptions used in that model, see below.
(4)
Consists of a sign-on award on 10/1/20 valued at $114.62 per share.
(5)
Consists of a sign-on award on 10/1/20 valued at $76.05 per share.
(8)
Consists of a sign-on award on 1/2/20 valued at $29.59 per share.
(9)
Consists of a sign-on award on 3/2/20 valued at $70.72 per share.
(10)
Consists of a sign-on award on 3/2/20 valued at $59.01 per share.
The following table shows the range of shares which may be issued upon settlement of the annual and sign-on PSU awards to the NEOs at various relative total shareholder return levels:
(1)Represents a sign-on award.
(2)Consists of a sign-on award of 14,006 target shares and an annual award of 18,206 target shares
(3)Represents a sign-on award.
The total equity award packages to the individuals were valued for purposes of determining the awards at $4,000,024, $1,000,001, $5,625,030, $2,249,499, $1,500,003 and $1,893,713 for Messrs.Fasola, Bourdon, Murray, Kamal, Haddock and Rubin, respectively. The NEOs will only realize the award date target values with respect to the PSUs if the company achieves a TSR during the three-year performance period from January1, 2020 through December31, 2022 which ranks at the 50 th percentile among the group of peer companies.
The award values of the PSUs were determined for purposes of determining the size of the award, based on the following assumptions:
The award value of the stock options awarded to Mr.Murray was determined by our compensation consultant for purposes of determining the award based on the following assumptions:
On March3, 2021 the company awarded to the NEOs then serving the following time-vesting RSUs under the 2016 MIP. The company awarded only RSUs, not PSUs, due to the pending merger with Centene, which based on its terms converts any outstanding unvested PSUs to time-vesting RSUs upon closing of the Merger. For further information on the treatment of the PSUs in the Merger, see the Merger Proxy Statement.
2021 Equity Awards
(2)
The RSUs were valued for purposes of determining the award at $92.85, the closing stock price on Nasdaq on 3/3/21.
### Retirement Vehicles/Deferred Compensation
We maintain a 401(k)savings plan which permits employees to defer compensation and to which the company makes matching contributions on behalf of the NEOs on the same basis as all other participants. We have never maintained a defined-benefit pension plan. We also operate a Supplemental | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Vest over a specified period of time from the date of grant contingent upon continued employment and, in the case of PSUs, the issuers total stockholder return over the performance period, and the actual amount received upon sale of shares will depend upon the fair market value of the shares at the times they are sold.
(2)
These stock options vest (or vested) with respect to 25% of the underlying shares on April1, 2021 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(3)
These stock options vest (or vested) with respect to 25% of the underlying shares on February1, 2020 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(4)
These stock options vest (or vested) with respect to 25% of the underlying shares on February1, 2019 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(5)
These stock options vest (or vested) with respect to 25% of the underlying shares on March17, 2018 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(7)
The vesting of this PSU will be determined based on the issuers total stockholder return (TSR) for the three-year period beginning on the grant date of the award relative to the TSRs of the companies in the Russell 2000 index over that period. The award is eligible to vest as to 0% to 150% of the target number of performance-based restricted stock units. Number of shares reflects maximum achievement, based on performance to date.
(9)
These RSUs vest as follows: 21,875 shares on each of May15 and November15, 2021; and with respect to 10,938 of such shares on May15, 2022.
(11)
These stock options vest (or vested) with respect to 25% of the underlying shares on February1, 2018 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(14)
These RSUs vest with respect to 6,098 on each of May15 and November15, 2021; and with respect to 3,050 of such shares on May15, 2022.
(16)
These RSUs vest with respect to 26,125 shares on each November15 and May15 hereafter until November15, 2022, and with respect to 13,063 of such shares on May15, 2023.
(17)
These RSUs vest with respect to 12,639 of the underlying shares on each of May15 and November15, 2021; and with respect to 6,319 of such shares on May15, 2022.
(19)
These RSUs vest with respect to 19,625 shares on each November15 and May15 hereafter until November15, 2022, and with respect to 9,813 of such shares on May15, 2023.
(20)
These RSUs vest with respect to 6,144 of the underlying shares on each of May15 and November15, 2021, and with respect to 3,072 of such shares on May15, 2022.
(22)
These stock options vest (or vested) with respect to 25% of the underlying shares on February14, 2019 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(23)
These stock options vest (or vested) with respect to 25% of the underlying shares on February14, 2020 and with respect to the remaining 75% of the underlying shares in equal monthly installments over the following 36 months.
(24)
These RSUs vested on February14, 2021.
(25)
These RSUs vested or will vest in two equal installments on each of February14, 2021 and February14, 2022.
(26)
These RSUs vested or will vest in three equal installments on each of February14, 2021, February14, 2022 and February14, 2023.
(28)
These RSUs vested or will vest in two equal installments on each of April1, 2021 and April1, 2022.
### Option Exercises and Stock Vested - 2020
The following table provides information regarding stock options that were exercised by our named executive officers during 2020 and the restricted stock unit awards granted to our named executive officers that vested during 2020.
(1)
The value realized upon the exercise of a stock option is calculated by multiplying (i)the number of shares of our common stock to which the exercise of the option related, by (ii)the difference between the per-share closing price of our common stock on the date the stock option was exercised and the per-share exercise price of the options.
(2)
The value realized upon the vesting of a stock award is calculated by multiplying (i)the number of shares of our common stock that vested, by (ii)the per-share closing price of our common stock on the vesting date. Represents the gross value realized prior to any applicable tax withholding.
The following section describes the benefits that may become payable to our named executive officers in connection with a termination of their employment with us and/or a change in control of Magnite. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different from the amounts presented below.
We are a party to an Executive Severance and Vesting Acceleration Agreement, referred to as the severance agreement, with each of our named executive officers. These agreements provide that if we terminate the employment of any of these executives without cause, if any of these executives resigns for good reason, or if the executives employment terminates due to the executives death or disability (as such terms are defined in the severance agreement), and prior to and not in connection with the consummation of a sale transaction (as such term is defined in the severance agreement), the executive will be entitled to receive continuation of his then-current base salary for a specified period (12 months for Messrs. Kershaw and Soroca and Ms.Evans), a pro-rata target bonus for the year of termination based upon the portion of the year worked and net of bonus amounts previously paid for the year, continuation of group health insurance coverage or reimbursement of premiums for each executive and his respective dependents for a specified period (12 months for Mr.Barrett, 6 months for Messrs. Day and Soroca and Ms.Evans, and 3 months for Mr.Kershaw), and accelerated vesting of equity awards for a specified period (12 months for Messrs. Kershaw and Soroca and Ms.Evans).
If we terminate the employment of any of these executives without cause, if any of them resigns for good reason or if any the executives employment terminates due to the executives death or disability, in any case in connection with or following a change in control of Magnite (within thirteen months of the change in control for Mr.Barrett), the benefits described above will be increased to include for Messrs. Barrett and Day, additional cash severance equal to one years target bonus (paid over 12 months); for Mr.Kershaw and Ms.Evans, a longer period of continuation of base salary equal to 12 months; for all the executives, full acceleration of vesting of all equity awards; and for all executives, except Mr.Soroca, a longer period of group health insurance coverage or reimbursement of premiums (12 months for Messrs. Barrett and Day and Ms.Evans and 6 months for Mr.Kershaw). In December 2019, in connection with the approval of the merger agreement between us and Telaria, our board approved the modification of the severance agreements (other than with respect to Ms.Evans, who commenced employment on April1, 2020) to provide that if the executive officer had been terminated in connection with or within 13 months following the closing of the merger between us and Telaria on April1, 2020, the executive officer would have been entitled to the enhanced change in control severance benefits described in this paragraph.
All severance benefits are conditioned upon these executives entering into a release of claims with us and abiding by the restrictive covenants contained in our standard confidentiality agreement (which includes an indefinite confidentiality covenant and one-year post-termination non-solicitation of employees covenant). The severance agreements also provide that if the payments or benefits made to the executive in connection with a change in control of Magnite would result in an excise tax under Section280G and 4999 of the U.S. Internal Revenue Code, such payments or benefits will be reduced if and to the extent such a reduction would result in a greater after-tax benefit for the executive.
The following tables present our estimates of the value of the payments and benefits that each of the named executive officers would have been entitled to receive (1)had his employment been terminated by us without cause, by the executive for good reason, or due to the executives death or disability on December31, 2020 and (2)had both such a termination of the executives employment and a change in control of Magnite occurred on that date. The actual amounts that would be paid upon a named executive officers termination of employment and/or a change in control can only be determined at the time of such event.
Severance Benefits
(1)
(1)
As discussed above, in December 2019, in connection with the approval of the merger agreement between us and Telaria, our board approved the modification of the severance agreements with our named executive officers (other than with respect to Ms.Evans, who commenced employment on April1, 2020) to provide that if the executive officer had been terminated in connection with or within 13 months following the closing of the merger between us and Telaria on April1, 2020, the executive officer would have been entitled to the enhanced change in control severance benefits described in this paragraph. In addition, the consummation of the Telaria Merger represented a change of control of Telaria for purposes of Ms.Evans severance agreement with respect to any equity that had been granted to Ms. Evans prior to the Telaria Merger. Accordingly, the amounts above reflect enhanced change of control severance benefits.
(2)
(3)
(4)
Kershaw and Soroca).
(5)
The value of the accelerated options and RSUs presented in the table is calculated based on our closing stock price on December31, 2020 of $30.71 and, in the case of the accelerated options, less the exercise price of the options.
Severance Benefits (Change in Control)
(1)
(2)
(3)
Kershaw and Soroca).
(4)
The value of the accelerated options and RSUs presented in the table is calculated based on our closing stock price on December31, 2020 of $30.71, and, in the case of the accelerated options, less the exercise price of the options.
CEO
### Pay-Ratio
Disclosure
Pursuant to the Exchange Act, we are required to disclose the ratio of the total annual compensation of our President and CEO, Michael Barrett, to the median of the total annual compensation of all of our employees (excluding our CEO). Based on SEC rules for this disclosure and applying the methodology described above, we have determined that our CEOs total compensation for 2020 was $3,512,905, and the median of the total 2020 compensation of all of our employees (excluding our CEO) was $167,686. Accordingly, we estimate the ratio of our CEOs total compensation for 2020 to the median of the total 2020 compensation of all of our employees (excluding our CEO) to be 20.95 to 1.
We identified the median employee by taking into account the annualized total cash compensation for 2020 for all individuals, excluding our CEO, who were employed by us or one of our affiliates on December31, 2020. We included all employees, whether employed on a full-time or part-time basis. We did not make any assumptions, adjustments or estimates with respect to their total cash compensation for 2020, but we did annualize the compensation for any employees who were not employed by us for all of 2020. Because our originally identified median employee was hired mid-year, we selected a different median employee with substantially similar compensation. We believe total cash compensation for all employees is an appropriate measure because we do not distribute annual equity awards to all employees.
Once the median employee was identified as described above, that employees<|endoftext|>Use U.S. LIBO Rate as a reference rate by no later than December 31, 2021, and if practicable, as far in advance of that deadline as possible. Regardless, there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBO Rate and any other unforeseen impacts of the potential discontinuation of LIBO Rate. The Company intends to monitor the developments with respect to the potential phasing out of LIBO Rate and work with its lenders to ensure any transition away from LIBO Rate will have minimal impact on its financial condition, but can provide no assurances that the impact of the discontinuation of LIBO Rate would not have a material adverse effect on our results of operations.
In March 2017, we issued $575.0 million aggregate principal amount of our 1.625% Notes, and in August 2020, we issued $700.0 million aggregate principal amount of our 3.875% Notes. Holders of the 1.625% Notes will have the right to require us to repurchase all or a portion of their 1.625% Notes upon the occurrence of a fundamental change (as defined under the respective indentures governing such notes) at a repurchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any, accrued prior to, but not including, the fundamental change repurchase date. Holders of the 3.875% Notes will have the right to require us to repurchase all of their 3.875% Notes upon the occurrence of certain change of control triggering events accompanied by certain ratings events (as described in the indenture governing the 3.875% Notes) at a repurchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, accrued prior to, but not including, the repurchase date. Moreover, we will be required to repay the 1.625% Notes and the 3.875% Notes in cash at their respective maturity dates, unless earlier repurchased or, in the case of the 1.625% Notes, converted. In addition, upon conversion of the 1.625% Notes to be repurchased, unless we elect to deliver solely shares of our common stock to settle such conversion (other than paying cash in lieu of delivering any fractional shares), we will be required to make cash payments in respect of such 1.625% Notes being converted.
Servicing the 1.625% Notes and the 3.875% Notes may require a significant amount of cash, and we may not have sufficient cash flow or the ability to raise the funds necessary to satisfy our obligations under such notes. Our ability to make cash payments in connection with conversions of the 1.625% Notes, repurchase the 1.625% Notes or the 3.875% Notes in the case of an applicable repurchase-triggering event under the respective indentures or repay such notes at maturity will depend on market conditions and our future performance, which is subject to economic, financial, competitive and other factors beyond our control. If we are unable to make cash payments upon conversion of the 1.625% Notes, we would be required to issue significant amounts of our common stock, which would dilute existing stockholders.
In addition, if we do not have sufficient cash to repurchase the 1.625% Notes or the 3.875% Notes following the applicable repurchase-triggering events, we would be in default under the terms of such notes, which could cross default other debt and materially adversely harm our business. In certain circumstances, a takeover of our Company and similar triggering events could also trigger an option of the holders of the 1.625% Notes and the 3.875% Notes to require us to repurchase such notes. This may have the effect of delaying or preventing a takeover of our Company that would otherwise be beneficial to investors in the 1.625% Notes, the 3.875% Notes and our common stock, which could materially decrease the value of such notes and of our common stock.
The terms of the Amended Credit Agreement and the terms of the 3.875% Notes limit the amount of future indebtedness secured by liens that we may incur, but the terms of the 1.625% Notes do not contain such limits. If we incur significantly more debt, this could intensify the risks described above. Our decision to use our cash for other purposes, such as to make acquisitions or to repurchase our common stock, could also intensify these risks.
If specified conditions are met, holders of the 1.625% Notes may convert their notes prior to the close of business on the business day immediately preceding July 15, 2023. Unless we elect to satisfy our conversion obligations by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional shares), in the event the conditional conversion feature under the 1.625% Notes is triggered, holders electing to convert their notes could require us to settle a portion or all of our conversion obligations through the payment of cash, which could materially adversely affect our liquidity. Additionally, when the conditional conversion feature under the 1.625% Notes is triggered at the end of the reporting period, we are required under applicable accounting rules to reclassify the outstanding principal of such notes as a current rather than long-term liability, which would result in a material reduction of our net working capital. A conditional conversion feature has been triggered as of December 31, 2020, and we can provide no assurance as to when or whether these conditional conversion features will lapse or be triggered again in the future. Any material decrease in our liquidity or reduction in our net working capital could have a material adverse effect on our financial condition and results of operations. In addition, we may elect to settle the 1.625% Notes solely in common stock to avoid an event of default under our Amended Credit Agreement, and any such issuance of common stock could materially dilute the ownership interests of existing stockholders, including stockholders who previously converted such notes to shares of our common stock.
