FreeCast, Inc S-1, filed Nov 13, 2023
FreeCast, Inc. (CAST)
As filed with the Securities and Exchange Commission on November 13, 2023
Registration No. 333-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FREECAST, INC.
(Exact name of registrant as specified in its charter)
| Florida | 7990 | 45-2787251 | ||
| (State or other jurisdiction of incorporation or organization) |
(Primary standard industrial classification code number) |
(I.R.S. employer identification number) |
6901 TPC Drive, Suite 200
Orlando, Florida 32822
(407) 374-1607
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
William A. Mobley, Jr., Chief Executive Officer
FreeCast, Inc.
6901 TPC Drive, Suite 200
Orlando, Florida 32822
(407) 374-1607
(Name, address, including zip code, and telephone
number,
including area code, of agent for service)
Copies to:
| Jeffery A. Bahnsen, Esq | Barry I. Grossman, Esq. |
| Bahnsen Legal Group, PLLC | Sarah E. Williams, Esq. |
| 131 NE 1st Avenue, Suite 100 | Matthew Bernstein, Esq. |
| Boca Raton, Florida 33432 | Ellenoff Grossman & Schole LLP |
| (727) 888-3026 | 1345 Avenue of the Americas New York, New York 10105 |
| (212) 370-1300 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☒ | Smaller reporting company ☒ |
| Emerging growth company ☒ |
If an emerging growth company, indicate by check mark 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 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion,
Preliminary Prospectus dated
[_______________], 2023
FREECAST, INC.
shares of common stock (par value, $0.0001)
This is our initial public offering of common stock. No public market currently exists for our common stock. We anticipate the initial public offering price will be between $ and $ per share.
We are selling shares of common stock.
We have applied to list our common stock on the Nasdaq Capital Market, or Nasdaq, under the symbol “CAST.” No assurance can be given that our application will be approved. If our common stock is not approved for listing on Nasdaq, we will not consummate this offering.
We expect to be a “controlled company” under Nasdaq corporate governance standards because more than 50% of the voting power of our common stock following the completion of this offering will be held by Nextelligence, Inc., which is majority owned and controlled by our Chief Executive Officer. As a “controlled company,” we are permitted to, and will, elect not to comply with certain Nasdaq corporate governance standards, including majority “independent director” requirements and certain requirements relating to independent compensation and nominating committees. Accordingly, you will not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of the Nasdaq Stock Market.
We are an “emerging growth company” as defined under the federal securities laws and, as such, may elect to comply with certain reduced reporting requirements for this prospectus and other filings with the Securities and Exchange Commission after this offering. See “Prospectus Summary—Emerging Growth Company Status.”
Investing in our securities involves a high degree of risk. You should carefully consider the risk factors beginning on page 7 of this prospectus before purchasing shares of our common stock.
| Per Share | Total | |||||||
| Initial public offering price | $ | $ | ||||||
| Underwriting discounts and commissions (1) | $ | $ | ||||||
| Proceeds to us, before expenses | $ | $ | ||||||
| (1) | The underwriter will receive compensation in the form of warrants to purchase up to ____ shares of common stock (assuming the over-allotment option is fully exercised) at an exercise price equal to 110% of the public offering price in addition to the underwriting discounts and commissions. We have also agreed to reimburse the underwriters for certain expenses. See “Underwriting” beginning on page 63. |
We have granted the underwriters the right to purchase up to additional shares of our common stock at the public offering price per share, less the underwriting discount, for 45 days after the date of this prospectus to cover over-allotments, if any. If the underwriters exercise this option in full, the total underwriting discounts and commissions will be $ [*] and the additional proceeds to us, before expenses, from the over-allotment option exercise will be $ [*].
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of common stock to purchasers on , 2023.
The date of this prospectus is , 2023.
Sole Book-Running Manager
Maxim Group LLC
TABLE OF CONTENTS
Neither we nor the underwriter has authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. When you make a decision about whether to invest in our common stock, you should not rely upon any information other than the information in this prospectus or in any free writing prospectus that we may authorize to be delivered or made available to you. Neither the delivery of this prospectus nor the sale of our common stock means that the information contained in this prospectus or any free writing prospectus is correct after the date of this prospectus or such free writing prospectus. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus. This prospectus is not an offer to sell or the solicitation of an offer to buy shares of common stock in any circumstances under which the offer or solicitation is unlawful.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our common stock or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus applicable to that jurisdiction.
We and the underwriters are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted. Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our common stock and the distribution of this prospectus outside of the United States.
i
Market, Industry and Other Data
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause our future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.”
Among others, we refer to estimates compiled by the following industry sources:
| ● | (https://www.statista.com/study/44526/digital-media-report/) |
| ● | (https://www.insiderintelligence.com/content/cord-cutting-hasn-t-lost-momentum) |
| ● | (https://www.nielsen.com/insights/2022/streaming-climbs-to-new-heights-again-in-april-despite-a-dip-in-total-tv-viewing/) |
Trademarks and Service Marks
This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
ii
This summary highlights certain information appearing elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. For a more complete understanding of this offering, you should read the entire prospectus carefully, including the information under “Risk Factors” and our financial statements and the related notes included elsewhere in this prospectus before investing in our common stock.
In this prospectus, unless otherwise stated or the context otherwise requires, references to “FreeCast®,” “Company,” “we,” “us” and “our” or similar references mean FreeCast, Inc.
Our Company
We are an entertainment-based content discovery, aggregation and management company that provides SmartGuide® digital interactive technology for consumers to organize today’s numerous sources of online media similar to a traditional on-screen television, or TV, guide. Initially, we licensed our technology to Telebrands Corp., or Telebrands, who distributed subscriptions to consumers through retailers under the brand known as Rabbit TV from 2012 through 2016. In July 2016, we began offering our product directly to consumers under our own brand, SelectTV. In October 2019, we began selling subscriptions to SelectTV as a direct-to-consumer retail product in the form of a packaged “cord cutting kit” through TV Infomercials, utilizing a toll-free phone number and ecommerce ordering system, with delivery of the product to consumers via the United States (U.S.) Postal Service.
In October 2022, due to falling retail sales through our retail big box channels following the covid outbreak and increasing difficulties in global supply chain management, the former SelectTV.com paid subscription service and packaged SelectTV Streaming TV Kits were terminated. We rebranded as FreeCast.com and unveiled a free registration subscription model. Our revenue streams include subscription revenue from additional monthly content bundles, product revenue from selling digital high-definition TV antennas, and other revenue from licensing, advertising, and referral fees.
We also distribute numerous licenses to retail, device manufacturers/distributors (mobile, tablets, set top boxes, “smart” TV’s, streaming equipment, gaming systems), as well as co-branding for hotel/hospitality, broadband carriers, telecommunications, and promotion companies.
The following table shows the aggregate number of subscribers at the end of each fiscal period presented in this prospectus.
| Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Subscribers (1) | 742,336 | 541,776 | ||||||
| (1) | Subscribers who have paid for their subscription or logged into their account within the past 36 months. |
The basis of our service platform is our proprietary content aggregation technology that automatically crawls the Internet to locate commercial-quality entertainment content from thousands of sources, including free, paid and subscription-based content. Additionally, we subscribe to the top entertainment data services such as Gracenote (owned by Nielson), Xperi, and Reelgood whom provide real-time updates. Our technology then sorts through and manages all available commercial-quality digital media, including both live and on-demand video from free, subscription and pay-per-view (PPV) services. All of this information is then incorporated into our interactive SmartGuide presented to consumers in a familiar easy-to-use cable-like TV guide via the Internet and as a software application, on all Wi-Fi enabled devices.
1
The SmartGuide uses images and related information on customized guide pages to provide subscribers with an easy way to explore all of the available media choices from one centralized account, regardless of the device or location. Upon selecting content to consume, the subscriber is directed to the original source of the content. If content is available for free, the subscriber is transferred to the website providing the content. If content is available through a subscription service (such as Netflix or Hulu), we allow the subscriber to log-in to the service through our SmartGuide and the subscriber is then directed to the subscription service’s website. If the content is PPV, the subscriber is directed to the page requiring payment for the PPV service. We do not manipulate or distribute the source content, and the provider of the content retains all rights to and management of content.
Because we link subscribers directly to third-party content sources and in no way manipulate, store, retransmit or distribute this content, we are not subject to licensing fees or restrictions by third-party content suppliers. We are not responsible for the availability or content of these external websites, nor do we endorse, warrant or guarantee the products, services or information described or offered. All logos and trademarks used in the guide are the sole property of their respective owners. We believe that this is a complementary relationship in which we directly supply free traffic to content suppliers, much like the print-based model employed by TV Guide in past decades.
Our SmartGuide technology is currently available on computers, “smart” phones, tablets, streaming devices and “smart” TV’s. It is available directly to consumers, branded as FreeCast.com, and will also be distributed by third parties, both as FreeCast.com and under other licensed brand names and partnerships.
Relationship with Nextelligence, Inc.