Concurrently with the issuance of the 1.625% Notes, we entered into note hedge transactions with certain financial institutions, which we refer to as the option counterparties. The convertible note hedges are expected to reduce the potential dilution upon any conversion of the respective series of notes and/or offset any cash payments we are required to make in excess of the principal amount of converted notes of such series, as the case may be. We also entered into warrant transactions with the option counterparties with respect to the 1.625% Notes and the 1.00% Notes. The warrants we entered with option counterparties for the 1.00% Notes are still outstanding. The warrant transactions could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds $25.96, with respect to the 1.00% Notes, and $30.70, with respect to the 1.625% Notes. The warrants with respect to the 1.00% Notes can be exercised by holders beginning in March 2021 and expire no later than April 2021. We currently anticipate the holders of the 1.00% Notes to exercise the warrants to purchase up to 37.3 million shares of common stock from us, which will be settled on a net-share basis depending on the average stock price on the day of exercise.
In connection with establishing their initial hedge of the convertible note hedges and warrant transactions, the option counterparties or their respective affiliates have purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock following the pricing of the 1.625% Notes. The option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives contracts with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of 1.625% Notes (and are likely to do so during any observation period related to a conversion of 1.625% Notes following any repurchase of 1.625% Notes by us on any fundamental change repurchase date or otherwise). The potential effect, if any, of these transactions and activities on the market price of our common stock will depend in part on market conditions and cannot be ascertained at this time. Any of these activities could materially adversely affect the value of our common stock.
The option counterparties are financial institutions or affiliates of financial institutions, and we are subject to the risk that these option counterparties may default under the note hedge transactions. We can provide no assurances as to the financial stability or viability of any of the option counterparties. Our exposure to the credit risk of the option counterparties is not secured by any collateral. If one or more of the option counterparties to one or more of our note hedge transactions becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under those transactions.
To the extent the option counterparties do not honor their contractual commitments with us pursuant to the note hedge transactions, we could face a material increase in our exposure to potential dilution upon any conversion of the 1.625% Notes and/or cash payments we are required to make in excess of the principal amount of converted 1.625% Notes, as the case may be. Our exposure will depend on many factors but, generally, the increase in our exposure will be correlated to the increase in the market price of our common stock and in the volatility of the market price of our common stock. In addition, upon a default by one of the option counterparties, we may suffer adverse tax consequences with respect to our common stock. Any such adverse tax consequences or increased cash payments could have a material adverse effect on our results of operations.
On June 7, 2020, our Board of Directors authorized and declared a dividend of one Right for each outstanding share of common stock. If a person or group of affiliated or associated persons acquires beneficial ownership of 15% or more of our then outstanding common stock, subject to certain exceptions, each Right would entitle its holder (other than the acquiring person or group of affiliated or associated persons) to purchase additional shares of our common stock at a substantial discount to the public market price. In addition, under certain circumstances, we may exchange the Rights (other than Rights beneficially owned by the acquiring person or group of affiliated or associated persons), in whole or in part, for shares of our common stock on a one-for-one basis. The stockholders rights plan could make it more difficult for a third party to acquire us or a large block of our common stock without the approval of our Board of Directors, which may discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.
Provisions in our charter documents may delay or prevent the acquisition of our Company, which could materially adversely affect the value of our common stock.
Our certificate of incorporation and by-laws contain provisions that could make it harder for a third party to acquire us without the consent of our Board of Directors. These provisions: establish advance notice requirements for submitting nominations for election to the Board of Directors and for proposing matters that can be acted upon by stockholders at a meeting; authorize the issuance of "blank check" preferred stock, which is preferred stock that our Board of Directors can create and issue without prior stockholder approval and that could be issued with voting or other rights or preferences that could impede a takeover attempt; and require the approval by holders of at least 66 2/3% of our outstanding common stock to amend any of these provisions in our certificate of incorporation or by-laws.
Although we believe these provisions make a higher third-party bid more likely by requiring potential acquirers to negotiate with our Board of Directors, these provisions apply even if an initial offer may | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Price (i) in cash, check, bank draft, or money order payable to the order of the Company; (ii) by delivering to us shares of common stock (included restricted stock) already owned by the participant having a fair market value equal to the aggregate option price and that the participant has not acquired from us within six months prior to the exercise date; (iii) by delivering to us or our designated agent an executed irrevocable option exercise form, together with irrevocable instructions from the participant to a broker or dealer, reasonably acceptable to us, to sell certain of the shares purchased upon the exercise of the option or to pledge such shares to the broker as collateral for a loan from the broker and to deliver to us the amount of sale or loan proceeds necessary to pay the purchase price; (iv) by requesting us to withhold the number of shares otherwise deliverable upon exercise of the stock option by the number of shares having an aggregate fair market value equal to the aggregate option price at the time of exercise ( i.e., a cashless net exercise); and (v) by any other form of valid consideration that is acceptable to the Committee in its sole discretion.
### Stock Appreciation Rights
The Committee is authorized to grant stock appreciation rights (SARs) as a stand-alone award (or freestanding SARs) or in conjunction with options granted under the Plan (or tandem SARs). SARs entitle a participant to receive an amount equal to the excess of the fair market value of a share of common stock on the date of exercise over the fair market value of a share of our common stock on the date of grant. The grant price of a SAR cannot be less than 100% of the fair market value of a share of our common stock on the date of grant. The Committee will determine the terms of each SAR award at the time of the grant, including, without limitation, the methods by or forms in which shares will be delivered to participants or registered in their names. The maximum term of each SAR award, the times at which each SAR award will be exercisable, and provisions requiring forfeiture of unexercised SARs at or following termination of employment or service generally are fixed by the Committee, except that no freestanding SAR may have a term exceeding 10 years and no tandem SAR may have a term exceeding the term of the option granted in conjunction with the tandem SAR. Distributions to the recipient may be made in common stock, cash, or a combination of both as determined by the Committee.
Restricted Stock and Restricted Stock Units
The Committee is authorized to grant restricted stock and restricted stock units. Restricted stock consists of shares of our common stock that may not be sold, assigned, transferred, pledged, hypothecated, encumbered, or otherwise disposed of, and that may be forfeited in the event of certain terminations of employment or service, prior to the end of the restricted period as specified by the Committee. Restricted stock units are the right to receive shares of common stock at a future date in accordance with the terms of such grant upon the attainment of certain conditions specified by the Committee, which include a substantial risk of forfeiture and restrictions on their sale or other transfer by the participant. The Committee determines the eligible participants to whom, and the time or times at which, grants of restricted stock or restricted stock units will be made; the number of shares or units to be granted; the price to be paid, if any; the time or times within which the shares covered by such grants will be subject to forfeiture; the time or times at which the restrictions will terminate; and all other terms and conditions of the grants. Restrictions or conditions could include, but are not limited to, the attainment of performance goals (as described below), continuous service with us, the passage of time, or other restrictions or conditions. Except as otherwise provided in the Plan or the applicable award agreement, a participant shall have, with respect to shares of restricted stock, all of the rights of a stockholder of the Company holding the class of common stock that is the subject of the restricted stock, including, if applicable, the right to vote the common stock and the right to receive any dividends thereon.
### Dividend Equivalent Rights
The Committee is authorized to grant a dividend equivalent right to any participant, either as a component of another award or as a separate award, conferring upon the participant the right to receive credits based on the cash dividends that would have been paid on the shares of common stock specified in the award as if such shares were held by the participant. The terms and conditions of the dividend equivalent right shall be specified in the grant. Dividend equivalents credited to the holder of a dividend equivalent right may be paid currently or may be deemed to be reinvested in additional shares. Any such reinvestment shall be at the fair market value at the time thereof. A dividend equivalent right may be settled in cash, shares, or a combination thereof.
Performance Awards
The Committee may grant performance awards payable at the end of a specified performance period in cash, shares of common stock, units, or other rights based upon, payable in, or otherwise related to our common stock. Payment will be contingent upon achieving pre-established performance goals (as described below) by the end of the applicable performance period. The Committee will determine the length of the performance period, the maximum payment value of an award, and the minimum performance goals required before payment will be made, so long as such provisions are not inconsistent with the terms of the Plan, and to the extent an award is subject to Section 409A of the Code, are in compliance with the applicable requirements of Section 409A of the Code and any applicable regulations or guidance. In certain circumstances, the Committee may, in its discretion, determine that the amount payable with respect to certain performance awards will be reduced from the maximum amount of any potential awards. If the Committee determines, in its sole discretion, that the established performance measures or objectives are no longer suitable because of a change in our business, operations, corporate structure, or for other reasons that the Committee deems satisfactory, the Committee may modify the performance measures or objectives and/or the performance period.
### Performance Goals
Awards of restricted stock, restricted stock units, performance awards, and other awards under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria which shall consist of one or more or any combination of the following criteria (Performance Criteria): cash flow; cost; revenues; sales; ratio of debt to debt plus equity; net borrowing, credit quality, or debt ratings; profit before tax; economic profit; earnings before interest and taxes; earnings before interest, taxes, depreciation, and amortization; gross margin; earnings per share (whether on a pre-tax, after-tax, operational, or other basis); operating earnings; capital expenditures; expenses or expense levels; economic value added; ratio of operating earnings to capital spending or any other operating ratios; free cash flow; net profit; net sales; net asset value per share; the accomplishment of mergers, acquisitions, dispositions, public offerings, or similar extraordinary business transactions; sales growth; price of the shares; return on assets, equity, or stockholders equity; market share; inventory levels, inventory turn or shrinkage; or total return to stockholders. Any Performance Criteria may be used to measure our performance as a whole or of any of our business units and may be measured relative to a peer group or index. Any Performance Criteria may include or exclude (i) events that are of an unusual nature or indicate infrequency of occurrence, (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; (iv) the effect of a merger or acquisition, as identified in our quarterly and annual earnings releases; or (v) other similar occurrences. In all other respects, Performance Criteria shall be calculated in accordance with our financial statements, under generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award, which is consistently applied and identified in the Companys audited financial statements, including in footnotes, or the Compensation Discussion and Analysis section of the Companys annual report.
Other Awards
The Committee may grant other forms of awards, based upon, payable in, or that otherwise relate to, in whole or in part, shares of our common stock, if the Committee determines that such other form of award is consistent with the purpose and restrictions of the Plan. The terms and conditions of such other form of award shall be specified in the grant. Such other awards may be granted for no cash consideration, for such minimum consideration as may be required by applicable law, or for such other consideration as may be specified in the grant.
### Vesting, Forfeiture and Recoupment, Assignment
The Committee, in its sole discretion, may determine that an award will be immediately vested, in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its date of grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the date of grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the award may be vested.
The Committee may impose on any award at the time of grant or thereafter, such additional terms and conditions as the Committee determines, including terms requiring forfeiture of awards in the event of a participants termination of service. The Committee will specify the circumstances on which performance awards may be forfeited in the event of a termination of service by a participant prior to the end of a performance period or settlement of such awards. Except as otherwise determined by the Committee, restricted stock will be forfeited upon a participants termination of service during the applicable restriction period. In addition, we may recoup all or any portion of any shares or cash paid to a participant in connection with any award in the event of a restatement of the Companys financial statements as set forth in the Companys clawback policy, if any, as such policy may be approved or modified by our Board from time to time.
Awards granted under the Plan generally are not assignable or transferable except by will or by the laws of descent and distribution, except that the Committee may, in its discretion and pursuant to the terms of an award agreement, permit transfers of nonqualified stock options or SARs to (i) the spouse (or former spouse), children, or grandchildren of the participant (Immediate Family Members); (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members; (iii) a partnership in which the only partners are (a) such Immediate Family Members and/or (b) entities which are controlled by the participant and/or his or her Immediate Family Members; (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision; or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the applicable award agreement pursuant to which such nonqualified stock options or SARs are granted must be approved by the Committee and must expressly provide for such transferability, and (z) subsequent transfers of transferred nonqualified stock options or SARs shall be prohibited except those by will or the laws of descent and distribution.
### Adjustments Upon Changes in Capitalization
In the event that any dividend or other distribution<|endoftext|>Extent such purchases are able to be made in compliance with Rule10b
, which is a safe harbor from liability for manipulation under Section9(a)(2) and Rule10b
-5 of the Exchange Act. Rule10b
-18 has certain technical requirements that must be complied with in order for the safe harbor to be available to the purchaser. Our sponsor, officers, directors and/or their affiliates will not make purchases of common stock if the purchases would violate Section9(a)(2) or Rule10b
-5 of the Exchange Act.
We will provide our public stockholders with the opportunity to redeem all or a portion of their shares of ClassA common stock upon the completion of our initial business combination at a per
-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the initial business combination including interest earned on the funds held in the trust account and not previously released to us to pay our taxes or to fund our working capital requirements, divided by the number of then outstanding public shares, subject to the limitations described herein. The per
-share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commissions we will pay to the underwriters. Our sponsor, officers, directors, special advisor and an employee of an affiliate of our sponsor have entered into a letter agreement with us, pursuant to which they have agreed to waive their redemption rights with respect to any founder shares and any public shares held by them in connection with the completion of our initial business combination.
If a stockholder vote is not required and we do not decide to hold a stockholder vote for business or other legal reasons, we will, pursuant to our amended and restated certificate of incorporation: conduct the redemptions pursuant to Rule13e
-4 and Regulation14E of the Exchange Act, which regulate issuer tender offers, and file tender offer documents with the SEC prior to completing our initial business combination which contain substantially the same financial and other information about the initial business combination and the redemption rights as is required under Regulation14A of the Exchange Act, which regulates the solicitation of proxies.
Upon the public announcement of our initial business combination, we or our sponsor will terminate any plan established in accordance with Rule10b5
-1 to purchase shares of our ClassA common stock in the open market if we elect to redeem our public shares through a tender offer, to comply with Rule14e
-5 under the Exchange Act.
In the event we conduct redemptions pursuant to the tender offer rules, our offer to redeem will remain open for at least 20 business days, in accordance with Rule14e
(a) under the Exchange Act, and we will not be permitted to complete our initial business combination until the expiration of the tender offer period. In addition, the tender offer will be conditioned on public stockholders not tendering more than a specified number of public shares which are not purchased by our sponsor, which number will be based on the requirement that we may not redeem public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination upon consummation of our initial business combination and after payment of underwriters fees and commissions.
Our initial stockholders will count toward this quorum and pursuant to the letter agreement, our sponsor, officers, directors, special advisor and an employee of an affiliate of our sponsor have agreed to vote their founder shares and any public shares purchased during or after our IPO (including in open market and privately negotiated transactions) in favor of our initial business combination. For purposes of seeking approval of the majority of our outstanding shares of common stock voted, non
-votes will have no effect on the approval of our initial business combination once a quorum is obtained. As a result, in addition to the founder shares held by our sponsor, officers, directors and special advisor and that employee, we would need only approximately 11.6%, of the 17,250,000 public shares outstanding to be voted in favor of an initial business combination (assuming only a quorum is present at the meeting) in order to have our initial business combination approved (assuming the over
-allotment option is not exercised). In addition, as a result of the founder shares and private placement warrants that the anchor investors may hold (directly or indirectly), they may have different interests with respect to a vote on an initial business combination than other public stockholders. These quorum and voting thresholds, and the voting agreements of our sponsor, officers, directors, special advisor and such employee may make it more likely that we will consummate our initial business combination.
Our amended and restated certificate of incorporation will provide that in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (so that we are not subject to the SECs penny stock rules) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination upon consummation of our initial business combination and after payment of underwriters fees and commissions.
Notwithstanding the foregoing, if we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated certificate of incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a group (as defined under Section13 of the Exchange Act), will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the shares sold in our IPO, which we refer to as the Excess Shares. We believe this restriction will discourage stockholders from accumulating large blocks of shares, and subsequent attempts by such holders to use their ability to exercise their redemption rights against a proposed initial business combination as a means to force us or our management to purchase their shares at a significant premium to the then
Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in our IPO could threaten to exercise its redemption rights if such holders shares are not purchased by us or our management at a premium to the then
### There is a nominal cost associated with the above
-referenced tendering process and the act of certificating the shares or delivering them through the DWAC System.
If our initial proposed initial business combination is not completed, we may continue to try to complete an initial business combination with a different target until 24 months from the closing of our IPO.
Our amended and restated certificate of incorporation provides that we will have only 24 months from the closing of our IPO to complete our initial business combination. If we are unable to complete our initial business combination within such 24
-month period, we will: (i)cease all operations except for the purpose of winding up, (ii)as promptly as reasonably possible but not more than ten business days thereafter subject to lawfully available funds therefor, redeem 100% of the public shares, at a per
There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination within the 24
-month time period.
Our initial stockholders have agreed to waive their rights to liquidating distributions from the trust account with respect to any founder shares held by them if we fail to complete our initial business combination within 24 months from the closing of our IPO. However, if our sponsor, our officers or directors or the anchor investors acquire public shares in or after our IPO, they will be entitled to liquidating distributions from the trust account with respect to such public shares if we fail to complete our initial business combination within the allotted 24
-month time period.
Our sponsor, officers, directors, special advisor and an employee of an affiliate of our sponsor have agreed, pursuant to a written agreement with us, that they will not propose any amendment to our amended and restated certificate of incorporation (i)to modify the substance or timing of the ability of holders of our public shares to seek redemption in connection with our initial business combination or our obligation to redeem 100% of our public shares if we do not complete our initial business combination within 24 months from the closing of our IPO or (ii)with respect to any other provision relating to stockholders rights or pre
-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of ClassA common stock upon approval of any such amendment at a per
-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account including interest earned on the funds held in the trust account and not previously released to us to pay our taxes and/or to fund our working capital requirements, divided by the number of then outstanding public shares. However, we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of our initial business combination and after payment of underwriters fees and commissions (so that we are not subject to the SECs penny stock rules).
We will depend on sufficient interest being earned on the proceeds held in the trust account to pay any tax obligations we may owe or for working capital purposes (provided that the funds released for working capital purposes may not exceed $250,000 annually).
If we were to expend all of the net proceeds of our IPO and the sale of the private placement warrants, other than the proceeds deposited in the trust account, and without taking into account interest, if any, earned on the trust account, the per
-share redemption amount received by stockholders upon our dissolution would be approximately $10.00. We cannot assure you that the actual per
-share redemption amount received by stockholders will not be substantially less than $10.00.
Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third
-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. We are not aware of any product or service providers who have not or will not provide such waiver other than the underwriters of our IPO and our independent registered public accounting firm.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable and up to $250,000 per year for working capital purposes, if any, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Note, with the principal bearing interest at an annual rate of 18%, compounded monthly. The loan is unsecured and the principal and accrued interest would have become due for repayment on January 20, 2020, but could have been repaid early without penalty. Pursuant to the terms of the loan agreement, the Company issued to the Lender 3,265,500 non-transferrable Series F Warrants to purchase common shares of the Company. The exercise price of the warrants was $0.09, and the warrants contained a provision restricting their exercise in the event any such exercise would cause the Lender to own 10% or more of the Companys outstanding common shares. The relative fair value of the warrants issued in connection with the senior unsecured note was estimated at $110,900, based upon a total fair value as calculated by a Black-Scholes option-pricing model.
On October 4, 2019, the Company entered into an agreement with the Lender to extend the due date of the note for a period of three years to mature on January 20, 2023, with the same terms as the original note. The Series F Warrants were cancelled and replaced with 4,000,000 Series K Warrants issued solely in relation to the extension of the note, with expiration at February 1, 2023 and an exercise price of $0.08. The Company accounted for the change in terms of this Senior unsecured note payable as a debt modification.
###
Notes to the
The fair value of the Series K Warrants issued in connection with the extension of the senior unsecured note and the fair value of the Series F Warrants at the date of amendment were estimated at $227,600 and $57,100, respectively, based upon fair values as calculated by a Black-Scholes option-pricing model using the following assumptions:
The net difference in the fair values of the warrants of $170,500, together with the unamortized discount, were recorded as a loss on extinguishment of debt of $195,611 in the year ended September 30, 2020.
At September 30, 2020, the note payable was $300,000, with all of the discount fully amortized. At September 30, 2019, the note payable was $274,889, which is net of the unamortized discount of $25,111.
On May 8, 2019, the Company entered into a separate loan agreement and promissory note with the Lender. Under the loan agreement, the Lender loaned the Company $250,000 in the form of a senior unsecured note, with the principal bearing interest at an annual rate of 18%, compounded monthly. The loan was unsecured and the principal and accrued interest would become due for repayment on November 7, 2020, but may be repaid early without penalty.
Pursuant to the terms of the May 8, 2019 loan agreement, the Company issued to the Lender 3,543,600 non-transferrable Series I Warrants to purchase common shares of the Company. The exercise price of the warrants is $0.07, with a term of eighteen months. The relative fair value of the warrants issued in connection with this senior unsecured note was estimated at $94,300, based upon a total fair value as calculated by a Black-Scholes option-pricing model. The relative fair value of the warrants was recorded as a discount of the note in the fiscal year ended September 30, 2020.
### Warrants Issued During the Year Ended
September 30, 2019
Expected volatility
138.5%
Stock price on date of the note
$0.07
Exercise price
$0.07
Expected dividends
-
Expected term (in years)
1.5
Risk-free rate
2.26%
Expected forfeiture rate
0%
On September 4, 2020, the Company paid the May 8, 2019 note in full, together with $60,851 of accrued interest for a total of $310,851. The unamortized discount of $25,136 was expensed concurrent with the payoff of the loan. At September 30, 2019, the note payable was $177,366, net of the unamortized discount of $72,634.
The accrued interest on the two senior unsecured notes payable was $142,492 and $83,107 at September 30, 2020 and September 30, 2019, respectively. Interest expense related to the senior unsecured notes payable to this related party was $120,237 and $73,704 for the fiscal years ended September 30, 2020 and 2019, respectively.
The $300,000 senior unsecured note payable would be senior to any other debt obtained by the Company subsequent to September 30, 2020. The note requires that when the Company enters into any other financings, 25% of the proceeds of such financings will be paid toward reduction of the principal and interest accrued on this note, which did not occur with the August 17, 2020 private placement. The Lender has provided a waiver of default on the Note that would otherwise exist due to a non-payment under this contract term for the note.
###
Notes to the
NOTE 7 ASSET RETIREMENT OBLIGATION:
Remediation, reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, capital costs and reclamation costs. Such assumptions are based on the Companys current mining plan and the best available information for making such estimates. In calculating the present value of the new estimate of the asset retirement obligation, the Company used a credit-adjusted risk-free interest rate of 8% and a projected mine life of 15 years.
On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions. Changes to the Companys asset retirement obligation on its mineral properties are as follows:
### In the fourth quarter of
Management updated the ARO at Lookout Mountain to reflect the actual disturbed acres from exploration activities and actual reclamation work performed to date. The updated estimate of undiscounted costs of approximately $234,119 is an increase from the $200,000 in the previous estimate. However, the ARO liability decreased by $80,435 as a result of changes in the estimated acres disturbed, estimated timing of costs, estimated costs to perform the reclamation work and the impact of discounting the costs to present value.
The ARO related to the changes described above were discounted using a credit adjusted, risk-free interest rate of 5
%.
### NOTE 8 INCOME TAXES:
At September 30, 2020 and 2019, the Company did not record a tax provision or benefit.
At September 30, 2020 and 2019, the Company had deferred tax assets arising principally from net operating loss carryforwards for income tax purposes. As the Companys management cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at September 30, 2020 and 2019.
The components of the Companys deferred taxes at September 30, 2020 and 2019 are as follows:
###
Notes to the
The federal income taxes of the Companys wholly owned subsidiary, BH Minerals USA, Inc., are not consolidated with those of the rest of the Company since BH Minerals USA, Inc. is wholly owned by the Companys Canadian subsidiary, Staccato Gold Resources Ltd.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. The Company does not expect that the NOL carryback provision of the CARES Act would result in a material cash benefit.
The CARES Act increases the amount of business interest expense that may be deducted for tax years beginning in 2019 and 2020 by computing the section 163(j) limitation. The CARES Act generallylimitsa taxpayers business interest deductions for a taxable year to the sum of: (1) 50% of the taxpayers adjusted taxable income for that year, (2) its business interest income and (3) floor plan financing interest. Any interest expense not deductible under 163(j) for any affected year may be carried forward without limitation. The Company does not expect that the change in the section 163(j) provision of the CARES Act would result in a material cash effect.
The annual tax benefit is different from the amount that would be provided by applying the statutory federal income tax rate to the Companys pretax loss for the following reasons:
At September 30, 2020, the Company had total federal net operating loss carryforwards of approximately $49.6 million, of which $44.8 million expire in fiscal years ending September 30, 2024 through September 30, 2038. Federal net operating loss carryforwards of $4.8 million will not expire. State net operating losses total approximately $19.9 million and will expire in fiscal years ending September 30, 2021 through September 30, 2040.
BH Minerals has total federal net operating loss carryforwards of approximately $18.4 million, of which $15.8 million expire in fiscal years ending September 30, 2025 through September 30, 2038. Federal net operating loss carryforwards of $2.6 million will not expire.
At September 30, 2020, the Company also has approximately $6.7 million in net operating loss carryforwards in Canada which will expire in fiscal years ending September 30, 2024 through September 30, 2032.
At September 30, 2020, $697,000 of foreign tax credit carryforwards expired.
The Company has not identified any unrecognized tax benefits. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to other operating expense. Fiscal years 2017 through 2020 remain subject to examination by state and federal tax authorities. The Company has reviewed its tax returns and believes the Company has not taken any unsubstantiated tax positions.
IRS Code Section 382 limits the loss and credit carryforwards in the event of an ownership change of a corporation. The equity placement activities during the year ended September 30, 2020 did not give rise to an ownership change under Section 382.
As a result of previous acquisitions, the Company acquired approximately $15,000,000 of federal net operating loss carryovers that are limited by Code Section 382. As of September 30, 2020, the Company has not determined if any other losses are limited by IRS Code Section 382.
###
Notes to the
NOTE 9 COMMON STOCK, WARRANTS AND PREFERRED STOCK:
### Private Placements
On October 18, 2018 and December 3, 2018, the Company closed two tranches of a private placement offering of 7,500,000 units of the Company at a price of $0.08 per unit for net proceeds of $600,000. Each unit in the offering consisted of one share of common stock of the Company and one Class E Warrant, with each warrant exercisable to acquire an additional share of common stock of the Company at a price of $0.14 per share until the warrant expiration date of October 29, 2021.
On March 29, 2019, the Company closed the sale of 2,000,000 units, the first tranche of a private placement offering of up to 7,500,000 units of the Company at a price of $0.08 per unit, for total proceeds of $160,000. As a result, 2,000,000 shares of the Companys common stock and 2,000,000 Warrants were issued.
On June 14, 2019, the Company closed the sale of 1,000,000 units, the second tranche of a private placement offering of up to 7,500,000 units of the Company at a price of $0.08 per unit, for total proceeds of $80,000. As a result, 1,000,000 shares of the Companys common stock and 1,000,000 Warrants were issued.
On July 28, 2019, in connection with the Lookout Mountain LLC Agreement, the Company issued 3,367,441 units of the Company at a price of $0.08 to PM&G for cash proceeds to the Company of $269,395. As a result, 3,367,441 shares of the Companys common stock and 3,367,441 Warrants were issued.
### On October 23, 2019, the
Company closed a private placement offering with accredited investors for 7,500,000 units of the Company at a price of US$0.08 per unit, for total proceeds to the Company of $600,000. Each unit consisted of one share of common stock of the Company and one-half common share purchase Class J warrant (each whole such warrant a Warrant), with each Warrant exercisable<|endoftext|>Target businesses that are sizable will be limited by our available financial resources. Furthermore, because we are obligated to pay cash for the shares of ClassA common stock which our public stockholders redeem in connection with our initial business combination, target companies will be aware that this may reduce the resources available to us for our initial business combination. This may place us at a competitive disadvantage in successfully negotiating and completing an initial business combination.
If the net proceeds of our initial public offering and the sale of the placement units not being held in the trust account are insufficient to allow us to operate for at least the 24 months following the closing of our initial public offering, we may be unable to complete our initial business combination, in which case our public stockholders may only receive $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.
The funds available to us outside of the trust account to fund our working capital requirements may not be sufficient to allow us to operate for at least the 24months following the closing of our initial public offering, assuming that our initial business combination is not completed during that time. We believe that the funds available to us outside of the trust account will be sufficient to allow us to operate for at least the 24months following the closing of our initial public offering; however, we cannot provide any assurance that our estimate is accurate.
We could also use a portion of the funds as a down payment or to fund a no-shop provision (a provision in letters of intent or merger agreements designed to keep target businesses from shopping around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed initial business combination, although we do not have any current intention to do so.
If the net proceeds of our initial public offering and the sale of the placement units not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search for an initial business combination, to pay our taxes and to complete our initial business combination.
If we are required to seek additional capital, we would need to borrow funds from our sponsor, management team or other third parties to operate or may be forced to liquidate. None of our sponsor, members of our management team nor any of their affiliates is under any obligation to advance funds to us in such circumstances. Any such advances would be repaid only from funds held outside the trust account or from funds released to us upon completion of our initial business combination. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account. Consequently, our public stockholders may only receive approximately $10.00 per share on our redemption of our public shares, and our warrants will expire worthless.
Subsequent to the completion of our initial business combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price.
Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure our stockholders that this diligence will surface all material issues that may be present inside a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-downor write-offassets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even though these charges may be non-cashitems and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existingdebt held by a target business or by virtue of our obtaining debt financing to partially finance the initial business combination. unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation or tender offer materials, as applicable, relating to the initial business combination constituted an actionable material misstatement or omission.
Our placing of funds in the trust account may not protect those funds from third-partyclaims against us. Although we will seek to have all vendors, service providers, prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account.
Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10years following redemption. Accordingly, the per-shareredemption amount received by public stockholders could be less than the $10.00 per share initially held in the trust account, due to claims of such creditors. Pursuant to the letter agreement, our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.00 per public share and (ii)the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per share and (ii)the actual amount per share held in the trust account as of the date of the liquidation of the trust account if less than $10.00 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely.