On June 30, 2011, we entered into a Technology License and Development Agreement, which was amended and restated on October 19, 2012, amended on July 1, 2013, amended and restated a second time on July 31, 2014 and further revised to terminate all payments to Nextelligence pursuant to the agreement, effective on June 30, 2016 (the “Technology Agreement”), with Nextelligence, Inc., or Nextelligence, which is majority owned and controlled by William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman of our board of directors. The Technology Agreement, which terminates on June 30, 2054, provides us with an exclusive license to a web-based application that installs in the end-user’s browser and any supported email functions or chat functions with search and certain other features (the “Technology”) from Nextelligence and for Nextelligence to provide all further development, improvement, modification, maintenance, management and enhancement services related to the Technology.
Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
| ● | engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes–Oxley Act of 2002, or Sarbanes–Oxley Act; | |
| ● | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or | |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation. |
2
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards, which we have elected to take advantage of.
We will remain an “emerging growth company” until the earliest to occur of:
| ● | our reporting $1.07 billion or more in annual gross revenues; | |
| ● | our issuance, in a three-year period, of more than $1 billion in non-convertible debt; | |
| ● | the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; or | |
| ● | June 30, 2029. |
Our Corporate Information
We were incorporated on June 21, 2011 in the State of Florida. Our principal executive offices are located at 6901 TPC Drive, Suite 200 Orlando, Florida 32822. Our telephone number is (407) 374-1607. We maintain a website at www.FreeCast.com. The information contained on our website is not, and should not be interpreted to be, a part of this prospectus.
Trademark and Service Mark Notice
FreeCast, SmartGuide and SelectTV are registered service marks of FreeCast, Inc. We use these registered service marks in connection with the operation of our business, including our corporate name, logos and website names. Other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners. Solely for convenience, some of the trademarks, service marks, and trade names referred to in this prospectus are listed without the ® and ™ symbols.
3
| Common stock being offered by us | shares | |
| Common stock outstanding immediately before this offering | shares | |
| Common stock outstanding after this offering | shares (or shares if the underwriters exercise the option to purchase additional shares in full). | |
| Over-allotment option | We have granted to the underwriters an option to purchase up to an additional _______________ shares of common stock to cover over-allotments, if any, at the applicable public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option in full or in part at any time and from time to time until 45 days after the date of this prospectus. | |
| Representative Warrants | Upon the closing of this offering, we have agreed to issue to Maxim, as representative to the underwriters in this offering (the “Representative”), warrants (the “Representative Warrants”) exercisable for a period of five years from the commencement of sales in this offering entitling the Representative to purchase 8% of the number of shares of common stock sold in this offering (including shares of common stock sold pursuant to the underwriters’ over-allotment option) at an exercise price equal to 110% of the public offering price. The warrants will be immediately exercisable and expire on the fifth anniversary of the commencement of sales of this offering. For additional information regarding our arrangement with the underwriters, please see “Underwriting.” | |
| Use of Proceeds | We expect to receive net proceeds, after deducting underwriting discounts and commissions and estimated expenses payable by us, of approximately $ million (or approximately $ million if the underwriters exercise their option to purchase additional shares in full), based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus. We intend to use the net proceeds from this offering for working capital and other general corporate purposes, which may include financing our growth, developing new products, and funding capital expenditures, acquisitions and investments. | |
| Dividend Policy | We do not anticipate paying any cash dividends on our common stock. In addition, we may incur indebtedness in the future that may restrict our ability to pay dividends. See “Dividend Policy” on page 21. | |
| Proposed Nasdaq trading symbol | We have applied to list our common stock on the Nasdaq Capital Market under the symbol “CAST.” No assurance can be given that our application will be approved. | |
| Risk Factors | The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 7. |
4
| Lock-Up | In connection with our initial public offering, we, our directors, executive officers, and certain shareholders holding three percent (3%) or more of our common stock have agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of 180 days following the closing of the offering of the shares. See “Underwriting” for more information. |
The number of shares of our common stock to be outstanding after this offering is based on 44,164,626 shares outstanding as of June 30, 2023. The number of shares of our common stock to be outstanding after this offering does not take into account:
| ● | 26,112,174 shares of common stock issuable upon the exercise of outstanding warrants as of June 30, 2023 at a weighted average exercise price of $1.55 per share. | |
| ● | 1,615,324 shares of common stock issuable upon exercise of outstanding options, of which 1,586,721 have vested and are exercisable as of June 30, 2023, at a weighted average exercise price of $2.00 per share. | |
| ● | 4,384,676 shares of common stock available for future issuance under our 2021 Incentive Award Plan. | |
| ● | shares of common stock issuable upon the exercise of Representative Warrants at an exercise price of $ per share. | |
| ● | 23,190,481 shares of common stock issuable upon the exercise of outstanding convertible debt as of June 30, 2023 at a conversion price of $0.25 per share. | |
Unless otherwise noted, the information in this prospectus assumes that the underwriters do not exercise their over-allotment option.
5
The following table presents our summary historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and notes thereto included elsewhere in this prospectus. The statements of operations data for the fiscal years ended June 30, 2023 and 2022 are derived from our audited financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected in the future.
| Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Statements of Operations Data: | ||||||||
| Total Revenue | $ | 507,200 | $ | 303,217 | ||||
| Total Cost of Revenue | 220,147 | 157,285 | ||||||
| Total Operating Expenses | 8,009,178 | 10,608,737 | ||||||
| Loss From Operations | (7,722,125 | ) | (10,462,805 | ) | ||||
| Total Other Income (Expense) | 1,336,008 | (1,141,117 | ) | |||||
| Net Loss | (6,386,117 | ) | (11,603,922 | ) | ||||
| Net Loss attributable to common shareholders | (16,235,064 | ) | (11,603,922 | ) | ||||
| Net Loss per share, basic and diluted | (0.40 | ) | (0.32 | ) | ||||
The pro forma statement of financial condition data as of June 30, 2023 gives effect to this offering based on an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus.
| As of June 30, 2023 | ||||||||
| Actual | Pro Forma | |||||||
| (unaudited) | ||||||||
| Balance Sheets Data: | ||||||||
| Cash and Cash Equivalents | $ | 1,634,494 | ||||||
| Accounts Receivable | 3,613 | |||||||
| Total Assets | 1,902,804 | |||||||
| Total Current Liabilities | 4,276,801 | |||||||
| Total Liabilities | 9,816,703 | |||||||
| Total Shareholders’ Equity (Deficit) | (7,913,899 | ) | ||||||
6
Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus before deciding whether to invest in shares of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. If any of the following risks actually occur, our business, financial condition, results of operations and future prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.
Risks Relating to Our Business
We may not be able to continue as a going concern without additional financing, and if such financing is not available to us or is not available to us on acceptable terms, we may be forced to cease operations.
We have a limited operating history and have incurred recurring losses from operations. As of June 30, 2023, we have an accumulated deficit of $48,725,037, and a stockholders’ deficit of $7,913,899. For the fiscal years ended June 30, 2023 and 2022, we incurred a net loss of $6,386,117 and $11,603,922, respectively. Our failure to generate sufficient revenues, effectively manage expenses or raise additional capital could adversely affect our ability to achieve our intended business objectives. These matters, among others, raise substantial doubt about our ability to continue as a going concern.
We funded our initial operations primarily through sales of common stock to accredited investors, debt financing, and exchange of common stock for services received by us. We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our shareholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct business. If we are not able to raise additional capital when required or on acceptable terms, we may have to: (i) significantly delay, scale back or discontinue the development or commercialization of new products; (ii) seek collaborators for further development and commercialization of our products; or (iii) relinquish or otherwise dispose of some or all of our rights to technologies or the products that we would otherwise seek to develop or commercialize.
Our SmartGuide relies on a technology that we license from Nextelligence, Inc. and any interruption of our rights as a licensee could have a significant adverse impact on some major aspects of our business, such as product development, customer retention and sales.
Our SmartGuide has been built on technology developed by Nextelligence, Inc., or Nextelligence, and used by us pursuant to a Technology License and Development Agreement (as amended, the “Technology Agreement”). Nextelligence is principally owned and controlled by William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman of our board of directors. The Technology Agreement provides that Nextelligence is obligated to provide all further development, improvement, modification, maintenance, management and enhancement services related to the technology in exchange for certain payments to Nextelligence by us. The Technology Agreement may be terminated if, among other things, we breach the Technology Agreement, if we become insolvent or subject to the bankruptcy laws, or if there is a change of control (as defined in the Technology Agreement). If we were not able to use the technology for any reason, it could have a significant adverse impact on some major aspects of our business, such as product development, customer retention and sales.
7
If our efforts to attract and retain subscribers are not successful, our business will be adversely affected.
Our ability going forward to attract and retain subscribers will depend on our ability to consistently provide a robust, valuable and quality experience for selecting and viewing TV shows, movies and channels and access to online radio stations. Furthermore, the relative service levels, content offerings, pricing and related features of competitors to our service may adversely impact our ability to attract and retain subscribers. If consumers do not perceive our service offering to be of value, or if we introduce new or adjust existing services that are not favorably received by them, we may not be able to attract subscribers. In addition, many of our subscribers are re-joining our service or originate from word-of-mouth advertising from existing subscribers. Our attracting and retaining subscribers may depend on our ability to:
| ● | offer a secure platform; | |
| ● | provide tools and services that meet the evolving needs of consumers; | |
| ● | provide a wide range of high-quality product and service offerings; | |
| ● | enhance the attractiveness of our platform; | |
| ● | maintain the quality of our customer service; and | |
| ● | continue adapting to the changing demands of the market. |
If our efforts to satisfy our existing subscribers are not successful, we may not be able to attract new subscribers, and as a result, our ability to maintain or grow our business will be adversely affected. Subscribers cancel their subscription to our service for many reasons, including a perception that they do not use the service sufficiently, the need to cut household expenses, availability of content is limited, competitive services provide a better value or experience and customer service issues are not satisfactorily resolved. We must continually add new subscribers both to replace subscribers who cancel and to grow our business beyond our current subscriber base. If too many of our subscribers cancel our service, or if we are unable to attract new subscribers in numbers sufficient to grow our business, our operating results will be adversely affected. If we are unable to successfully compete with current and new competitors in both retaining our existing subscribers and attracting new subscribers, our business will be adversely affected. Further, if excessive numbers of subscribers cancel our service, we may be required to incur significantly higher marketing expenditures than we currently anticipate in order to replace these subscribers with new subscribers.
If we are not able to continue to innovate or if we fail to adapt to changes in our industry, our business, financial condition and results of operations would be materially and adversely affected.
The market for online video, radio and games is characterized by rapidly changing technology, evolving industry standards, new service and product introductions and changing customer demands. Although we have developed new products and services in order to meet customer demands, new technologies and evolving business models for delivery of entertainment video continue to develop at a fast pace and we may not be able to keep up with all of the changes. Consumers are afforded various means for consuming online video, radio and games. The various economic models underlying these differing means of entertainment video delivery include subscription, pay-per-view, ad-supported and piracy-based models. Several competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we do. New entrants may enter the market with unique service offerings or approaches to distributing online video, radio and games and other companies also may enter into business combinations or alliances that strengthen their competitive positions. The changes and developments taking place in our industry may also require us to re-evaluate our business model and adopt significant changes to our long-term strategies and business plan. If we are unable to successfully or profitably compete with current and new competitors, programs and technologies, our business will be adversely affected, and we may not be able to increase or maintain market share, revenues or profitability.
We may not be able to maintain or grow our revenue or our business.
Since the beginning of fiscal year 2019, we have been focused on investing in and developing new technologies, which we anticipate will drive future growth and give us a sustainable revenue stream. In addition, we have transitioned to a “multi license” model from a “single-license” model. We believe that with new technology, coupled with our new sales and marketing strategy focused on generating revenue through free registrations of FreeCast.com by partnering with retailers, manufacturers, operators and/or distributors of streaming devices, mobile phones, broadband carriers, broadcasters, property management, multi-dwelling developers, builders, and various mass consumer communities of streaming tv watchers in exchange for a negotiated revenue sharing percentage with each distributor on a case-by-case basis. However, there can be no assurance that we will be able to generate sufficient revenue from distributor fees or fees from premium content purchased by subscribers through our SmartGuide to fund our operations in the future. In addition, our growth may become stagnant for many other reasons, including decreasing consumer spending, increasing competition, slowing growth of the consumption of online video, radio and games, changes in government policies or general economic conditions.
If we are not able to manage our growth, our business could be adversely affected.
We are currently engaged in an effort to grow our service by promoting online access renewal, developing new products, expanding internationally and to residents of rural areas. As we undertake all these changes, if we are not able to manage the growing complexity of our business, including improving, refining or revising our systems and operational practices, our business may be adversely affected.
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If our efforts to build strong brand identity and improve subscriber satisfaction and loyalty are not successful, we may not be able to attract or retain subscribers, and our operating results may be adversely affected.
We must continue to build and maintain strong brand identity for our products and services, which have expanded over time. We believe that strong brand identity will be important in attracting subscribers. If our efforts to promote and maintain our existing brands and brands we develop in the future are not successful, our operating results and our ability to attract subscribers may be adversely affected. From time to time, subscribers express dissatisfaction with our service, including, among other things, title availability, processing and service interruptions. To the extent dissatisfaction with our service is widespread or not adequately addressed, our brand may be adversely impacted and our ability to attract and retain subscribers may be adversely affected. With respect to our planned international expansion, we will also need to establish our brand and to the extent we are not successful, our business in new markets would be adversely impacted.
If we are unable to manage the mix of subscriber acquisition sources, our subscriber levels and marketing expenses may be adversely affected.
We utilize a broad mix of marketing programs to promote our service to potential new subscribers. We obtain new subscribers through our online marketing efforts, including paid search listings, banner ads, text links and permission-based e-mails. In addition, we have engaged in various offline marketing programs, including TV and radio advertising, direct mail and print campaigns, consumer package and mailing insertions. We maintain an active public relations program to increase awareness of our service and drive subscriber acquisition. We opportunistically adjust our mix of marketing programs to acquire new subscribers at a reasonable cost with the intention of achieving overall financial goals. If we are unable to maintain or replace our sources of subscribers with similarly effective sources, or if the cost of our existing sources increases, our subscriber levels and marketing expenses may be adversely affected.
If we are unable to continue using our current marketing channels, our ability to attract new subscribers may be adversely affected.
We may not be able to continue to support the marketing of our service by current means if such activities are no longer available to us, become cost prohibitive or are adverse to our business. If companies that currently promote our service decide that we are negatively impacting their business, that they want to compete more directly with our business or enter a similar business or decide to exclusively support our competitors, we may no longer be given access to such marketing through them. In addition, if advertising rates increase, we may curtail marketing efforts or otherwise experience an increase in our marketing costs. Laws and regulations impose restrictions on the use of certain channels, including commercial e-mail and direct mail. We may limit or discontinue use or support of e-mail and other activities if we become concerned that subscribers or potential subscribers deem such activities intrusive, which could affect our goodwill or brand. If the available marketing channels are curtailed, our ability to attract new subscribers may be adversely affected.
Although we do not distribute content through our service, if we are sued for content accessed through our service, our results of operations would be adversely affected.
Although we do not distribute content through our service, we face potential liability for negligence, copyright, patent or trademark infringement or other claims based on content accessed through our service. We also may face potential liability for content uploaded from our users in connection with our community-related content or reviews. If we become liable for such activities, then our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our results of operations. We cannot assure you that we are insured or indemnified to cover claims of these types or liability that may be imposed on us.
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We rely upon a number of partners to offer our service.
We currently offer subscribers the ability to easily navigate available sources of online video, radio and games and consume such media through their computers and other Internet-connected devices. If we are not successful in maintaining existing and creating new relationships with content providers, or if we encounter technological, content licensing or other impediments to our ability to organize content, our ability to grow our business could be adversely impacted. Furthermore, mobile devices and TV’s are manufactured and sold by entities other than FreeCast and while these entities should be responsible for the devices’ performance, the connection between these devices and FreeCast may nonetheless result in consumer dissatisfaction toward FreeCast and such dissatisfaction could result in claims against us or otherwise adversely impact our business.
Any significant disruption in our computer systems or those of third-parties that we utilize in our operations could result in a loss or degradation of service and could adversely impact our business.
Subscribers and potential subscribers access our service through our Web site or their TVs, computers, game consoles, or streaming or mobile devices. Our reputation and ability to attract, retain and serve our subscribers are dependent upon the reliable performance of our computer systems and those of third-parties that we utilize in our operations. Interruptions in these systems, or with the Internet in general, including discriminatory network management practices, could make our service unavailable or degraded. Much of our software is proprietary, and we rely on the expertise of our engineering and software development teams for the continued performance of our software and computer systems. Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our service to existing and potential customers.
Our servers and those of third-parties we use in our operations are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in our service and operations as well as loss, misuse or theft of data. Our Web site periodically experiences directed attacks intended to cause a disruption in service. Any attempts by hackers to disrupt our service or our internal systems, if successful, could harm our business, be expensive to remedy and damage our reputation. Our insurance does not cover expenses related to attacks on our Web site or internal systems. Efforts to prevent hackers from entering our computer systems are expensive to implement and may limit the functionality of our services. Any significant disruption to our service or internal computer systems could result in a loss of subscribers and adversely affect our business and results of operations.
We utilize our own communications and computer hardware systems located either in our facilities or in that of a third-party Web hosting provider. In addition, we utilize third-party Internet-based or “cloud” computing services in connection with our business operations. Problems faced by our third-party Web hosting or cloud computing providers, including technological or business-related disruptions, could adversely impact the experience of our subscribers. In addition, fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events could damage these systems and hardware or cause them to fail completely. As we do not maintain entirely redundant systems, a disrupting event could result in prolonged downtime of our operations and could adversely affect our business.
We rely upon third parties to host certain aspects of our service and any disruption of, or interference with, our use of such third-party services would impact our operations and our business would be adversely impacted.
We make use of a number of services provided by third parties, including distributed computing infrastructure platform for business operations, or what is commonly referred to as a cloud computing service. We have architected our software and computer systems so as to utilize data processing, storage capabilities and other services provided by such third parties. Given this, along with the fact that we cannot easily switch our operations to other providers, any disruption of or interference with our use of current service providers would impact our operations and our business would be adversely impacted.