If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our board may be exposed to claims of punitive damages.
In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.
To the extent any bankruptcy claims deplete the trust account, the per-shareamount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading in securities and that our activities do not include investing, reinvesting, owning, holding or trading investment securities constituting more than 40% of our total assets (exclusive of U.S. Our business will be to identify and complete an initial business combination and thereafter to operate the post-transactionbusiness or assets for the long term.
To this end, the proceeds held in the trust account may only be invested in UnitedStates government securities within the meaning of Section2(a)(16) of the Investment Company Act having a maturity of 185days or less or in money market funds meeting certain conditions under Rule2a-7promulgated under the Investment Company Act which invest only in direct U.S. The trust account is intended as a holding place for funds pending the earliest to occur of: (i)the completion of our initial business combination; (ii)the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A)to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or certain amendments to our charter prior thereto or to redeem 100% of our public shares if we do not complete our initial business combination within 24months from the closing of our initial public offering or (B)with respect to any other provision relating to stockholders rights or pre-initialbusiness combination activity; or (iii)absent an initial business combination within 24months from the closing of our initial public offering, our return of the funds held in the trust account to our public stockholders as part of our redemption of the public shares. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to complete an initial business combination or may result in our liquidation.
If a corporation complies with certain procedures set forth in Section280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Granted stock option and restricted stock awards to the Company's eligible directors, officers and employees and consultants providing services to the Company to purchase SGRP Shares pursuant to SGRP's 2020 Stock Compensation (the "
2020 Plan
"), SGRP's 2018 Stock Compensation (the "
2018 Plan
"), and SGRP's 2008 Stock Compensation Plan (as amended, the "
2008 Plan
"). SGRP's stockholders approved and adopted the 2020 Plan in January 2021, the 2018 Plan in May 2018, and the 2008 Plan in May 2008, as the successor to various predecessor stock option plans.
As of February 4, 2021, there were awards representing 565,000 shares of SGRP's Common Stock that had been granted under the 2018 Plan (all of which remained outstanding). After April 30, 2021, no further grants can be made under the 2020 Plan respecting shares of SGRP's Common Stock. As of December 31, 2020, there were awards representing 585,000 shares of SGRP's Common Stock that had been granted under the 2018 Plan (565,000 of which remained outstanding), and awards respecting 3,044,927 shares of SGRP's Common Stock outstanding under the 2008 Plan. After May 31, 2019, the 2018 Plan ended and no further grants can be made under the 2018 Plan respecting shares of SGRP's Common Stock.
2020 Plan
The Board authorized and approved the revised proposed 2020 stock compensation plan of SPAR Group, Inc. (the "
2020 Plan
"), to be submitted to the Corporation's stockholders for ratification and approval at the Special Meeting, and it was approved on January 19, 2021.The 2020 Plan:(a) has four-month term from the 2020 Plan Effective Date (as defined below) through May 1, 2021 (the "
20-21 Period
"); (b) provides for the issuance of "non-qualified" option awards to purchase shares of SGRP's Common Stock ("
### SGRP Shares
") aggregating: (i) 550,000 SGRP Shares plus;
(ii) 50,000 SGRP Shares for each of up to the first threeadditional new Directors during the period December 1, 2020, to April 30, 2021 (for a possible total of 700,000 SGRP Shares) available for future Awards during the 20-21 Period as outlined below (the "
20-21 Maximum
") under 2020 Plan; (c) requires the Company to issue as of the Effective Date of the Plan new awards for options to purchase: (i) New Awards for options to purchase an aggregate of 125,000 New Award Shares to 19 employees (other than the Named Executive Officers) in individual amounts designated by the Board; (ii) 10,000 new award shares to each of Panagiotis N. Lazaretos, Igor Novgorodtsev, Robert G. Brown, and Arthur H. Baer (each a director); and (iii) 50,000 new award shares to each member of the Board of Directors on the Effective Date of the Plan.
The 2020 Plan became effective immediately upon the approval by stockholders on January 19, 2021 (the "
2020 Plan Effective Date
"), and the 2020 Plan will govern all options issued thereafter. Capitalized terms used and not otherwise defined herein shall have the meanings respectively assigned to them in the 2020 Plan.
The 2020 Plan provides:(i) for a term from the 2020 Plan Effective Date (as defined below) through May 31, 2021 (the "
20-21 Period
");and (ii) for 550,000 shares of SGRP's Common Stock ("
### SGRP Shares
") plus 50,000 additional SGRP Shares for each new director added to the Board between January 19, 2021 and April 1,2021, available for future Awards during the 20-21 Period as outlined below (the "
20-21 Maximum
") under 2020 Plan. The descriptions of the 2020 Plan below are subject to and are qualified in their entirety by the full text of the 2020 Plan, which is attached as Annex B to and is hereby incorporated by reference into this Proxy Statement.
Since one new director joined the Board, 600,000 SGRP Shares were available for Awards on the 2020 Plan Effective Date. On February 4, 2021, NQSO Awards were granted respecting 565,000 shares of SGRP's Common Stock. After making those awards, the remaining availability for future new awards for options to purchase as 35,000 SGRP Shares unless new directors join the Board between January 19, 2021 and May 1, 2021. The Plan will have expired on May 1, 2021.
Under the 2020 Plan, the Company (through its Compensation Committee with Board approval) may from time to time grant Awards in the form of nonqualified stock options ("
NQSO s"), respecting SGRP Shares to and the Company's specified executives and employees and directors. However, unlike the 2008 Plan and 2018 Plan, the 2020 Plan does not permit the granting of incentive stock options ("
### ISOs
"), stock appreciation rights based on SGRP Shares ("
### SAR s"), restricted SGRP Shares ("
Restricted Stock
"), or restricted stock units based on SGRP Shares ("
RSU s").
### Summary of the 2020 Plan
The 2021 Plan and information regarding options granted thereunder is summarized above, and the 2020 Plan and 2018 Plan and information regarding options, stock appreciation rights, restricted stock and restricted stock units granted thereunder are summarized below, but these descriptions are subject to and are qualified in their entirety by the full text of those Plans.Unless again amended and extended (as approved by SGRP's stockholders), the 2020 Plan terminates on May 1, 2021, and thereafter no further Awards may be made under it unless additional time and shares are added to it in an amendment approved by the Board and stockholders. Awards granted prior to the end the final term of the 2020 Plan shall continue to be governed by the 2020 Plan (which 2020 Plan shall continue in full force and effect for that purpose).
Subject to the terms and conditions and within the limitations of the 2020 Plan, the Compensation Committee has the power and authority to recommend to the Board for Board approval: (i) the persons who shall be granted Awards under the 2020 Plan; (ii) when they shall receive Awards and the applicable grant dates; (iii) the standard term of each award, including any provisions for early termination or forfeiture; (iv) the method or formula for determining: (A) the date each option shall become exercisable;(B) whether the installments shall be cumulative; and (C) the date each installment shall become exercisable or vest and the term of each installment; (v) the form of payment of the exercise price for any option; (vi) the method or formula for determining: (A) the exercise price of each option;and (B) the Fair Market Value of a share of Common Stock for all purposes of the Plan;(vii) whether and under what conditions to subject the exercise or vesting of all or any portion of an award to the fulfillment of certain restrictions or contingencies, including (without limitation) restrictions or contingencies relating to: (A) entering into a covenant not to compete with any SGRP Company;(B) financial objectives for the Corporation, any of its Subsidiaries, a division, a product line or other category; and/or (C) the period of continued employment or consulting of the awardee with any SGRP Company, and in each case to determine whether such restrictions or contingencies have been met; (viii) the method or formula for determining the amount, if any, necessary to satisfy the obligation to withhold taxes or other amounts with respect to any award;(ix) whether to cancel or modify an award either with or without the consent of the Awardee or as provided in the Contract, provided, however, that any modified provision is permitted to be included in an Award granted under the 2020 Plan on the date of the modification, and provided, further, that in the case of a modification (within the meaning of Section 424(h) of the Code) of an ISO, such option as modified would be permitted to be granted on the date of such modification under the terms of the 2020 Plan;(x) how to construe the respective Contracts and the 2020 Plan; and (xi) the policies, rules and regulations relating to the 2020 Plan and how and when to prescribe, amend and rescind the same.
The 2020 Plan setsand limits the maximum number of shares of Common Stock that may be issued pursuant to Awards made under the 2020 Plan to the 20-21 Maximum during the 20-21 Period, subject to adjustment as provided in the 2020 Plan (see below).
Theemployees, officers and directors of the providing services to the Company (collectively, the "
### Participants
") under the 2020 Plan may be (and under the 2018 Plan may have been) granted certain Equity Compensation Awards based on SGRP Shares. There are approximately 120 employees, officers and directors who currently meet the eligibility requirements to participate in the 2020 Plan.
Like the 2018 Plan, the 2020 Plan permits the granting of awards consisting of non-qualified options to purchase shares of SGRP Shares Common Stock ("
### NQSOs
" or "
Options
"). However (unlike the 2018 Plan and 2008 Plan), the 2020 Plan does not permit granting options that qualify under Section 422 of the United States Internal Revenue Code of 1986 as amended (the "
### Code
") for treatment as incentive stock options ("
Incentive Stock Options
" or "
### ISO s
") stock appreciation rights based on SGRP Shares ("
### SAR s"), restricted SGRP Shares ("
Restricted Stock
"), and restricted stock units based on SGRP Shares ("
RSUs
").
2008 Plan Summary
2008 Plan Stock option award activity for the years endedDecember 31, 2020 and 2019 is summarized below:
The total intrinsic value of stock option awards exercised during the year endedDecember 31, 2020 and 2019 was $6,000 and $257,000, respectively.
The Company recognized $95,000 and $139,000in stock-based compensation expense relating to stock option awards during the years ended December 31, 2020 and 2019, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2020 and 2019, was approximately $24,000 and $35,000, respectively.
As of December 31, 2020, total unrecognized stock-based compensation expense related to stock options was $17,000. This expense is expected to be recognized over a weighted average period of approximately 1.0 years, and will be adjusted for changes in estimated forfeitures.
2018 Plan Summary
Following are the specific valuation assumptions used for options granted in 2020 and 2019for the 2019Plan:
2018 Plan Stock option award activity for the years ended December 31, 2020and 2019are summarized below:
The total intrinsic value of stock option awards exercised during the years ended December 31, 2020and 2018 was $3,000 and $0.
The Company recognized $34,000 and $90,000in stock-based compensation expense relating to stock option awards during the years ended December 31, 2020 and 2019, respectively. The recognized tax benefit on stock-based compensation expense related to stock options during the years ended December 31, 2020 and 2019, was approximately $8,000 and $22,000, respectively.
As of December 31, 2020, total unrecognized stock-based compensation expense related to stock options was $41,000. This expense is expected to be recognized over a weighted average period of approximately 2.0 years, and will be adjusted for changes in estimated forfeitures.
### Restricted Stock- 2008 Plan
The restricted stock awards previously issued under the 2008 Plan vested during the first four years following issuance at the rate of 25% on each anniversary date of their issuance so long as the holder continues to be employed by the Company. Restricted stock granted under the 2008 Plan is measured at fair value on the date of the grant, based on the number of shares granted and the quoted price of the Company's common stock. The Company did not issue restricted stock awards to its employees or Directors under the 2008 plan during the years ended December 31, 2020 and 2019.
The following table summarizes the activity for restricted stock Awards during the years ended December 31, 2020 and 2019:
During the years ended December 31, 2020 and 2019, the Company recognized approximately $0 and $1,200, respectively, of stock-based compensation expense related to restricted stock. The recognized tax benefit on stock-based compensation expense related to restricted stock during the years endedDecember 31, 2020 and 2019<|endoftext|>An implied interest rate was calculated as 12.36% based on the timing of the initial repayment of $132,200 and subsequent 42 monthly instalments of $15,571. The promissory note was secured by the crusher.
13.
### CONVERTIBLE DEBENTURES
The maturity date of the convertible debentures are as follows:
PETROTEQ ENERGY INC.
Expressed in US dollars
13.
(a)
Alpha Capital Anstalt
On December 15, 2015, the Company issued a convertible secured note for $555,556 to Alpha Capital Anstalt. The convertible secured note had interest at a rate of 5% per annum, matured on June 15, 2017 and was convertible into units, consisting of one common share of the Company and one common share purchase warrant of the Company.
On April 5, 2016, $55,556 of the principal of the convertible secured note was settled by the issuance of 22,991 common shares of the Company. The remaining $500,000 of the principal and $12,577 of accrued interest of the convertible secured note was settled on April 8, 2016 using the proceeds from the issuance of an additional convertible secured note to Alpha Capital Anstalt.
During the year ended August 31, 2019, the remaining principal amount of $56,500 was settled through the issue of common shares.
(b)
### Private lenders
According to the terms of an amendment between two debenture holders and the Company on February 9, 2018, a portion of their debentures was convertible into common shares (see Note 12(a)(ii)). On September 11, 2018, the remaining convertible portion of the debenture was converted into common shares of the Company through the issue of 316,223 common shares of the Company
(c)
### GS Capital Partners
On December 28, 2018, the Company issued a convertible debenture of $143,750 including an original issue discount of $18,750, together with warrants exercisable for 260,416 shares of common stock at an exercise price of $0.48 per share with a maturity date of April 29, 2019. The debenture has a term of four months and one day and bears interest at a rate of 10% per annum payable at maturity and at the option of the holder the purchase amount of the debenture (excluding the original issue discount of 15%) is convertible into 260,416 common shares of the Company at $0.48 per share in accordance with the terms and conditions set out in the debenture.
(d)
### Calvary Fund I LP
On September 4, 2018, the Company issued units to Calvary Fund I LP for $250,000, which was originally advanced on August 9, 2018. The units consist of 250 units of $1,000 convertible debentures and 1,149,424 common share purchase warrants. The convertible debenture bears interest at 10%, matures on September 4, 2019 and is convertible into common shares of the Company at a price of $0.87 per common share. The common share purchase warrants entitle the holder to acquire additional common shares of the Company at a price of $0.87 per share and expired on September 4, 2019.
(e)
### Calvary Fund I LP
On October 12, 2018, the Company entered into an agreement with Calvary Fund I LP whereby the Company issued 250 one year units for proceeds of $250,000, each unit consisting of a $1,000 principal convertible unsecured debenture, bearing interest at 10% per annum and convertible into common shares at $0.86 per share, and a warrant exercisable for 1,162 common shares at an exercise price of $0.86 per share.
(f)
### SBI Investments, LLC
On October 15, 2018, the Company entered into an agreement with SBI Investments LLC whereby the Company issued 250 one year units for proceeds of $250,000, each debenture consisting of a $1,000 principal convertible unsecured debenture, bearing interest at 10% per annum and convertible into common shares at $0.86 per share, and a warrant exercisable for 1,162 shares of common stock at an exercise price of $0.86 per share.
PETROTEQ ENERGY INC.
Expressed in US dollars
13.
(g)
Bay Private Equity, Inc.
On September 17, 2018, the Company issued 3 one year convertible units of $1,100,000 each to Bay Private Equity, Inc. (Bay) for net proceeds of $2,979,980. These units bear interest at 5% per annum and mature one year from the date of issue. Each unit consists of one senior secured convertible debenture of $1,100,000 and 250,000 common share purchase warrants. Each convertible debenture may be converted to common shares of the Company at a conversion price of $1.00 per share. Each common share purchase warrant entitles the holder to purchase an additional common share of the Company at a price of $1.10 per share for one year after the issue date. On January 23, 2019, $400,000 of the principal outstanding was repaid out of the proceeds raised on the January 16, 2019 Bay Private Equity convertible debenture (see Note 13(h)).
(h)
### Bay Private Equity, Inc.
On January 16, 2019, the Company issued a convertible debenture of $2,400,000, including an original issue discount of $400,000, to Bay for net proceeds of $2,000,000 related to this agreement. The convertible debenture bears interest at 5% per annum and matured on October 15, 2019. The convertible debenture may be converted to 5,000,000 common shares of the Company at a conversion price of $0.40 per share. $400,000 of the proceeds raised was used to repay a portion of the $3,300,000 convertible debenture issued to Bay Private Equity on September 17, 2018 (see Note 13(g)).
(i)
### Cantone Asset Management, LLC
On July 19, 2019, the Company issued a convertible debenture of $300,000, including an original issue discount of $50,000 for net proceeds of $234,000 after certain legal expenses, and warrants exercisable for 1,315,789 common shares at an exercise price of $0.24 per share. The convertible debenture bears interest at 7% per annum and matures on October 19, 2020. The convertible debenture may be converted to 1,578,947 common shares of the Company at a conversion price of $0.19 per share.
(j)
### Calvary Fund I LP
On August 19, 2019, the Company issued a convertible debenture of $480,000, including an original issue discount of $80,000 for net proceeds of $374,980 after certain legal expenses, and warrants exercisable for 2,666,666 common shares at an exercise price of $0.15 per share. The convertible debenture bears interest at 3.3% per annum and matures on August 29, 2020. The convertible debenture may be converted to 2,833,529 common shares of the Company at a conversion price of $0.17 per share.
14.
RECLAMATION AND RESTORATION PROVISIONS
PETROTEQ ENERGY INC.
Expressed in US dollars
14.
RECLAMATION AND RESTORATION PROVISIONS (continued)
(a)
### Oil Extraction Plant
In accordance with the terms of the lease agreement, the Company is required to dismantle its oil extraction plant at the end of the lease term, which is expected to be in 25 years. During the year ended August 31, 2015, the Company recorded a provision of $350,000 for dismantling the facility.
During the year ended August 31, 2019, in accordance with the requirements to provide a surety bond to the Utah Division of Oil Gas and Mining in terms of the amendment to the Notice of Intent to Commence Large Mining Operations at an estimated production of 4,000 barrels per day, the Company estimated that the cost of dismantling the oil extraction plant and related equipment would increase to $498,484.
Because of the long-term nature of the liability, the greatest uncertainties in estimating this provision are the costs that will be incurred and the timing of the dismantling of the oil extraction facility. In particular, the Company has assumed that the oil extraction facility will be dismantled using technology and equipment currently available and that the plant will continue to be economically viable until the end of the lease term.
(b)
### Site restoration
In accordance with environmental laws in the United States, the Companys environmental permits and the lease agreements, the Company is required to restore contaminated and disturbed land to its original condition before the end of the lease term, which is expected to be in 25 years. During the year ended August 31, 2015, the Company provided $200,000 for this purpose.
The site restoration provision represents rehabilitation and restoration costs related to oil extraction sites. This provision has been created based on the Companys internal estimates. Significant assumptions in estimating the provision include the technology and equipment currently available, future environmental laws and restoration requirements, and future market prices for the necessary restoration works required.
During the year ended August 31, 2019, in accordance with the requirements to provide a surety bond to the Utah Division of Oil Gas and Mining in terms of the amendment to the Notice of Intent to Commence Large Mining Operations at an estimated production of 4,000 barrels per day, the Company estimated that the cost of restoring the site would increase to $2,472,013.
PETROTEQ ENERGY INC.
Expressed in US dollars
15.
### COMMON SHARES
Authorized unlimited common shares without par value
### Issued and Outstanding
176,241,746 common shares as at August 31, 2019.
(a)
### Settlement of loans
On September 28, 2018, the Company issued 316,223 shares to two private investors in settlement of the remaining portion of their convertible debt of $255,078 (see Note 13(b)).
On December 3, 2018, the Company issued 145,788 shares of common stock to private investors in settlement of the remaining portion of their convertible debt of $56,500 including interest thereon of $13,479 (see Note 13(a)).
(b)
### Settlement of liabilities
Between September 4, 2018 and August 31, 2019, the Company issued 7,793,557 shares of common stock to several investors in settlement of $3,043,742 of trade debt.
(c)
### Common share subscriptions
On September 6, 2018, the Company issued 1,234,567 units to an investor for net proceeds of $1,000,000. Each unit consists of one share of common stock and three quarters of a share purchase warrant for a total warrant exercisable over 925,925 shares of common stock.
On October 11, 2018, the Company issued 81,229 shares of common stock to investors for net proceeds of $79,605. In addition, a further 752,040 units were issued to investors for net proceeds of $737,000. Each unit consisting of one share of common stock and a warrant exercisable for a share of common stock at exercise prices ranging from $1.35 to $1.50.
On November 7, 2018, the Company issued 320,408 units to investors for net proceeds of $169,000, each unit consisting of one share of common stock and a warrant exercisable for a share of common stock at an exercise price ranging from $0.61 to $0.66 per share.
On December 7, 2018, the Company issued a total of 3,868,970 shares of common stock to investors for net proceeds of $2,275,193. Certain of the subscription agreements were unit agreements, whereby warrants exercisable over 3,373,920 shares of common stock were issued to investors at exercise prices ranging from $0.67 to $1.50 per share.
On December 7, 2018, the Company issued 1,190,476 units to an investor for net proceeds of $500,000, each unit consisting of one share of common stock and a warrant exercisable for a share of common stock at an exercise price of $0.525 per share.
On January 10, 2019, the company issued a total of 1,522,080 shares of common stock to investors for net proceeds of $645,100. Certain of the subscription agreements were unit agreements, whereby warrants exercisable over 1,437,557 shares of common stock were issued to investors at an exercise price ranging from $1.00 to $1.50 per share.
On January 11, 2019, the Company issued 307,692 units to an investor for net proceeds of $200,000, each unit consisting of one share of common stock and a warrant exercisable for a share of common stock at an exercise price of $1.50 per share.
On January 25, 2019, the Company issued 147,058 units to an investor for net proceeds of $50,000, each unit consisting of one share of common stock and a warrant exercisable for a share of common stock at an exercise price of $0.37 per share.
On February 27, 2019, the Company issued a total of 7,242,424 shares of common stock to investors for net proceeds of $2,390,000. | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Our initial business combination contained an actionable material misstatement or material omission.
If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per-shareredemption amount received by stockholders may be less than $10.00 per share.
Although we have sought and will continue to seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the trust account.
Upon redemption of our public shares, if we do not complete our business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10years following redemption.
Our sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.00 per public share or (ii)such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest that may be withdrawn to pay our taxes. Therefore, our sponsor may not be able to satisfy those obligations.
In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.00 per public share or (ii)such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, and our sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations.
The securities in which we invest the funds held in the trust account could bear a negative rate of interest, which could reduce the value of the assets held in trust such that the per-shareredemption amount received by public stockholders may be less than $10.00 per share.
with a maturity of 185days or less or in money market funds meeting certain conditions under Rule2a-7under the Investment Company Act, which invest only in direct U.S. While short-termU.S. In the event that we do not complete our initial business combination or make certain amendments to our amended and restated memorandum and articles of association, our public stockholders are entitled to receive their pro-ratashare of the proceeds held in the trust account, plus any interest income, net of taxes paid or payable (less, in the case we do not complete our initial business combination, $100,000 of interest).
If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-shareamount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
Our business is to identify and complete a business combination and thereafter to operate the post-transactionbusiness or assets for the long term.
(ii)the redemption of any public shares properly tendered in connection with a stockholder vote to amend our amended and restated certificate of incorporation (a)to modify the substance or timing of our obligation to provide holders of our ClassA common stock the right to have their shares redeemed or to redeem 100% of our public shares if we do not complete our initial business combination by October 23, 2022, or (b)with respect to any other provisions relating to the rights of holders of our ClassA common stock;
The pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by October 23, 2022 may be considered a liquidating distribution under Delaware law. However, it is our intention to redeem our public shares as soon as reasonably possible following October 23, 2022 in the event we do not complete our business combination and, therefore, we do not intend to comply with the foregoing procedures.
Furthermore, if the pro rata portion of our trust account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete our initial business combination by October 23, 2022 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.
Holders of ClassA common stock will not be entitled to vote on any election of directors we hold prior to our initial business combination.
However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 20 business days after the closing of our initial business combination, we will use our commercially reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of ClassA common stock issuable upon exercise of the warrants and thereafter will use our commercially reasonable efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the ClassA common stock issuable upon exercise of the warrants, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If the shares of ClassA common stock issuable upon exercise of the warrants are not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis in which case the number of shares of our ClassA common stock that you will receive upon cashless exercise will be based on a formula subject to a maximum number of shares equal to 0.365shares of our ClassA common stock per warrant (subject to adjustment). Notwithstanding the foregoing, if our ClassA common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a covered security under Section18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a cashless basis in accordance with Section3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use our commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Our ability to require holders of our warrants to exercise such warrants on a cashless basis after we call the warrants for redemption or if there is no effective registration statement covering the shares of ClassA common stock issuable upon exercise of these warrants will cause holders to receive fewer shares of ClassA common stock upon their exercise of the warrants than they would have received had they been able to pay the exercise price of their warrants in cash.
If we call the warrants for redemption, we will have the option, in our sole discretion, to require all holders that wish to exercise warrants to do so on a cashless basis under certain circumstances. If we choose to require holders to exercise their warrants on a cashless basis or if holders elect to do so when there is no effective registration statement, the number of shares of ClassA common stock received by a holder upon exercise will be fewer than it would have been had such holder exercised his or her warrant for cash. For example, if the holder is exercising 875 public warrants at $11.50 per share through a cashless exercise when the shares of ClassA common stock have a fair market value of $17.50 per share when there is no effective registration statement, then upon the cashless exercise, the holder will receive 300shares of ClassA common stock. The holder would have received 875shares of ClassA common stock if the exercise price was paid in cash. This will have the effect of reducing the potential upside of the holders investment in our company because the warrant holder will hold a smaller number of shares of ClassA common stock upon a cashless exercise of the warrants they hold.
Pursuant to an agreement entered into on October 20, 2020, our initial stockholders and their permitted transferees can demand that we register the private placement warrants and the shares of ClassA common stock issuable upon exercise of the founder shares and the private placement warrants held by them and holders of warrants that may be issued upon conversion of working capital loans may demand that we register such warrants or the ClassA common stock issuable upon exercise of such warrants.
Because we are not limited to evaluating a target business in a particular industry, sector or any specific target businesses with which to pursue our initial business combination, you will be unable to ascertain the merits or risks of any particular target business operations.
Although we have initially focused our search for a target business in the technology sector, we may seek to complete a business combination with an operating company in any industry or sector.
Although we intend to focus on identifying business combination candidates in the technology sector, we may consider a business combination outside of our managements area of expertise if a business combination candidate is presented to us and we determine that such candidate offers an attractive acquisition opportunity for our company. In the event we elect to pursue an acquisition outside of the areas of our managements expertise, our managements expertise may not be directly applicable to its evaluation or operation, and the information contained elsewhere in this report regarding the areas of our managements expertise would not be relevant to an understanding of the business that we elect to acquire.
We may seek acquisition opportunities with a financially unstable business or an entity lacking an established record of revenue or earnings, which could subject us to volatile revenues or earnings or difficulty in retaining key personnel.
We may also issue shares of ClassA common stock upon the conversion of the ClassB common stock at a ratio greater than one-to-oneat the time of our initial business combination as a result of the anti-dilutionprovisions contained in our amended and restated certificate of incorporation.
As of March 31, 2021, there were 70,000,000 and 2,500,000 authorized but unissued shares of ClassA common stock and ClassB common stock, respectively, available for issuance, excluding shares of ClassA common stock reserved for issuance upon exercise of outstanding warrants and currently issuable upon conversion of ClassB common<|endoftext|>Job and provided no services to the Company since March 2020. The Company maintains a number of causes of action regarding Ms. Sisca, and management has not determined what actions it will take, if any.
-
Stefan Gugisberg, former CEO of 12 Europe A. G. (now defunct) (see resignations for details)
ITEM 12.
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 29, 2020 by (i) each person who is known by us to own beneficially more than 10% of our outstanding common stock; (ii) each of our officers and directors; and (iii) all of our directors and officers as a group.
As of December 31, 2020, there are 36,152,866 common shares outstanding and 5 million Series A Preferred Shares outstanding. Each Series A Preferred Shares is convertible to 20 common shares upon conversion and until conversion allows the holder to 20 votes. Consequently, the chart below is based upon 8,050,000,000 eligible votes.
SEC Rule 13d-3 generally provides that beneficial owners of securities include any person who, directly or indirectly, has or shares voting power and/or investment power with respect to such securities, and any person who has the right to acquire beneficial ownership of such security within 60 days. Any securities not outstanding which are subject to such options, warrants or conversion privileges exercisable within 60 days are treated as outstanding for the purpose of computing the percentage of outstanding securities owned by that person. Such securities are not treated as outstanding for the purpose of computing the percentage of the class owned by any other person. As of March 29, 2019, there are no outstanding warrants and convertible notes payable are owned by investors who are not management, directors or beneficial owners of more than 10% of the outstanding shares.
### Description of Registrants Securities
Company Stock
On March 8, 2019, the Company filed a with the Securities and Exchange Commission a Form 14C which increased the aggregate number of shares which this Company has the authority to issue from One Billion Fifty Million (1,050,000,000) to Eight Billion Fifty Million (8,050,000,000) shares, consisting of (a) Eight Billion (8,000,000,000) shares of Common Stock, par value $0.00001 per share (the Common Stock) and (b) fifty million (50,000,000) shares of Preferred Stock, par value $0.00001 per share (the Preferred Stock). Of the Preferred Stock we have 8 classes designated as; Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series D-1 Preferred Stock, Series D-3 Preferred Stock, Series D-5 Preferred Stock, and Series D-6 Preferred Stock.
Series A Preferred Stock; each Series A Preferred Share is convertible to 20 shares of Common Stock, and has a liquidation preference over all of the Companys other shares, and each Series A Preferred Share carries 20 votes on any matter requiring a vote of shareholders. This class consists of ten million (10,000,000) shares authorized, of which there 6,500,000 shares and 9,183,566 as of December 31, 2018 and December 31, 2019 (and as of the date of this report) respectively.