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We rely heavily on our proprietary technology to locate and organize online video, radio and games and to manage other aspects of our operations, and the failure of this technology to operate effectively could adversely affect our business.
We continually enhance or modify the technology used for our operations. We cannot be sure that any enhancements or other modifications we make to our operations will achieve the intended results or otherwise be of value to our subscribers. Future enhancements and modifications to our technology could consume considerable resources. If we are unable to maintain and enhance our technology, our ability to retain existing subscribers and to add new subscribers may be impaired. In addition, if our technology or that of third-parties we utilize in our operations fails or otherwise operates improperly, our ability to retain existing subscribers and to add new subscribers may be impaired. Also, any harm to our subscribers’ personal computers or other devices caused by software used in our operations could have an adverse effect on our business, results of operations and financial condition.
Privacy concerns could limit our ability to leverage our subscriber data and our disclosure of or unauthorized access to subscriber data could adversely impact our business and reputation.
In the ordinary course of business and, in particular, in connection with merchandising our service to our subscribers, we collect and utilize data supplied by our subscribers. We currently face certain legal obligations regarding the manner in which we treat such information. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the Internet regarding users’ browsing and other habits. Increased regulation of data utilization practices, including self-regulation or findings under existing laws, that limit our ability to use collected data, could have an adverse effect on our business. In addition, if unauthorized access to our subscriber data were to occur or if we were to disclose data about our subscribers in a manner that was objectionable to them, our business reputation could be adversely affected, and we could face potential legal claims that could impact our operating results.
Our reputation and relationships with subscribers would be harmed if our subscriber data, particularly billing data, were to be accessed by unauthorized persons.
We maintain personal data regarding our subscribers, including names and, in many cases, mailing addresses. With respect to billing data, such as credit card numbers, we rely on licensed encryption and authentication technology to secure such information. We take measures to protect against unauthorized intrusion into our subscribers’ data. If, despite these measures, we, or our payment processing services, experience any unauthorized intrusion into our subscribers’ data, current and potential subscribers may become unwilling to provide the information to us necessary for them to become subscribers, we could face legal claims, and our business could be adversely affected. Similarly, if a well-publicized breach of the consumer data security of any other major consumer Web site were to occur, there could be a general public loss of confidence in the use of the Internet for commerce transactions which could adversely affect our business.
In addition, we do not obtain signatures from subscribers in connection with the use of credit cards by them. Under current credit card practices, to the extent we do not obtain cardholders’ signatures, we are liable for fraudulent credit card transactions, even when the associated financial institution approves payment of the orders. From time to time, fraudulent credit cards are used on our Web site to obtain service. Typically, these credit cards have not been registered as stolen and are therefore not rejected by our automatic authorization safeguards. While we do have a number of other safeguards in place, we nonetheless experience some loss from these fraudulent transactions. We do not currently carry insurance against the risk of fraudulent credit card transactions. A failure to adequately control fraudulent credit card transactions would harm our business and results of operations.
We may not be able to protect our intellectual property rights.
We rely on a combination of trademark, fair trade practice, patent, copyright and trade secret protection laws, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information.
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Intellectual property protection may not be sufficient and confidentiality agreements may be breached by counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights, including our rights under the Technology Agreement with Nextelligence. In addition, policing any unauthorized use of our intellectual property is difficult, time-consuming and costly and the steps we have taken may be inadequate to prevent the misappropriation of our intellectual property. In the event that we resort to litigation to enforce our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we would prevail in such litigation. In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors. Any failure in protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations.
Intellectual property claims against us could be costly and result in the loss of significant rights related to, among other things, our Web site, technology, title selection processes and marketing activities.
Trademark, copyright, patent and other intellectual property rights are important to us. Our intellectual property rights extend to our technology, business processes and the content on our Web site. We use the intellectual property of third-parties in merchandising our products and marketing our service through contractual and other rights. From time to time, third-parties allege that we have violated their intellectual property rights. If we are unable to obtain sufficient rights, successfully defend our use, or develop non-infringing technology or otherwise alter our business practices on a timely basis in response to claims against us for infringement, misappropriation, misuse or other violation of third-party intellectual property rights, our business and competitive position may be adversely affected. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of our business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. We have not searched patents relative to our technology. Defending ourselves against intellectual property claims, whether they are with or without merit or are determined in our favor, results in costly litigation and diversion of technical and management personnel. It also may result in our inability to use our current Web site and technology, or our inability to market our service or merchandise our products. As a result of a dispute, we may have to develop non-infringing technology, enter into royalty or licensing agreements, adjust our merchandising or marketing activities or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.
If we are unable to protect our domain names, our reputation and brand could be adversely affected.
We currently hold various domain names relating to our brand, including freecast.com. Failure to protect our domain names could adversely affect our reputation and brand and make it more difficult for users to find our Web site and our service. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. The regulation of domain names in the U.S. may change in the near future. Governing bodies may establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we may be unable to acquire or maintain relevant domain names. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable, without significant cost or at all, to prevent third-parties from acquiring domain names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.
We depend on key management as well as experienced and capable personnel generally, and any failure to attract, motivate and retain our staff could severely hinder our ability to maintain and grow our business.
We rely on the continued service of our senior management, including our founder and Chief Executive Officer and Chairman of our board of directors, William A. Mobley, Jr., other members of our executive team and other key employees to develop our products, services and solutions. In our industry, there is substantial and continuous competition for highly skilled business, product development, technical and other personnel. As a result, our human resources organization focuses significant efforts on attracting and retaining individuals in key technology positions. If we lose the services of any member of management or key personnel, and are unable to attract or locate suitable or qualified replacements, or otherwise hire talented personnel, we may incur additional expenses to recruit and train new staff, making it more difficult to meet our business objectives, which could severely disrupt our business and growth.
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We cannot be assured we can obtain or retain third-party contractors for our specific services or development needs, which could disrupt our business operations or growth.
If we experience a substantial loss of, or an inability to attract, talented personnel, we may experience difficulty in meeting our business objectives.
Our brand name and our business may be harmed by aggressive marketing and communications strategies of our competitors.
Due to competition in our industry, we have been and may be the target of incomplete, inaccurate and false statements about our company and our services that could damage our and our management’s reputation and our brand and materially deter consumers from using our service. Our brand name and our business may be harmed if we are unable to promptly respond to our competitors’ misleading marketing efforts.
Risks Related to our Industry
Changes in consumer viewing habits, including more widespread usage of demand methods of entertainment video consumption could adversely affect our business.
The manner in which consumers seek entertainment online is changing rapidly. Digital cable, wireless and Internet content providers are continuing to improve technologies, content offerings, user interfaces and business models that allow consumers to access entertainment video-on-demand with interactive capabilities. The devices through which online video, radio and games can be consumed are also changing rapidly. For example, content from cable service providers may be viewed on laptops and mobile devices and content from Internet content providers may be viewed on TVs. If competitors providing similar services address the changes in consumer habits in a manner that is better able to meet content distributor and consumer needs and expectations, our business could be adversely affected.
Our business depends on continued and unimpeded access to the Internet at non-discriminatory prices, and Internet access providers and Internet backbone providers may be able to block, limit, degrade or charge for access to certain of our products and services, which could lead to additional expenses and the loss of users.
Our products and services depend on the ability of our customers’ viewers to access the Internet, and certain of our customers’ products require significant bandwidth to work effectively. Currently, this access is provided by companies that have significant and increasing market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies and mobile communications companies. Some of these providers have stated that they may take measures that could degrade, disrupt or increase the cost of user access by restricting or prohibiting the use of their infrastructure to support or facilitate offerings, or by charging increased fees to provide offerings, while others, including some of the largest providers of broadband Internet access services, have committed to not engaging in such behavior.
The ability of the FCC to regulate broadband Internet access services was called into question by an April 2010 ruling of the U.S. Court of Appeals for the D.C. Circuit. The FCC then proposed rules regulating broadband Internet access, but on January 14, 2014, the D.C. Circuit Court of Appeals struck down the net neutrality rules adopted by the FCC, determining that the FCC did not have the authority to issue or enforce net neutrality rules, as it had failed to identify certain service providers as “common carriers.” On February 26, 2015, the FCC approved a new rule that reclassifies broadband Internet access service as a telecommunication service and regulates broadband Internet access as a public utility (Title II Order). In 2016, a divided panel of the D.C. Circuit Court of Appeals upheld the Title II Order, concluding that the FCC’s classification of broadband Internet access service was permissible. However, under President Donald Trump’s administration, the FCC reversed course and in December 2017 adopted a new rule referred to as the Restoring Internet Freedom Order, which went into effect on June 11, 2018. The Restoring Internet Freedom Order (RIFO): (i) reinstated the information service classification of broadband Internet access service; (ii) reinstated the determination that mobile broadband Internet access service is not a commercial mobile service; and (iii) eliminated the Internet conduct standard and the non-exhaustive list of factors intended to guide application of that rule. On October 1, 2019, D.C. Circuit Court of Appeals upheld most provisions of the RIFO. One aspect of the RIFO that the court did not uphold relates to the FCC’s assertion that it could pre-empt state-level actions involving Net Neutrality and the Open Internet. More than 30 states have introduced bills to add their own net neutrality protections, several of which have gone into effect. The U.S. House of Representatives on April 10, 2019 passed a bill, called the Save the Internet Act, requiring internet service providers to treat all online content the same. The U.S. Senate, however, did not pass the bill. On July 9, 2021, President Joe Biden signed Executive Order 14036 (EO), “Promoting Competition in the American Economy,” a sweeping array of initiatives across the executive branch. Among them included instructions to the FCC to restore the net neutrality rules under the Title II Order that had been undone during the prior administration.