Series B. Preferred Stock; each Series B Preferred Share is non-voting, has a face value of $1, and is second in liquidation preference to Series A, and is convertible into Common Shares at a 35% discount to market. There are one million (1,000,000) shares authorized, with 68,000 and 121,000 outstanding as of December 31, 2018 and December 31, 2019 respectively. As of the date of this report, there are 174,000 outstanding.
Series C Preferred Stock; each Series C Preferred Share has no liquidation preference, is not convertible, is non-transferable, and has special voting privileges whereby each share of Series C Preferred has 8,000,000,000 in any matter requiring a vote of the shareholders. There are two shares are authorized of which one share was issued and outstanding as of December 31, 2018 and 1 issued and outstanding as of December 31, 2019.
Series D Preferred Stock; there are ten million shares of Series D Preferred Stock, designated as Blank Check Preferred allowing the Board of directors to set the rights privileges and voting as determined by the Board as well as dividing this Series into other series as the need may arise. The Company has elected to create subclasses of Series D Preferred Shares, as follows:
Series D-1 Preferred Stock; consists of one million (1,000,000) shares of Series D-1 Preferred stock, with a face value of $2, and has a liquidation preference after Series B Preferred Shares, these shares are convertible into the Companys Common Shares at a 25% discount to market or redeemable by the Company in a range of 125% - 140% of the face value, depending on how long the shares were outstanding. These shares are non-voting, with 311,250 and 0 outstanding as of December 31, 2018 and December 31, 2019 respectively. As of the date of this report, there are none outstanding.
Series D-2 Preferred Stock; consists of two million five hundred thousand (2,500,000) shares of Series D-2 Preferred stock, with a face value of $2, have a 8% annual dividend, are non-voting, and has a liquidation preference after Series D-1 Preferred Shares, these shares are convertible into the Companys Common Shares at no discount and redeemable by the Company at the face value. There were 0 and 923,268 outstanding as of December 31, 2018 and December 31, 2019 respectively. As of the date of this report, there are 923,268 outstanding.
Series D-3 Preferred Stock; consists of one million (1,000,000) shares of Series D-3 Preferred stock, with a face value of $5, has a liquidation preference after Series D-2 Preferred Shares, have a 10% annual dividend, convertible at face value into Common Shares. For any shares held before May 31, 2019, there was a one-time PUT option, whereby the Company would be obligated to buy the shares back from the holder at face value, this PUT option was unexercised. There were 54,846 and 54,840 outstanding as of December 31, 2018 and December 31, 2019, respectively. As of the date of this report, there are 54,840 outstanding.
Series D-4 Preferred Stock; As a subsequent event in April 2020, the Company authorized one million (1,000,000) shares of Series D-4 Preferred stock, with a face value of $100, no annual dividend, are non-voting, and has a liquidation preference after Series D-3 Preferred Shares, these shares are convertible into the Companys Common Shares at no discount. There were N/A and N/A outstanding as of December 31, 2018 and December 31, 2019, respectively.
Series D-5 Preferred Stock; consists of one million (1,000,000) shares of Series D-5 Preferred Stock, has a $4 face value, has a 6% annual dividend payable in arrears, has no voting rights, convertible to Common Stock at face value. There were N/A and 128,494 Series D-5 Shares outstanding as of December 31, 2018 and December 31, 2019, respectively. As of the date of this report, there are 128,494 outstanding.
Series D-6 Preferred Stock; consists of one million (1,000,000) shares of Series D-6 Preferred Stock, has a face value of $5, there are no dividends, the shares are convertible at face value. There were N/A and 104,680 Series D-6 Shares outstanding as of December 31, 2018 and December 31, 2019, respectively. As of the date of this report, there are 104,680 outstanding.
### Common Stock
Each share of Common Stock shall have, for all purposes, one (1) vote per share. Subject to the preferences applicable to Preferred Stock outstanding at any time, the holders of shares of Common Stock shall be entitled to receive such dividends and other distributions in cash, property or shares of stock of the Company as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Company legally available therefore. The holders of Common Stock issued and outstanding have and possess the right to receive notice of shareholders meetings and to vote upon the election of directors or upon any other matter as to which approval of the outstanding shares of Common Stock or approval of the common shareholders is required or requested.
On March 14, 2019, The Company increased its authorized Common shares to 8,000,000,000 shares at a par value of $0.00001. On October 18, 2019 the Company completed a 1 for 100 reverse common stock split reducing the outstanding common shares to 25,410,391 at that time. Since that time, the Companys convertible debt holders have converted a portion of their debt into 573,593,567 Common Shares, resulting in 599,003,958 Common Shares outstanding as of May 22, 2020. Adjusted for the reverse stock split, there were 6,542,519 and 36,935,303 Common Shares outstanding as of December 31, 2018 and December 31, 2019, respectively.
In the twelve months ended December 31, 2020, the Company issued 1,140,168,315 Common Shares 5,538,488 versus 30,392,784 in the twelve months ended December 31, 2019.
### Voting Rights
Except as otherwise required by law or as may be provided by the resolutions of the Board of Directors authorizing the issuance of common stock, all rights to vote and all voting power shall be vested in the holders of common and Preferred stock. Each share of common stock shall entitle the holder thereof to one vote.
No Cumulative Voting
Except as may be provided by the resolutions of the Board of Directors authorizing the issuance of common stock, cumulative voting by any shareholder is expressly denied.
Rights upon Liquidation, Dissolution or Winding-Up of the Company Upon any liquidation, dissolution or winding-up of the corporation, whether voluntary or involuntary, the remaining net assets of the Company shall be distributed first to holders of Preferred Stock, excluding Series C Preferred Shares and then pro rata to the holders of the common stock.
We refer you to our Articles of Incorporation, any amendments thereto, and certificate of designation Bylaws, and the applicable provisions of the Nevada Revised Statutes for a more complete description of the rights and liabilities of holders of our securities.
Item 13.
There are certain conflicts of interest between the Company and our officers and directors. Mr. Angelo Ponzetta our Chief Executive Officer and Chairman was the principal owner and controlling officer of each of our first three acquisitions: 12 Hong Kong Ltd, 12 Japan Ltd and 12 Europe A.G. As such, there were some intercompany transactions between the entities as well as transactions with officers that are considered related party transactions. Angelo Ponzettas brother Gianni was a shareholder and officer of 12 Europe A.G. and is now a less than 5% shareholder of the Company.
Daniele Monteverde our Chief Financial Officer and director was a both a principal and officer of both 12 Hong Kong Ltd. And 12 Japan. Mr. Monteverde has many business interests, including his ownership of Aquarium Inc which in the past has been a supplier of content for the Companys interactive Mirrors and marketing videos. These products were provided in the past to the Company at a 50% discount to the market price that Aquarium Inc. would charge other clients, saving the Company about $4,500. For certain periods of time Mr. Monteverde provided free office space to 12 Japan, Inc, in the offices of one of his other companies. Management believes that the rental savings were immaterial to the scope of the operation. Mr. Monteverde has many other business interests to which he currently devotes attention and may be expected to do so although management time should be devoted to our business. As a result, conflicts of interest may arise that can be resolved only through his exercise of judgment in a manner which is consistent with his fiduciary duties to the Company.
Other than disclosed in herein, none of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Companys outstanding shares of its common stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
Shares tendered or withheld to satisfy any federal, state, or local tax withholding obligations may or may not be made available for re-issuance under the Omnibus Plan.
### Transferability.
Awards are not transferable other than by will or the laws of descent and distribution, unless the Administrator allows a participant to (i) designate in writing a beneficiary to exercise the award or receive payment under the award after the participants death, (ii) transfer an award to a former spouse as required by a domestic relations order incident to a divorce, or (iii) otherwise transfer an award without receiving any consideration.
Adjustments.
If (i) we are involved in a merger or other transaction in which our shares of common stock are changed or exchanged; (ii) we subdivide or combine shares of common stock or declare a dividend payable in shares of common stock, other securities, or other property (other than stock purchase rights issued pursuant to a stockholder rights agreement); (iii) we effect a cash dividend that exceeds 10% of the fair market value of a share of common stock or any other dividend or distribution in the form of cash or a repurchase of shares of common stock that our Board determines is special or extraordinary, or that is in connection with a recapitalization or reorganization; or (iv) any other event occurs that in the Administrators judgment requires an adjustment to prevent dilution or enlargement of the benefits intended to be made available under the Omnibus Plan, then the Administrator will, in a manner it deems equitable, adjust any or all of (A) the number and type of shares subject to the Omnibus Plan and which may, after the event, be made the subject of awards; (B) the number and type of shares of common stock subject to outstanding awards; (C) the grant, purchase, or exercise price with respect to any award; and (D) the performance goals of an award.
In any such case, the Administrator may also provide for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award, subject to the terms of the Omnibus Plan.
The Administrator may, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, authorize the issuance or assumption of awards upon terms and conditions we deem appropriate without affecting the number of shares of common stock otherwise reserved or available under the Omnibus Plan.
### Change of Control
To the extent a participant has an employment, retention, change of control, severance, or similar agreement with us or any of our affiliates that discusses the effect of a change of control (as defined in the Omnibus Plan) on the participants awards, such agreement will control. Otherwise, unless otherwise provided in an award agreement or by the Administrator prior to the change of control, in the event of a change of control, if the purchaser, successor or surviving entity (or parent thereof) (the Successor) agrees, then some or all outstanding awards will be assumed or replaced with the same type of award with similar terms and conditions. If applicable, each award that is assumed must be appropriately adjusted, immediately after such change of control, to apply to the number and class of securities that would have been issuable to a participant upon the consummation of such change of control had the award been exercised, vested, or earned immediately prior to such change of control, and other appropriate adjustment to the terms and conditions of the award may be made.
If a participant is terminated from employment without cause (as defined in the Omnibus Plan) or the participant resigns employment for good reason (as defined in the Omnibus Plan) within 24 months following the change of control, then upon such termination, all of the participants awards in effect on the date of such termination will vest in full or be deemed earned in full.
### Term of Omnibus Plan.
Unless earlier terminated by our Board of Directors, the Omnibus Plan will remain in effect until the date all shares reserved for issuance have been issued, except that no incentive stock options may be issued if the term of the Omnibus Plan extends beyond 10 years from the effective date without stockholder approval of such extension.
The following table lists the outstanding equity awards held by each of our named executive officers as of December 31, 2020:
(1) The stock options granted on June 20, 2019 vest over three years. Options granted to Mr. Stanker on September 1, 2018 vested 2,572 shares over one year and 45,200 shares vest 25% after one year with the remaining options vesting ratably over the subsequent 36-month period. Stock awards granted on August 5, 2020 vest over two years. The stock awards granted to Mr. Floyd vest over one year.
(2) Options for the purchase of 16,523 shares of our common stock were granted to each of Dr. David Young, Patrick Lin, Dr. Sian Bigora, Wendy Guy and James Stanker on June 20, 2019 contained either service or performance vesting conditions, have a contractual term of five years and an exercise price equal to the closing price of our common stock on the OTCQB on the date of grant of $16.80. Stock options for the purchase of 7,859 shares of common stock vested one-third on the first anniversary date of the grant, with the remaining options vesting ratably over the subsequent two years. Stock options for the purchase of 8,664 shares vested upon meeting the following performance criteria: (i) 1,733 shares vested on August 29, 2019 when we in-licensed an additional drug asset; (ii) 1,733 shares vested on December 31, 2020 when we completed our Phase 2A clinical trial for PCS499; and (iii) 5,198 shares vested on October 6, 2020 when we up-listed from the OTCQB to the Nasdaq market.
(3) On October 1, 2020, Dr. David Young voluntarily forfeited all stock options that had previously been granted to him in 2019.
(4) Market value is based on $6.59 per share, which is the closing market price of the common stock on December 31, 2020, the last trading day of the year.
Employee Non-Competition, Non-Solicitation, Invention and Non-Disclosure Agreements
In addition, under these agreements, each named executive officer has agreed that we own all inventions that are developed by such named executive officer during his or her employment with us that (i) are related to our business or our customers or suppliers or any of our products or services being researched, developed, manufactured or sold by us or which may be used with such products or services; (ii) result from tasks assigned to the executive officer by us; or (iii) result from the use of our premises or personal property (whether tangible or intangible) owned, leased or contracted for by us.
### DIRECTOR COMPENSATION
On March 15, 2021, our compensation committee recommended, and our Board of Directors approved, an amendment to our compensation plan for non-employee directors. Effective January 1, 2021, each non-employee director will receive an annual cash retainer of $10,000, payable in quarterly installments and an annual restricted stock grant equal to $30,000 total value. The number of shares of restricted stock issued will be determined by dividing $30,000 by the closing price per share of the common stock on the last trading day prior to the grant, with vesting occurring on the 12-month anniversary dates of the grant.
Prior to the change described above, each non-employee director received an annual cash retainer of $20,000, payable quarterly and an equity award. Our directors waived any cash compensation and directors fees until we completed our up-list to Nasdaq in October 2020. As such, they did not earn or receive any cash compensation until the fourth quarter of 2020. We granted 6,876 restricted stock awards to each of Justin Yorke, Virgil Thompson and Geraldine Pannu on August 5, 2020, of which 4,538 restricted stock awards vested on October 6, 2020 when we successfully completed our underwritten public offering and up-listed to the Nasdaq Capital Market. The remaining 2,338 restricted stock awards vest on the first and second anniversary of the grant date.
New directors will continue to receive an initial stock option grant upon their appointment to the Board of Directors. Our directors are also reimbursed for any reasonable out-of-pocket expenses incurred in connection with service as a director.
The table below shows all compensation paid to our non-employee directors during the year ended December 31, 2020.
(1) Reflects the aggregate grant date fair value of restricted stock and stock options awarded calculated in accordance with FASB ASC Topic 718. Refer to Note 5 Stock-Based Compensation in our December 31, 2020 consolidated financial statements appearing in our annual report on Form 10-K, which was originally filed on March 25, 2021, for a discussion of the assumptions underlying the valuation of the equity awards.
(2) Dr. Islam was appointed to our Board of Directors on November 3, 2020.
Item 12.
The following table sets forth certain information with respect to the beneficial ownership of our common stock at March 22, 2021 for:
### Each of our directors;
and
Each person, or group of affiliated persons, who beneficially owned more than 5% of our common stock.
The number of shares of our common stock beneficially owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares over which the individual has sole or shared voting power or investment power as well as any shares that the individual has the right to acquire within 60 days of March 22, 2021, through the exercise of any stock option, warrants or other rights. Except as otherwise indicated, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock held by that person.
The percentage of shares beneficially owned is computed on the basis of 15,392,584 shares of our common stock outstanding (excluding 129,032 issued but unvested shares of restricted stock) as of March 22, 2021. Shares of our common stock that a person has the right to acquire within 60 days of March 22, 2021, are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group.
Certain of our officers, directors and existing stockholders have indicated an interest in purchasing shares in this offering on the same terms as those offered to the public. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, fewer or no shares in this offering to any of these officers, directors or stockholders, or any of these officers, directors or stockholders may determine to purchase more, fewer or no shares in this offering. The underwriters will receive the same underwriting discounts and commissions on any shares purchased by these officers, directors and stockholders as they will on any other shares sold to the public in this offering. The below ownership percentages do not reflect the potential purchase of any shares of common stock in this offering by these officers, directors or stockholders.