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Unless either the Court overturns or Congress passes legislation, or until the FTC adopts new rules as instructed under the EO, that supersedes the RIFO, it is possible that broadband service providers could impose restrictions on bandwidth and service delivery that may adversely impact our download speeds or ability to deliver content over those facilities, or impose significant end user or other fees that could impact the cost of our services to end users, or our delivery costs. If no action is taken by the Court or Congress, current and future actions by broadband Internet access providers may also result in limitations on access to our services, a loss of existing users, or increased costs to us, our users or our customers, thereby impairing our ability to attract new users, or limiting our opportunities and models for revenue and growth.
Changes in how network operators handle and charge for access to data that travel across their networks could adversely impact our business.
We rely upon the ability of consumers to access our service through the Internet. To the extent that network operators implement usage-based pricing, including meaningful bandwidth caps, or otherwise try to monetize access to their networks by data providers, we could incur greater operating expenses and our subscriber acquisition and retention could be negatively impacted.
Most network operators that provide consumers with access to the Internet also provide these consumers with multichannel video programming. As such, companies like Comcast, Time Warner Cable and Cablevision have an incentive to use their network infrastructure in a manner adverse to our continued growth and success. While we believe that consumer demand, regulatory oversight and competition will help limit these incentives, to the extent that network operators are able to provide preferential treatment to their data as opposed to ours, our industry and business could be negatively impacted.
Risks Related to the Offering
An active trading market for our common stock may not develop, which may cause our common stock to trade at a discount from the initial offering price and make it difficult for you to sell the shares you purchase.
Prior to this offering, there has been no public trading market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development or maintenance of an active trading market. The initial public offering price per share of our common stock has been determined by agreement among us and the underwriters and may not be indicative of the price at which our common stock will trade in the public trading market after this offering. If an active trading market does not develop, there may be difficulty selling any shares of our common stock.
Certain recent initial public offerings of companies with public floats comparable to our anticipated public float have experienced extreme volatility that was seemingly unrelated to the underlying performance of the respective company. We may experience similar volatility, which may make it difficult for prospective investors to assess the value of our common stock.
In addition to the risks addressed below in “—The market price of our common stock may be volatile, which could cause the value of your investment to decline,” our common stock may be subject to extreme volatility that is seemingly unrelated to the underlying performance of our business. Recently, companies with comparable public floats and initial public offering sizes have experienced instances of extreme stock price run-ups followed by rapid price declines, and such stock price volatility was seemingly unrelated to the respective company’s underlying performance. Although the specific cause of such volatility is unclear, our anticipated public float may amplify the impact the actions taken by a few shareholders have on the price of our common stock, which may cause our share price to deviate, potentially significantly, from a price that better reflects the underlying performance of our business. Should our common stock experience run-ups and declines that are seemingly unrelated to our actual or expected operating performance and financial condition or prospects, prospective investors may have difficulty assessing the rapidly changing value of our common stock. In addition, investors of our common stock may experience losses, which may be material, if the price of our common stock declines after this offering or if such investors purchase our common stock prior to any price decline.
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Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due to low volume trading. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of our common stock. As a result of this volatility, investors may experience losses on their investment in our common stock. Furthermore, the potential extreme volatility may confuse the public investors of the value of our shares, distort the market perception of our share price and our financial performance and public image and negatively affect the long-term liquidity of our common stock, regardless of our actual or expected operating performance. If we encounter such volatility, including any rapid share price increases and declines seemingly unrelated to our actual or expected operating performance and financial condition or prospects, it will likely make it difficult and confusing for prospective investors to assess the rapidly changing value of our common stock and understand the value thereof.
The offering price of our common stock may not be indicative of future market prices of our common stock.
The offering price of the shares of our common stock has been arbitrarily determined by us and should not be considered an objective indication of our actual value, as it bears no relationship to our assets, earnings, book value or any other objective financial statement criteria of value.
Our management will have considerable discretion as to the use of the net proceeds to be received by us from this offering, and such use may not improve our financial results or increase the trading price of our common stock.
We have not allocated a significant portion of the net proceeds to be received by us in this offering to any particular purpose, and our use of such proceeds will be based on our current growth strategies and business conditions. Our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. The net proceeds may be used for corporate purposes that do not improve our efforts to maintain profitability or increase the trading price of our common stock. The net proceeds from this offering, pending investment in operating assets or businesses, may be placed in investments that do not produce income or that lose value.
After this offering, William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman of our board of directors, individually and through Nextelligence, which is majority owned and controlled by him, will own or control in excess of % of our outstanding common stock.
After this offering, William A. Mobley, Jr., our Chief Executive Officer and Chairman of our board of directors, individually and through Nextelligence, Inc., which is majority owned and controlled by him, will own or control in excess of % of our outstanding common stock. As a result, Mr. Mobley is able to exercise significant influence over our company, including, but not limited to, any shareholder approvals for the election of our directors and, indirectly, the selection of our senior management, the amount of dividend payments, if any, our annual budget, increases or decreases in our share capital, new securities issuance, mergers and acquisitions and any amendments to our amended and restated articles of incorporation. Furthermore, this concentration of ownership may delay or prevent a change of control or discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could decrease the market price of our shares.
The market price of our common stock may be volatile, which could cause the value of your investment to decline.
Securities markets worldwide experience significant price and volume fluctuations. This market volatility, as well as the factors listed below, some of which are beyond our control, could affect the market price of our common stock:
| ● | our failure to achieve actual operating results that meet or exceed guidance that we may have provided due to factors beyond our control, such as currency volatility and trading volumes; | |
| ● | future announcements concerning us or our competitors, including the announcement of acquisitions; | |
| ● | changes in government regulations or in the status of our regulatory approvals or licensure; | |
| ● | public perceptions of risks associated with our services or operations; | |
| ● | developments in our industry; and | |
| ● | general economic, market and political conditions and other factors that may be unrelated to our operating performance or the operating performance of our competitors. |
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If you purchase common stock sold in this offering, you will experience immediate and substantial dilution.
Based upon our financial statements at June 30, 2023, if you purchase common stock sold in this offering, you will experience immediate and substantial dilution of $ per share based on an offering price of $ , because the price that you pay per share will be greater than the net tangible book value per share. Our existing shareholders will experience an immediate increase in net tangible book value of $ per share. In addition, you may face additional dilution if we issue additional securities in the future to finance our operations.
If securities or industry analysts do not publish research or reports about our business, if they change their recommendations regarding our common stock adversely, or if we fail to achieve analysts’ earnings estimates, the market price and trading volume of our common stock could decline.
The trading market for our common stock may be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of the analysts who cover us or our industry make unfavorable comments about our market opportunity or business, the market price of our common stock would likely decline. If one or more of these analysts ceases coverage of us or fails to regularly publish reports on us, we could lose visibility in the financial markets, which could cause the market price of our common stock or trading volume to decline. In addition, if we fail to achieve analysts’ earnings estimates, the market price of our common stock would also likely decline.
If we are unable to meet the continued listing requirements of Nasdaq, Nasdaq will delist our common stock.
Upon the consummation of this offering, our common stock will be listed on Nasdaq. In the future, if we are not able to meet Nasdaq’s continued listing standards, we could be subject to suspension and delisting proceedings. A delisting of our common stock and our inability to list on another national securities exchange could negatively impact us by: (i) reducing the liquidity and market price of our common stock; (ii) reducing the number of investors willing to hold or acquire our common stock, which could negatively impact our ability to raise equity financing; (iii) limiting our ability to use a registration statement to offer and sell freely tradable securities, thereby preventing us from accessing the public capital markets; and (iv) impairing our ability to provide equity incentives to our employees.
Because we do not intend to pay dividends for the foreseeable future, investors in the offering will benefit from their investment in shares only if our common stock appreciates in value.
We currently intend to retain our future earnings, if any, to finance the operation and growth of our business and do not expect to pay any dividends in the foreseeable future. As a result, the success of an investment in our common stock will depend upon any future appreciation in its value. Our common stock may not appreciate in value or even maintain the price at which investors in this offering have purchased their shares.
Our business currently depends on the availability of adequate funding and access to capital. As a result, we need to raise significant amounts of additional capital. We may be unable to obtain the additional capital when we need it, or on acceptable terms, if at all.
As of June 30, 2023, we have a cash balance of approximately $1,634,494. We had a working capital deficit of approximately $2,580,296 as of June 30, 2023. We plan to raise additional equity financing, without which we will not be able to meet our obligations as they become due for the next 12 months. We cannot provide any assurance that additional equity financing will be available on terms that are acceptable to us, or at all.
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For as long as we are an “emerging growth company,” we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.
We are an “emerging growth company,” as defined in the Securities Act of 1933, as amended, or the Securities Act. 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 Section 404(b) of the Sarbanes–Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy and information statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and of shareholder approval of any golden parachute payments not previously approved. Because we intend to take advantage of these exemptions, some investors may find our common stock less attractive, which may result in a less active trading market for our common stock and our stock price may be more volatile.
In addition, the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period for complying with new or revised accounting standards.
We could remain an “emerging growth company” until June 30, 2028 or, if earlier: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion; (ii) if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of the second fiscal quarter of any fiscal year, the last day of such fiscal year; or (iii) the date on which we have issued more than $1 billion in non-convertible debt securities during the preceding three-year period. If we are still a smaller reporting company (a company with a public float of less than $75 million) after we no longer qualify as an emerging growth company, we may be able to make use of some of the same exemptions (such as the exemption to the auditor attestation requirements of Section 404(b) of the Sarbanes–Oxley Act) as were available to us when we qualified as an emerging growth company.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
We are not currently required to comply with Section 404(a) of the Sarbanes–Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the U.S. Securities and Exchange Commission’s, or SEC’s, rules implementing Sections 302 and 404 of the Sarbanes–Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. However, as an “emerging growth company,” our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an “emerging growth company.” At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
In addition, to comply with the requirements of being a public company, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our securities are listed, the SEC or other regulatory authorities, which could require additional financial and management resources.
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In the past, we have had weaknesses in our internal control over financial reporting.
Although we are not yet required to assess our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer have determined that there have been, in the past, weaknesses in our internal control over financial reporting, relating to our failure to receive documentation prior to paying certain invoices. As is the case with many companies of our size: (i) we did not have written documentation of our internal control policies and procedures; (ii) we did not have sufficient segregation of duties within accounting functions; (iii) we did not have adequate staff and supervision within our accounting function; and (iv) we lacked a sufficient process for periodic financial reporting, including timely preparation and review of financial reports and statements. Our Chief Executive Officer and Chief Financial Officer believe that such weaknesses have been substantially remediated through, among other things, our hiring of the CFO Squad, LLC in December 2018 as a technical accounting expert in financial reporting and controlling function in accordance with the U.S. Generally Accepted Accounting Principles (GAAP).
Shareholders may be diluted by the future issuance of additional common stock in connection with acquisitions or otherwise.
After this offering, we will have approximately shares of common stock authorized but unissued, assuming the underwriters do not exercise their option to purchase additional shares. Our amended and restated articles of incorporation authorize us to issue these shares of common stock and options, rights, warrants and appreciation rights relating to common stock for the consideration and on the terms and conditions established by our board of directors in its sole discretion, whether in connection with acquisitions, in future common stock offerings or otherwise. Any common stock that we issue after this offering will dilute the percentage ownership held by the investors who purchase common stock in this offering.
Substantial future sales or perceived potential sales of our common stock in the public market could cause the price of our common stock to decline significantly.
Sales of our common stock or other equity securities in the public market after this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline significantly. Upon completion of this offering, we will have shares of common stock outstanding, assuming the underwriters do not exercise their option to purchase additional shares, of which shares of our common stock, representing % of our outstanding common stock immediately after this offering, will not be subject to lock-up agreements. All shares of common stock sold in this offering will be freely transferable by persons other than our “affiliates” without restriction or further registration under the Securities Act. The common stock outstanding after this offering will be available for sale, upon the expiration of the lock-up periods described elsewhere in this prospectus beginning from the date of this prospectus (if applicable to such holder), subject to volume and other restrictions as applicable under Rules 144 and 701 under the Securities Act. Any or all of these shares may be released prior to the expiration of the applicable lock-up period at the discretion of one of the designated representatives. To the extent shares are released before the expiration of the applicable lock-up period and sold into the market, the market price of our common stock could decline significantly.
Certain holders of our common stock will have the right to cause us to register under the Securities Act the sale of their shares, subject to the applicable lock-up periods in connection with this offering. Registration of these shares under the Securities Act would result in such shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. Sales of these registered shares in the public market could cause the price of our common stock to decline significantly.
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Anti-takeover provisions contained in our articles of incorporation and bylaws could impair a takeover attempt.
Our articles of incorporation and bylaws contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:
| ● | classifying our board of directors into three classes; | |
| ● | authorizing “blank check” preferred stock, which could be issued by our board of directors without shareholder approval and may contain voting, liquidation, dividend, and other rights superior to our common stock; | |
| ● | limiting the liability of, and providing indemnification to, our directors and officers; | |
| ● | limiting the ability of our shareholders to call and bring business before special meetings; | |
| ● | requiring advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our board of directors; and | |
| ● | controlling the procedures for the conduct and scheduling of board of directors and shareholder meetings. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.
Any provision of our articles of incorporation or bylaws that has the effect of delaying or deterring a change in control could limit the opportunity for our shareholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
The COVID-19 pandemic has had, and may in the future continue to have, a material adverse impact on our business.
The onset of the 2019 novel coronavirus (“COVID-19”) pandemic and the travel restrictions, quarantines, and related public health measures and actions taken by governments and the private sector have adversely affected global economies, financial markets and the overall environment for our business, which is most prominently reflected in our fiscal year 2021 results. By the beginning of our fiscal year 2022, there was a trend in many parts of the world of increasing availability and administration of vaccines against COVID-19, as well as an easing of restrictions on individual, business, and government activities. However, the extent to which it may continue to impact our future results of operations and overall financial performance remains uncertain and is difficult to assess or predict. New variants and subvariants of COVID-19 continue to surface, including in our most recent fiscal year. According to the World Health Organization, the Omicron variant was identified in November 2021 and the Omicron subvariants BA.4 and BA.5 were identified in January and February 2022, respectively. The existence of new or enduring variant strains of COVID-19 may cause delays in the easing of any restrictions still in place and the implementation of new restrictions and mandates, which could be applied differently across jurisdictions. The global macroeconomic effects of the pandemic may persist for an indefinite period of time, even after the pandemic has subsided. In addition, we cannot predict the impact the COVID-19 pandemic has had and will have on our brand partners, third-party vendors and service providers, and we may continue to be materially adversely impacted as a result of the negative past, present and future impact upon our brand partners, third-party vendors and service providers.
The impact of the COVID-19 pandemic on our business going forward will depend on a range of factors which we are not able to accurately predict, including the duration and scope of the pandemic, a repeat of the spike in the number of COVID-19 cases, the geographies impacted, the impact of the pandemic on economic activity and the nature and severity of measures adopted by governments, including restrictions on travel, mandates to avoid large gatherings and orders to self-quarantine or shelter in place. In addition, to the extent COVID-19 adversely affects our operations and global economic conditions more generally, it may also have the effect of heightening many of the other risks described in these Risk Factors.
We will incur significantly increased costs as a result of and devote substantial management time to operating as a public company.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, including the establishment and maintenance of effective disclosure and financial controls, changes in corporate governance practices and required filing of annual, quarterly and current reports with respect to our business and operating results. These requirements will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. In addition, our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. We will also need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and will need to establish an internal audit function. We also expect that operating as a public company will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. This could also make it more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. In addition, after we no longer qualify as an “emerging growth company,” as defined under the JOBS ACT we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We are just beginning the process of compiling the system and processing documentation needed to comply with such requirements. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. In that regard, we currently do not have an internal audit function, and we will need to hire or contract for additional accounting and financial staff with appropriate public company experience and technical accounting knowledge.
We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this prospectus or in the documents incorporated by reference herein that are not descriptions of historical facts are forward-looking statements that are based on management’s current expectations and are subject to risks and uncertainties that could negatively affect our business, operating results, financial condition and stock price. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. . We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Forward-looking statements contained in this prospectus include, but are not limited to, statements about:
| ● | the online video and entertainment industry; | |
| ● | our financial performance; | |
| ● | our ability to attract and retain customers; | |
| ● | our ability to expand our business; | |
| ● | our ability to retain and hire necessary employees and appropriately staff our operations; and | |
| ● | our estimates regarding capital requirements and needs for additional financing. |
We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we do not intend to update any of these forward-looking statements after the date of this prospectus or to conform these statements to actual results or revised expectations.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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We estimate that we will receive net proceeds from this offering of approximately $ million, based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their option to purchase additional shares, we estimate that we will receive an additional $ million in net proceeds.
Each $1.00 increase or decrease in the assumed initial public offering price would increase or decrease, as applicable, the net proceeds to us by approximately $ million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. Each increase or decrease of 1.0 million shares in the number of shares offered by us would increase or decrease, as applicable, the net proceeds to us by approximately $ million, assuming that the assumed initial public offering price, as set forth on the cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions. If the underwriters’ over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $ million.