* represents less than 1%
(1) Unless otherwise indicated, the address for each beneficial owner listed is c/o Processa Pharmaceuticals, Inc., 7380 Coca Cola Drive, Suite 106, Hanover, Maryland 21076.
(2) Consists of (i) 364,363 shares of common stock held directly by Dr. Young; (ii) 506,841 shares held by family entities; (iii) 849,599 shares held by CorLyst, LLC (CorLyst) (773,763 shares held on behalf of entities controlled by Dr. Young, 55,527 shares held on behalf of unrelated stockholders, and stock purchase warrants to purchase 20,309 shares); and (iv)<|endoftext|>These amounts.
After careful consideration, the Compensation Committee of the Board determined, and the Board agreed, that, concurrently with the public offering of the Companys securities in September 2020 (the Offering), the Company would offer $1,500,000 of units substantially similar to the units sold in the Offering, with each unit consisting of one share of our common stock and one five-year warrant to purchase one share of our common stock at an exercise price of $5.00 per share, to the Management Creditors as partial payment of the deferred compensation owed. Approximately $525,000 of the remaining deferred compensation owed was paid in cash for the purpose of assisting the Management Creditors in paying the income taxes that will be imposed on both the common stock and cash received. The Compensation Committee and the Board also considered that the Management Creditors previously owned shares or options to purchase shares of the Companys common stock, which had decreased in value, and that the Compensation Committee and the Board believed it to be in the best interests of the Company and its stockholders for the Companys executive officers and directors to have a financial interest in the success of the Company.
The units offered to the Management Creditors were valued at the offering price for the Units sold in the Offering. The following table provides details of the payments:
_____________
(1)
These units were valued at the same price as the offering price for Units sold in the Offering. The computation of the number of units was based on the public offering price of $5.00 per Unit. Number of units is rounded to nearest whole number.
The following table sets forth all compensation awarded or earned for employment services during 2020 and 2019 by (i) each person who served as our chief executive officer during 2020, and (ii) our two other most highly compensated executive officers (collectively referred to as the Named Executive Officers).
(1)
Represents the grant date fair value of the stock options for financial statement reporting purposes. See footnotes 2 and 8 to our consolidated financial statements for the year ended December 31, 2020 for a discussion of the assumptions made and methods used for determining stock compensation values.
(2)
Dr. Newman became our Chief Scientific Officer effective August 25, 2020, following the termination of Dr. Guirakhoos employment effective August 10, 2020.
(3)
The amount for 2020 includes $150,000 of cash compensation which was deferred at Mr. Dodds election. The amount for 2019 includes $225,000 of such deferred cash compensation.
(4)
The amount for 2020 includes $62,504 of cash compensation which was deferred at Mr. Reynoldss election. The amount for 2019 includes $93,757 of such deferred cash compensation.
(5)
Amount for 2020 includes $26,042 of cash compensation which was deferred at Dr. Guirakhoos election. The amount for 2019 includes $62,500 of such deferred cash compensation. The deferred compensation was paid to Dr. Guirakhoo in the form of common stock, warrants and cash during 2020.
(6)
Represents the grant date fair value for stock options granted on December 2, 2020 for 273,000 shares with an exercise price of $2.79 per share, vesting over a three-year period.
(7)
Represents the grant date fair value for stock options granted on December 2, 2020 for 128,000 shares with an exercise price of $2.79 per share, vesting over a three-year period.
(8)
Represents the grant date fair value for stock options granted on December 2, 2020 for 35,000 shares with an exercise price of $2.79 per share, vesting over a three-year period.
(9)
Represents employer matching contributions to the Companys 401(k) retirement plan.
(10)
Represents $3,738 and $3,648 of employer matching contributions to the Companys 401(k) retirement plan for 2020 and 2019, respectively, and $7,500 and $18,000 in housing expense allowances for each year, respectively.
### Employment Agreements
David A. Dodd
Mr. Dodd serves as our President and Chief Executive Officer under an employment agreement dated September 1, 2018. The employment agreement provides for an initial annual salary of $250,000 to Mr. Dodd, subject to periodic increases as determined by the Board. Mr. Dodd is also eligible for an annual bonus, as determined by the Board, with an initial target of 65% of his base salary. Dodd a bonus of $162,500 which was paid in January 2021. No bonus was awarded to Mr. Dodd for 2019. Mr. Dodd is eligible for annual grants of additional awards from our equity incentives plans as determined by the Board. Dodd a stock option grant for 273,000 shares with an exercise price of $2.79 per share, vesting over a three-year period. Mr. Dodd also is eligible for health insurance and 401(k) benefits at the same level and subject to the same conditions as provided to all other employees.
In September 2018, to help conserve the Companys cash resources, as part of his employment agreement, Mr. Dodd agreed to defer a portion of his base salary, effectively reducing his current annualized salary to $25,000, until August 31, 2020 when his full salary was restored. Of the $450,000 accumulated salary deferral owed to Mr. Dodd at that date, approximately 74% was paid in the form of the Companys equity securities, with the remainder paid in cash. below.
### Mark W. Reynolds.
Mr. Reynolds serves as our Chief Financial Officer under an employment agreement dated January 1, 2010 and amended on October 22, 2013. The employment agreement provided for an initial annual salary of $212,600 to Mr. Reynolds, subject to periodic increases as determined by the Compensation Committee. Mr. Reynolds current annualized base salary is $234,392. Reynolds a bonus of $117,196 which was paid in January 2021. No bonus was awarded to Mr. Reynolds for 2019. Mr. Reynolds is eligible for annual grants of additional awards from our equity incentives plans as determined by the Board. Reynolds a stock option grant for 128,000 shares with an exercise price of $2.79 per share, vesting over a three-year period. Mr. Reynolds is eligible for health insurance and 401(k) benefits at the same level and subject to the same conditions as provided to all other employees.
In April 2016, to help conserve the Companys cash resources, Mr. Reynolds agreed to defer a portion of his base salary, effectively reducing his annualized salary from $234,392 to $140,635, until August 31, 2020 when his full salary was restored. Of the $406,279 accumulated salary deferral owed to Mr. Reynolds at that date, approximately 74% was paid in the form of the Companys equity securities, with the remainder paid in cash.
### Mark J. Newman, PhD
Dr. Newman serves as our Chief Scientific Officer under an employment agreement dated August 25, 2020. The employment agreement provides for an initial annual salary of $250,000 on a full-time annualized basis, or $125,000 per year on a 50% prorated basis to Dr. Newman, subject to periodic increases as determined by the Compensation Committee. In December 2020, the Board awarded Dr. Newman a bonus of $18,750. Dr. Newman is eligible for grants of awards from our equity incentive plans at the same level and subject to the same conditions as provided to all other employees. On December 2, 2020, the Board awarded to Dr. Newman a stock option grant for 35,000 shares with an exercise price of $2.79 per share, vesting over a three-year period. Dr. Newman is not eligible for health insurance and 401(k) benefits due to his part-time employment status.
Dodd provides that we will pay severance compensation to Mr. Dodd in the event his employment is terminated by the Company without cause or by Mr. Dodd with good reason (as defined in the agreement). If we terminate Mr. Dodds employment not for cause or he resigns for good reason, then we would pay (a) an amount in cash equal to three times his then base salary and target annual bonus and (b) all stock option grants held by Mr. Dodd will be fully vested. The agreement also addresses his compensation upon termination if there is a change in control (as defined). If we terminate Mr. Dodds employment not for cause or he resigns for good reason at any time during the three month period which immediately precedes a change in control (as defined) or during the one year period following a change in control, then we would also pay Mr. Dodd an amount in cash equal to (x) three times the cost to provide 401(k) or other deferred compensation or health and welfare benefits to him, and (y) a tax gross-up payment (if an excise tax is imposed by 4999 of the Internal Revenue Code or any related interest or penalties are incurred by him).
Reynolds provides that, if we terminate his employment without cause, we will pay a severance payment in the form of monthly payments of base salary for a period equal to one week for each full year of service (14 weeks as of December 31, 2020). Additionally if we terminate Mr. Reynolds employment at any time during the three month period which immediately precedes a change in control (as defined in the amended employment agreement) or during the one year period following a change in control, then we would pay an amount in cash equal to (a) two times his then base salary and target annual bonus, (b) two times the cost to provide 401(k) or other deferred compensation or health and welfare benefits to him, (c) full, complete vesting of all stock options, restricted stock grants or other equity or equity-type grants, and (d) a tax gross-up payment (if an excise tax is imposed by 4999 of the Internal Revenue Code or any related interest or penalties are incurred by him). The change of control provision also provides for full and complete vesting of all stock option grants held by him.
Our employment agreement with Dr. Newman provides that, if we terminate his employment without cause, we will pay a severance payment in the form of monthly payments of base salary for a period equal to one week for each full year of service.
GeoVax has awarded stock options to its senior management and other employees, pursuant to the GeoVax Labs, Inc. 2020 Stock Incentive Plan (the 2020 Plan). The 2020 Plan was adopted by the Board on June 19, 2020 to provide equity-based and/or incentive awards to selected employees, directors, and independent contractors of the Company or its affiliates. The terms of these awards typically provide for vesting over a defined period of time, generally three years. The options expire if not exercised within ten years from the date of grant. The Company does not have a formula for determining stock option awards. Awards are generally based on the subjective judgment of the President and Chief Executive Officer and on the Compensation Committees subjective judgment. The following table sets forth certain information with respect to unexercised options previously awarded to our Named Executive Officers that were outstanding as of December 31, 2020. The table also includes warrants, if any, granted to our Named Executive Officers upon payment of the deferred compensation to the Management Creditors.
(1)
These stock options were granted subject to stockholder approval of an amendment to the 2020 Stock Incentive Plan increasing the maximum aggregate number of shares of common stock that may be issued pursuant to the 2020 Plan. Assuming such approval, these stock options vest and become exercisable in three equal installments on December 2, 2021, 2022 and 2023.
(2)
Warrants granted as payment of deferred compensation occurring on September 29, 2020. See Summary Compensation Table.These warrants are immediately exercisable and have a five-year term.
The 2020 Plan contains provisions that could lead to an accelerated vesting of options or other awards. In the event of certain change-in-control transactions described in the 2020 Plan, (i) outstanding options or other awards may be assumed, converted or replaced; (ii) the successor corporation may substitute equivalent options or other awards or provide substantially similar consideration to 2020 Plan participants as were provided to stockholders (after taking into account the existing provisions of the | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
On income taxes, accounting in interim periods and requires increased disclosures. The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provisions of ASC 740-10-25.
### Loss Per Share
Net loss per common share is computed pursuant to ASC 260-10-45, Earnings Per Share. Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period, unless their effect is anti-dilutive due to continuing losses. As of December 31, 2020, the Company had a total of 83,333 (50,000 from outstanding warrants and 33,333 from convertible notes payable) potentially dilutive shares outstanding. As of December 31, 2019, there were no potentially dilutive shares outstanding.
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations or financial position.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
NOTE 2 Financial Condition and Going Concern
The Company has sustained operating losses during the current year and may not achieve the level of profitable operations to sustain its activities.
Management intends to raise additional operating funds through equity and/or debt offerings.
If adequate working capital is not available to the Company, it may be required to curtail its operations.
### NOTE 3 Investment in Growing Crops
Investment in growing crops consisted of the cost of the crop inputs in the ground at December 31, 2019 and were recorded at cost and were expensed to Crop Loss on the statement of operations during the fourth quarter of 2019 since the crop harvest and related farming activities failed. The Company incurred a loss from the crop activities in the amount of $246,914 during 2019. The Company is continuing to pursue opportunities in the recreational and industrial cannabis industries, but is not currently engaging in the growing of crops.
NOTE 4 Property and Equipment
At December 31, 2020 and 2019, property and equipment consisted of the following:
Depreciation expense was $35,350 and $15,702 for the years ended December 31, 2020 and 2019, respectively.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
NOTE 5 Notes Payable
The Companys debt consists of the following:
(1)
One note for $50,000 includes as an additional return on the debt a 3% interest in the Gross Crop Yield from the Companys hemp crop in McDermitt, NV. No accrual has been made for this interest due to failure of crop and no proceeds received from a Gross Crop Yield. This note was purchased by another note holder and the additional return from a Gross Crop Yield was eliminated.
(2)
All notes that have become due to the date of this report have been extended to a future due date, as per above date ranges.
(3)
The Series 2 Notes contain certain automatic and voluntary conversion provisions. The Payee shall have the option to voluntarily convert this Note to shares of the common stock of the Company, at any time during the Term of this Note, or any extension of the note. The shares so converted shall be at the price of the securities being currently offered in the Offering, or $1.50. The Payee shall also be issued Warrants for the purchase of common stock in the Company with a value equal to fifty percent (50%) of the face amount of this Note and effective as of the date of any Conversion to shares of common stock in the Company. Such Warrants shall be priced at $1.50 per share during the three-year term of this Note or any extension of this Note.
The Company has incurred an interest expense of $42,955 and $13,029 during the years ended December 31, 2020 and 2019. The Company has interest accrued on the above notes in the amount of $31,985 and $29,819 at December 31, 2020 and 2019.
### NOTE 6 Notes Payable-Related Party
The Companys related party debt consists of the following:
(1)
All notes that have become due to the date of this report have been extended to a future due date as per the date range listed above.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
The Company has incurred an interest expense of $4,645 and $569 during the years ended December 31, 2020 and 2019, respectively. The Company has interest accrued on the above notes in the amount of $5,214 and $569 at December 31, 2020 and 2019.
### NOTE 7 Income Taxes
The Company adopted the provisions of ASC 740-10. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in a companys financial statements. ASC 740-10 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. Laws and regulation in this area are voluminous and are often ambiguous. As such, we are required to make many subjective assumptions and judgments regarding the income tax exposures. Interpretations and guidance surrounding income tax laws and regulations change over time. As such, changes in the subjective assumptions and judgments can materially affect amounts recognized in the balance sheets and statements of income.
The Company has no unrecognized tax benefit, which would affect the effective tax rate if recognized. There has been no significant change in the unrecognized tax benefit during the year ended December 31, 2020.
We classify interest and penalties arising from the underpayment of income taxes in the statement of income under general and administrative expenses. As of December 31, 2020, we had no accrued interest or penalties related to uncertain tax positions.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
The components of deferred income tax assets (liabilities) at December 31, 2020 and 2019, were as follows:
### As of December 31, 2020:
Balance
Rate
Tax
Federal loss carryforward
$749,777
21%
$ 157,453
Valuation allowance
(157,453)
Deferred tax asset
$ -
### As of December 31, 2019:
Balance
Rate
Tax
Federal loss carryforward
$518,957
21%
$ 108,941
Valuation allowance
(108,941)
Deferred tax asset
$ -
Due to the passage of the Tax Cuts and Jobs Act on December 20, 2017 the rate of the U.S. Federal Income Tax dropped from 34% to 21%, which is a flat percentage tax rate used for the calculation of the deferred income tax assets.