Although we have not yet determined with any certainty the manner in which we will allocate these net proceeds, we currently intend to use the net proceeds of this offering primarily to increase our sales and marketing efforts and expand our geographical presence. By hiring additional sales, marketing and technical personnel, we expect to accelerate our growth and take advantage of the momentum that we believe currently exists in the market for services like ours. We also intend to build out our infrastructure to handle the anticipated growth in our subscription base and our product offerings.
Our management will retain broad discretion in the allocation and use of the net proceeds from this offering. The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments, and the rate of growth, if any, of our business. For example, if we were to expand our operations more rapidly than anticipated by our current plans, a greater portion of the proceeds would likely be used for the construction and expansion of facilities, working capital and other capital expenditures. Alternatively, if we were to engage in an acquisition that contained a significant cash component, some or all of the proceeds might be used for that purpose.
Pending specific utilization of the net proceeds as described above, we intend to invest the net proceeds of the offering in short-term investment grade and U.S. government securities.
We have never declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends after the offering or for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our common stock will be made at the discretion of our board of directors and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our board of directors may deem relevant. In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock.
21
The following table sets forth our capitalization as of June 30, 2023:
| ● | On an actual basis; and | |
| ● | On a pro forma as adjusted basis to give effect to the sale of shares of common stock by us in this offering at the initial public offering price of $ per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.
| Actual | Pro Forma as Adjusted (1) |
|||||||
| Cash | $ | 1,634,494 | $ | |||||
| Debt | 6,401,285 | |||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $.0001 par value, 5,000,000 shares authorized; no share issued and outstanding. | - | |||||||
| Common stock, $.0001 par value, 200,000,000 shares authorized; 44,164,626 shares issued and outstanding; shares issued and outstanding pro forma, shares issued and outstanding, pro forma as adjusted | 4,430 | |||||||
| Common stock subscriptions | 1,250,000 | |||||||
| Additional paid-in capital | 39,556,708 | |||||||
| Accumulated deficit | (48,725,037 | ) | ||||||
| Total stockholders’ equity (deficit) | $ | (7,913,899 | ) | $ | ||||
| Total Capitalization | $ | (1,512,614 | ) | $ | ||||
| (1) | The pro forma information set forth above is illustrative only and will change based on the actual initial public offering price and number of shares issued in this offering, each determined at pricing. Each $[1.00] increase or decrease in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease pro forma cash, additional paid-in capital, total shareholder’ deficit and total capitalization by approximately $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each 1.0 million share increase or decrease in the number of shares offered by us would increase or decrease pro forma cash, additional paid-in capital, total shareholders’ deficit and total capitalization by approximately $ million, assuming that the assumed initial public offering price, as set forth on the cover page of this prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
The pro forma number of shares to be outstanding immediately after this offering as shown above is based on 44,164,626 shares outstanding as of June 30, 2023 and does not take into account:
| ● | 26,112,174 shares of common stock issuable upon the exercise of outstanding warrants as of June 30, 2023 at a weighted average exercise price of $1.55 per share. | |
| ● | 1,615,324 shares of common stock issuable upon exercise of outstanding options, of which 1,586,721 have vested and are exercisable as of June 30, 2023, at a weighted average exercise price of $2.00 per share. | |
| ● | 4,384,676 shares of common stock available for future issuance under our 2021 Incentive Award Plan. | |
| ● | shares of common stock issuable upon the exercise of Representative Warrants at an exercise price of $ per share. | |
| ● | 23,190,481 shares of common stock issuable upon the exercise of outstanding convertible debt as of June 30, 2023 at a conversion price of $0.25 per share. |
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If you invest in our common stock, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share you will pay in this offering and the pro forma net tangible book value per share of our common stock after this offering. Our historical net tangible book value as of June 30, 2023 was $ (7.9) million or $ (0.18) per share of common stock. Our net tangible book value per share set forth below represents our total tangible assets less total liabilities, divided by the number of shares of our common stock outstanding on June 30, 2023.
The pro forma net tangible book value as of June 30, 2023 was $ million or $ per share of common stock. Our pro forma net tangible book value per share represents our total tangible assets less our total liabilities, divided by the number of outstanding shares of common stock, after giving effect to the pro forma adjustments referenced under “Capitalization.”
After giving effect to our issuance and sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover of this prospectus, after deducting the estimated underwriting discounts and offering expenses payable by us, the pro forma as adjusted net tangible book value as of June 30, 2023 would have been $ or $ per share. This represents an immediate increase in net tangible book value to existing shareholders of $ per share. The initial public offering price per share will significantly exceed the net tangible book value per share. Accordingly, new investors who purchase shares of common stock in this offering will suffer an immediate dilution of their investment of $___ per share. The following table illustrates this per share dilution to the new investors purchasing shares of common stock in this offering without giving effect to the over-allotment option granted to the underwriters:
| Assumed public offering price per share | $ | |||
| Net tangible book value per share as of June 30, 2023 | ||||
| Proforma net tangible book value per share as of June 30, 2023 | ||||
| Increase in net tangible book value per share attributable to the offering | ||||
| Pro forma as adjusted net tangible book value per share as of June 30, 2023 after giving effect to the offering |
||||
| Dilution per share to new investors | $ |
A $1.00 increase (decrease) in the assumed initial public offering price of $**** per share would increase (decrease) the pro forma net tangible book value by $ million, the pro forma net tangible book value per share after this offering by $ per share and the dilution in pro forma net tangible book value per share to investors in this offering by $ per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and offering expenses payable by us.
Similarly, a 1.0 million increase or decrease in the number of shares of our common stock offered by us would increase or decrease our pro forma as adjusted net tangible book value by approximately $ per share and the dilution per share to investors in this offering by $ per share, assuming the assumed initial public offering price remains the same and after deducting estimated underwriting discounts and commissions payable by us. If the underwriters exercise their option to purchase additional shares in full, the pro forma as adjusted net tangible book value per share of our common stock would be $ per share, and the dilution in pro forma net tangible book value per share to investors purchasing shares in this offering would be $ per share.
If the underwriters exercise their over-allotment option in full, the pro forma net tangible book value will increase to $ per share, representing an immediate increase to existing shareholders of $ per share and an immediate dilution of $ per share to new investors. If any shares are issued in connection with outstanding options, you will experience further dilution.
The tables above assume no exercise of warrants to purchase, or conversion of debt into, shares of common stock outstanding as of June 30, 2023. At June 30, 2023, there were 26,112,174 shares of common stock issuable upon exercise of outstanding warrants at a weighted average exercise price of $1.55 per share, 1,615,324 shares of common stock issuable upon exercise of outstanding options, of which 1,586,721 have vested and are exercisable as of June 30, 2023 at a weighted average exercise price of $2.00 per share and 23,190,481 shares of common stock issuable upon the exercise of outstanding convertible debt at a conversion price of $0.25 per share. The tables above also do not take into account shares of common stock issuable upon the exercise of Representative Warrants at an exercise price of $ per share or 4,384,676 shares of common stock available for future issuance under our 2021 Incentive Award Plan.
The following table summarizes, as of June 30, 2023, on the pro forma basis described above, the differences between the number of shares purchased from us, the total consideration paid to us in cash and the average price per share that existing shareholders and new investors paid for such shares. The calculation below is based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
| Shares Purchased | Total Consideration | Average Price | ||||||||||||||||||
| Number | Percent | Amount | Percent | Per Share | ||||||||||||||||
| Existing shareholder | $ | % | $ | % | $ | |||||||||||||||
| New investors | % | % | ||||||||||||||||||
| Total | $ | % | $ | % | ||||||||||||||||
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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The following table presents our selected historical financial data for the periods presented and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statement and notes thereto included elsewhere in this prospectus. The statements of operations data for the fiscal years ended June 30, 2023 and 2022 and the statements of financial condition data as of June 30, 2023 and 2022 are derived from our audited financial statements included elsewhere in this prospectus.
| Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Statements of Operations Data: | ||||||||
| Total Revenue | $ | 507,200 | $ | 303,217 | ||||
| Cost of Revenue | 220,147 | 157,285 | ||||||
| Gross Profit | 287,053 | 145,932 | ||||||
| Total Operating Expenses: | 8,009,178 | 10,608,737 | ||||||
| Loss From Operations | (7,722,125 | ) | (10,462,805 | ) | ||||
| Total Other Income (Expense) | 1,336,008 | (1,141,117 | ) | |||||
| Net Loss | $ | (6,386,117 | ) | $ | (11,603,922 | ) | ||
| Net Loss per share, basic and diluted | $ | (0.40 | ) | $ | (0.32 | ) | ||
| As of June 30, | ||||||||
| 2023 | 2022 | |||||||
| Balance Sheets Data: | ||||||||
| Cash and Cash Equivalents | $ | 1,634,494 | $ | 833 | ||||
| Accounts Receivable | 3,613 | 13,860 | ||||||
| Total Assets | 1,902,804 | 516,401 | ||||||
| Total Current Liabilities | 4,276,801 | 5,245,123 | ||||||
| Total Liabilities | 9,816,703 | 7,293,820 | ||||||
| Total Shareholders’ Deficit | (7,913,899 | ) | (6,777,419 | ) | ||||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and the related notes thereto and other financial information appearing elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the section titled “Risk Factors.”