The new law also changes the rules on NOL carry forward. The 20-year limitation was eliminated, giving the taxpayer the ability to carry forward losses indefinitely. However, utilization of NOL carry forwards arising after January 1, 2018, will now be limited to 80 percent of taxable income.
The income tax provision differs from the amount on income tax determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations for the years ended December 31, 2020 and 2019 due to the following:
### NOTE 8 Capital Changes
Offering of Securities
Common stock
We are offering a maximum of 2,000,000 Shares of common stock (Shares) exclusively to accredited investors. There is no minimum number of Shares to be sold pursuant to this offering other than the minimum purchase requirement. The offering price is $1.50 per Share ($3,000,000). This offering became effective February 4, 2020.
The Company has sold and issued 106,667 shares of its common stock under this offering to independent investors for gross proceeds of $160,001.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
Secured Convertible Notes
Additionally, we are offering up to $1,000,000 in Series 2
Senior Convertible Secured Promissory Notes exclusively to accredited investors. The Notes will be in a minimum face amount/increment of $10,000 for a term of three years and shall bear interest at a rate at eight Percent (8%) per annum. The Notes will automatically convert to Common Stock of the Company if the Company has received $1,000,000 from its offering or any other source or sources at a conversion price of $1.50 per share. The Notes can also be voluntarily converted by the holder. The Payee shall also be issued Warrants for the purchase of common stock in the Company with a value equal to fifty percent (50%) of the face amount of the Note and effective as of the date of any Conversion to shares of common stock in the Company. Such Warrants shall be priced at $1.50 per share during the three-year term of the Note or any extension of the Note.
The Company has sold $50,000 of the Series 2 Senior Convertible Secured Promissory Notes in 2020.
These securities have not been registered with the United States Securities and Exchange Commission or with any state securities agency. These securities are being offered pursuant to exemptions from the registration requirements of the Securities Act of 1933, as amended pursuant to Rule 506 of Regulation D, and from the registration requirements of the securities laws of the states in which the securities will be offered. The securities are subject to certain restrictions on resale and may be resold only as permitted under applicable federal and state securities laws.
### Warrants
Under an Investment Banking Agreement, the Company issued 50,000 warrants. The exercise price per share of the Common Stock under this Warrant is $.01 and is fully vested on the Issue Date and is non-cancellable nor non-redeemable.
Common Stock Purchase Warrants
As of December 31, 2020 and 2019, the following common stock purchase warrants were outstanding:
(1) The Company granted 50,000 common stock purchase warrants in December 2020 to exercise at a purchase price of $.01. During 2020, none of the purchase warrants were exercised.
HIGH SIERRA TECHNOLOGIES, INC.
December 31, 2020 and 2019
The fair value of the outstanding common stock purchase warrants was calculatedusing the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):
The Company recorded $74,500 to general and administrative expense for the value of the warrants granted in 2020.
NOTE 9 Contingencies, Commitments, Legal Matters and Consulting Agreements
Management of the Company has conducted a diligent search and concluded that there were no commitments, contingencies, or legal matters pending at the balance sheet dates, other than what has been disclosed below. The Company has entered into several Consulting Agreements for the marketing of its securities, all of which will terminate in the year 2021.
On May 13, 2019, the Company entered into an Agricultural Lease for approximately 200 acres in Northern Nevada to plant its Hemp Grow for 2019. The Company is no longer operating under this Agricultural Lease. Thus there are no contingent liabilities thereunder.
The term of the lease is for five years commencing May 18, 2019 through May 17, 2024.
There are no minimum fixed monthly payments due on this lease, but an annual participation bonus in an amount equal to fifteen percent of the gross crop yield from the leasehold properties. The Gross Crop Yield is defined by the actual amount received from the crop harvest less all expenses derived from the growing, processing and sale of the crop harvested from the Property.
The Company is solely responsible for all crop care, labor, irrigation, insurance, taxes, repairs and maintenance of the crop, equipment and other costs of planting, raising and harvesting of crops. The Company is responsible for all other miscellaneous cost to grow and take it to market. As the Company is no longer engaged in the activities contemplated by the Agricultural Lease, the Company is no longer subject to any such liabilities.
Due to the lease payments being variable, the Company has not recorded a right of use asset or lease liability on the balance sheet and will recognize the variable lease payments in the period when the obligation for those payments has occurred in accordance with ASC 842,
### Leases
No gross crop yields have been achieved by the Company to date, and therefore no lease payments have been made<|endoftext|>Hims & Hers Health, Inc. 1 on Form 10-K/A (the Amendment) to its Annual Report on Form 10-K for the year ended December 31, 2020, originally filed on March 22, 2021 (the Original Filing or the Form 10-K), for the sole purpose of including the information required by Part III of Form 10-K. This information was previously omitted from the Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits the information in the below referenced items to be incorporated in the Form 10-K by reference from our definitive proxy statement if such statement is filed no later than 120 days after our fiscal year end. We are filing this Amendment to provide information required in Part III of Form 10-K for the fiscal year ended December 31, 2020, because a definitive proxy statement containing such information will not be filed by the Company within 120 days after the end of the fiscal year covered by the Form 10-K.
In addition, pursuant to the rules of the SEC, Item 15 of Part IV has been amended and replaced in its entirety to include currently dated certifications of the Companys principal executive officer and principal financial officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Companys principal executive officer and principal financial officer are filed with this Amendment as Exhibits 31.3, 31.4, 32.3 and 32.4 hereto.
Except as described above, this Amendment does not amend any other information set forth in the Form 10-K, and we have not updated disclosures included in the Form 10-K to reflect any subsequent events. The Form 10-K continues to speak as of the date of the Form 10-K. This Amendment should be read in conjunction with the Form 10-K and with our filings with the SEC subsequent to the Form 10-K.
### PART III
Item 10.
Our directors and executive officers, and certain information about each of them as of April 30, 2021 are set forth below.
*
Executive Officers
Andrew Dudum.
Dudum has served as our Chief Executive Officer and Chairman of our Board of Directors. Mr. Dudum is a co-founder of Hims and has been the Chief Executive Officer and a director of Hims since September 2016. Mr. Dudum is a Co-Founder and General Partner of startup studio and investment fund Atomic Labs, LLC where he has co-founded over a dozen companies including Bungalow, Homebound, TalkIQ, and Terminal, since 2013. Mr. Dudum is a serial founder, active angel investor and advisor to various startup companies. Mr. Dudum is an advisor to Cherubic Ventures, a China and U.S. Mr. Dudum received a B.A.
### Spencer Lee.
Lee has served as our Chief Financial Officer. Mr. Lee has served as Hims Chief Financial Officer and Treasurer since March 2019. Previously, from March 2015 to March 2019, Mr. Lee served as Chief Financial Officer of Minted, Inc. Mr. Lee holds a B.A.
### Dr. Patrick Carroll, M.D
Patrick Carroll has served as our Chief Medical Officer and will oversee all matters pertaining to provision of care, clinical outcomes, patient safety, healthcare information systems and strategic initiatives and programs that will enhance the Hims & Hers care model. Prior to joining Hims in June 2019, Dr. Carroll was the Group Vice President and Chief Medical Officer of Walgreens Company from May 2014 to June 2019. Prior to joining Walgreens in May 2014, Dr. Carroll served as the Chief Medical Officer of Integrated Care Partners, Hartford HealthCares clinical integration organization. From 2010 to 2012, Dr. Carroll served as the Chief Medical Officer for the Granite Medical Group, a 40-provider Multispecialty/Primary Care Group that is part of Atrius Health. Dr. Carroll received his bachelors degree from the College of the Holy Cross and his medical degree from Dartmouth Medical School. Dr. Carroll is Board Certified in Family Practice and in Adolescent Medicine.
Melissa Baird.
Baird has served as our Chief Operating Officer. Ms. Baird has served as Hims Chief Operating Officer since February 2018. Ms. Baird brings more than nine years of operations and technology management in the consumer space to us as well as over 10 years of scientific research experience. Prior to serving as the Chief Operating Officer of Hims, from July 2016 to January 2018 Ms. Baird was Vice President of Systems and Procedures for Draper James. From December 2015 to July 2016, Ms. Baird served as the General Manager of Onefinestay. Prior to that, Ms. Baird was with Bonobos from September 2013 to November 2015 ultimately serving as the Vice President of Operations and Product Management. From May 2011 to September 2013, Ms. Baird served as the Product Manager of Supply Chain Operations for Zulily, holding responsibility for internalizing Zulilys fulfillment operations and scaling operations through technology programs. From January 2001 to May 2011, Ms. Baird served in a variety of scientific research roles spanning from Lab Technician to Geneticist. Ms. Baird obtained a B.S.
### Soleil Boughton
Boughton has served as our Chief Legal Officer and Corporate Secretary. Ms. Boughton joined Hims in October 2018 to oversee the companys legal department and public policy activities and currently serves as Chief Legal Officer and Corporate Secretary. Ms. Boughton brings 16 years of healthcare law experience to the company, and has represented digital health companies, hospitals, health systems and other healthcare and life sciences companies across all aspects of a companys life cycle. Ms. Boughton was in-house healthcare counsel for Googles Cloud Healthcare & Life Sciences from October 2017 to October 2018. Prior to that, Ms. Boughton was a Partner in the Healthcare & Life Sciences group of Jones Day from January 2015 to October 2017, where she primarily represented direct-to-consumer telehealth and other digital health companies. Ms. Boughton obtained a B.A. from Pomona College and a J.D. from the UCLA School of Law.
Non-Employee Directors
### Alex Bard.
Bard has served on our Board of Directors. Mr. Bard has been a member of the Board of Directors of Hims since December 2017. Since July 2017, Mr. Bard has served as a Managing Director at Redpoint Ventures. From September 2014 to July 2017, Mr. Bard served as Chief Executive Officer at Campaign Monitor. From September 2011 to September 2014, Mr. Bard served as Executive Vice President & General Manager of the Service Cloud business at Salesforce.com, which acquired Assistly, Inc., where Mr. Bard served as Founder and Chief Executive Officer from October 2009 to September 2011. Mr. Bard currently serves as a member of the Board of Directors of several privately held companies. Mr. Bard received a Bachelor of Arts degree from Stony Brook University. We believe Mr. Bard is qualified to serve on our Board of Directors because of his extensive operational and management experience, as well as his expertise as a venture capital investor and advisor to technology companies.
Ambar Bhattacharyya
Mr. Bhattacharyya joined our Board of Directors in March 2021. Since 2015, Mr. Bhattacharyya has served as a managing director of Maverick Ventures, which serves as the private investment arm of Maverick Capital, a venture capital fund. Prior to joining Maverick Ventures, Mr. Bhattacharyya worked at Bessemer Venture Partners and Bain Capital Ventures. Mr. Bhattacharyya received a B.S. in Finance and a B.A. from Harvard Business School. We believe Mr. Bhattacharyya is qualified to serve as a director given his significant experience advising rapidly growing technology companies and his knowledge of and experience in corporate finance.
### Dr. Delos Cosgrove, M.D.
Cosgrove has served on our Board of Directors. Dr. Cosgrove has served as a board observer from October 2019 until formally becoming a member of the Board of Directors of Hims in September 2020. Dr. Cosgrove also currently serves as the Executive Advisory for The Cleveland Clinic and has since December 2017. Prior to that, from January 2004 to December 2017 Dr. Cosgrove served as the President and Chief Executive Officer of the Cleveland Clinic. Dr. Cosgrove obtained a B.A. After medical school Dr. Cosgrove served as Chief of USAF in the Casualty Staging Flight in Da Nang, Republic of Vietnam and as a surgeon at Hamilton AFB in California. We believe Dr. Cosgrove is qualified to serve on our Board of Directors because of his vast medical training and experience working in management and advisory roles.
Kirsten Green.
Green has served on our Board of Directors. Ms. Green has served as a board observer from June 2018 until formally becoming been a member of the Board of Directors of Hims in September 2020. Ms. Green is currently the Founder and Managing Director of Forerunner Ventures and has been in this role since Forerunners inception in 2010. Currently, Ms. Green also serves on the Board of Directors of Nordstrom, Inc., Glossier, Draper James, Rockets of Awesome, Ritual, Prose, Faire, the Yes, Curated and Modern Fertility. Prior to founding Forerunner 2010, Ms. Green served as a Senior Accountant at Deloitte for three years, an Associate at Donaldson, Lufkin & Jenrette for one year and Vice President of Banc of America Securities for five years. Ms. Green obtained a B.A. We believe Ms. Green is qualified to serve on our Board of Directors because of her experience with and knowledge of the business of Hims and her experience as a venture capital investor and advisor.
### Jules Maltz.
Maltz has served on our Board of Directors. Mr. Maltz has been a member of the Board of Directors of Hims since April 2019. Mr. Maltz joined Institutional Venture Partners in August 2008 and is currently a General Partner. Mr. Maltz focuses on later-stage venture investments in rapidly growing software and Internet companies. Mr. Maltz is currently a board member of G2, Hopin, Indiegogo and Tala, and was previously a board member of NerdWallet, Oportun, RetailMeNot, TuneIn, Buddy Media and Yext. Prior to joining Institutional Venture Partners in 2008, Mr. Maltz worked for 3i, a leading global venture capital firm. Mr. Maltz received a Bachelor of Arts degree in economics from Yale University and received an M.B.A. from Stanford University. We believe Mr. Maltz is qualified to serve on our Board of Directors because of his extensive experience investing in and advising rapidly growing emerging growth companies.
Lynne Chou OKeefe.
OKeefe has served on our Board of Directors. Ms. OKeefe has been a member of the Board of Directors of Hims since November 2020. Ms. OKeefes experience includes both healthcare operating and investing roles over the past 16 years. Ms. OKeefe has served as the Founder and Managing Partner of Define Ventures since October 2018 and serves on the boards of private companies including Lightship, Tia, and Folx Health. Previously, Ms. OKeefe was a Partner in the Life Sciences Group of Kleiner Perkins from June 2013 to October 2018, and served on the boards of private companies including Livongo, Lumeris, Mango Health, and multiple other companies. Ms. OKeefe received a B.S. from Harvard Business School. We believe Ms. OKeefe is qualified to serve on our Board of Directors because of her experience in both operational and investing roles in the healthcare space and her knowledge of and experience with other telehealth businesses.
### Andrea Perez
Ms. Perez joined our Board of Directors in March 2021. Ms. Perez is the Global Vice President and General Manager for Brand Jordans Womens Division at Nike, a position she has held since October 2017. Prior to joining Nike, Ms. Perez held various positions at several leading sports and fitness companies. Ms. Perez was a co-founder of the Women of Nike employee group, and currently serves as chair of the governance committee for the Womens Sport Foundation. Ms. Perez received a B.A. We believe Ms. Perez is qualified to serve as a director given her experience at high profile consumer brands and her years of leadership experience running a division focused on womens products.
David Wells.
Wells has served on our Board of Directors. Mr. Wells has been a member of the Board of Directors of Hims since September 2020. Mr. Wells is considered a financial expert, having served as | [{"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}, {"idx": "10k", "domain": "business", "domain2": "", "header_footer": "", "lang": "en", "source": "business-0.jsonl"}] |
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