Overview
Revenue for the year ended June 30, 2023 increased by 67.27%, or $203,983, to $507,200, as compared with $303,217 for the year ended June 30, 2022, while our net loss decreased by 44.97%, or $5,217,805, to $6,386,117.
We see opportunities for growth in international sales, pre-loads in manufactured streaming devices, including mobile devices, smart TV’s, media set top boxes/sticks and laptops, and introducing FreeCast.com into the in-home market. Additionally, we see bulk licensing growth opportunities in commercial MDU (multi dwelling units) such as apartments, condominiums, student housing, planned communities, and the hospitality sector (hotels, short stay).
However, we can only take advantage of these opportunities if we have sufficient capital to do so, are able to recruit the necessary staff, and are able to expand our current infrastructure. We may also face additional challenges from new competitors that may be able to launch new businesses at relatively low cost, with consumers easily being able to shift spending from one provider to another. In order to combat this, we must continue to deliver a product that is more advanced than that of competitors.
Primarily as a result of our shift to a free registration subscription service, we have been able to increase our number of subscribers during our most recent fiscal year. Our subscriber numbers have increased from 541,776 on June 30, 2022 to 742,336 on June 30, 2023. Our revenue per subscriber has increased from $0.56 for the twelve-month period ending June 30, 2022 compared to $1.46 for the twelve-month period ending June 30, 2023.
As of June 30, 2023, we have a cash balance of approximately $1,634,494 and a working capital deficit of approximately $2,580,296. We plan to raise additional equity financing as well, without which we will not be able to meet our obligations as they become due for the next 12 months. However, we cannot provide any assurance that additional equity financing will be available on terms that are acceptable to us, or at all.
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Components of our Operating Results
Revenue
Subscription Revenue
We no longer generate subscription revenue through renewal sales of Rabbit TV and Rabbit TV Plus, or through Select TV and Streaming TV Kits, which operated as the successor products to Rabbit TV and Rabbit TV Plus. In October 2022, our SelectTV.com paid subscription service and packaged SelectTV Streaming TV Kits were discontinued. We rebranded to the corporate namesake FreeCast.com, and relaunched our SmartGuide as a free registration subscription service. SmartGuide is our internet distributed streaming media guide that searches and aggregates media content on the web and facilitates access to our customers through Wi-Fi-enabled devices that support streaming video.
We do, however, sell monthly subscriptions for premium content purchased through our SmartGuide for varying fees for different content. Revenue from such premium subscription fees is recognized on a gross basis over the service period as we are deemed to be the principal in the relationship with the end user. We control the content before transferring it to the end user and have latitude in establishing pricing. We both retransmit and “ingest” and distribute content.
Subscription revenue is derived from online sales through search engine optimization, search engine marketing, various marketing advertising services, the utilization of resellers in the form of publishers that promote upcoming retail promotions and packages, as well as direct sales to subscribers of our Value Channels subscription service. Value Channels subscription contains 17 cable channels and sells on a monthly subscription or annual fee. Value Channels is integrated into the initial FreeCast.com free registration and then offered as an upgrade. Both FreeCast.com (free registration) and Value Channels is available in various streaming Smart TV models (Google TV’s, Amazon Fire TV’s, LG, Samsung, TCL, Sony, and others), plus Streaming Devices (Amazon Fire, Google ChromeCast, Apple TV), PC’s/Laptops and mobile apps for Android and iOS devices.
Subscription revenue is recognized ratably on a straight-line basis over the duration of the subscription period, generally ranging from one month to five years. If the subscriber renews early, then the expiration date is extended by the renewal period, and the additional subscription fee is deferred and amortized over the additional months purchased by the subscriber. We no longer offer SelectTV lifetime subscriptions, which was initially deferred and recognized over a five-year period. All subscription fees are collected at the time of purchase.
Product Revenue
Beginning in 2023, in conjunction with the release of our new product FreeCast Home, we started recognizing contracts with customers from product sales requiring performance up to delivery, as well as contracts with customers that contain a subscription portion that causes revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. For our physical product sales, our performance obligations are satisfied at that time.
Other Revenue
Other revenue includes licensing, advertising and referral fee revenue. We generate revenue through free registrations of FreeCast.com by partnering with retailers, manufacturers, operators and/or distributors of streaming devices, mobile phones, broadband carriers, broadcasters, property management, multi-dwelling developers, builders, and various mass consumer communities of streaming tv watchers. A FreeCast.com license is freely provided per registered consumer marketed by distributors in exchange for a negotiated revenue sharing percentage with each distributor on a case-by-case basis. Affiliate commissions are earned and then shared from third-party advertisement service providers, pay-per-view movie or series distributors, and live events tickets sales for such things as professional boxing or concerts. These license arrangements have not resulted in significant revenue to date.
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We generate advertising revenue pursuant to arrangements with advertising agencies and brokers. Under these arrangements, we provide the agencies and brokers the ability to sell advertising on our service directly to advertisers. We report this revenue net of amounts due to agencies and brokers because we are neither the primary obligor under these arrangements, nor do we set the pricing or establish or maintain the relationship with the advertisers.
Referral fee revenue is generated through premium services which are also available on our platform, for an additional fee, to allow single or time-limited use of private, decrypted viewing of movies, sporting events, concerts or other types of events.
Deferred Revenue
Deferred revenue consists principally of both prepaid but unrecognized subscription revenue and advertising fees received or billed in advance of the delivery or completion of the delivery of services. We may pay sales incentives, in cash or by issuing equity instruments, to distributors of our subscriptions. Such sales incentives are not recognized as deferred revenue. Rather, sales incentives are recognized in current operations when issued, regardless of amounts in deferred revenue, which may have resulted from the distributor’s efforts. Deferred revenue consists primarily of subscriptions for multiple months purchased upfront and recognized ratably over the term of the subscription.
Cost of Revenue
Cost of revenue consists primarily of hosting, product development, and infrastructure costs and the salaries and benefits related to employees in software engineering, facilities-related expenses, and information technology associated with supporting those functions. Hosting costs consist of content streaming, maintaining our Internet service and creating and serving advertisements through third-party ad servers. We make payments to third-party advertising servers in the period in which the advertising impressions are delivered or click-through actions occur, and accordingly record this as a cost of revenue in the related period. We incur product development expenses primarily for improvements to our website and related apps, development of new advertising products and development and enhancement of the guide and streaming system. Product development costs are generally expensed as incurred.
Operating Expenses
Compensation and Benefits
Compensation and benefits consist primarily of employee-related costs, including salaries and benefits related to employees in finance, accounting, internal information technology and other administrative personnel and stock-based compensation.
Sales and Marketing
Sales and marketing consist primarily of employee-related costs, including salaries, commissions and benefits related to employees in sales, sales support and marketing departments. In addition, sales and marketing expenses include external sales and marketing expenses such as third-party marketing, TV Infomercials, branding, advertising, public relations expenses, commissions, facilities-related expenses, and infrastructure costs.
General and Administrative
General and administrative expenses include professional services costs for outside legal and accounting services, facilities-related expenses, travel costs, third party customer support, and credit card fees.
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Fiscal Year Ended June 30, 2023 Compared to Fiscal Year Ended June 30, 2022
Revenue
Our primary source of revenue is subscription revenue. Additionally, we have two other revenue streams: product revenue and other revenue, which encompasses earnings from licensing, advertising, and referral fees.
Subscription revenue increased by 70.24%, or $207,699, to $503,419, in the fiscal year ended June 30, 2023, as compared to $295,720 for the fiscal year ended June 30, 2022. The increase in subscription revenue is primarily attributable to our shift to a free registration subscription service and recognition of deferred revenue purchased in the prior fiscal year and recognized in the fiscal year ended June 30, 2023. The increase in subscribers drove increased purchases of our content provider bundles. As a result, we strategically decreased our advertising and marketing budget and increased our research and development budget to the benefit of future sales from an enhanced product.
Product revenue decreased by 91.12%, or $4,523, to $441, in the fiscal year ended June 30, 2023, as compared to $4,964 for the fiscal year ended June 30, 2022. In January 2021, we ceased sales of our “cord cutting kit”, which resulted in a reduced volume of product sales in the fiscal year ended June 30, 2022 and 2023.
Other revenue consisted almost entirely of advertising revenue pursuant to arrangements with advertising affiliates and brokers. Under these arrangements, we provide the agencies and brokers the ability to sell advertising inventory on our service directly to advertisers. Advertising and other revenue increased by 31.86%, or $807, to $3,340 in the fiscal year ended June 30, 2023, as compared to $2,533 for the fiscal year ended June 30, 2022. This increase is attributed to a higher volume of advertising sales due to an increase in subscribers.
Cost of Revenue
Cost of revenue increased by 39.97%, or $62,862, to $220,147 in the fiscal year ended June 30, 2023, as compared to $157,285 for the fiscal year ended June 30, 2022. The increase in cost of revenue is primarily attributed to increased hosting and a write-off of inventory in the current fiscal year.
Operating Expenses
Operating expenses decreased by 24.50%, or $2,599,559, to $8,009,178 in the fiscal year ended June 30, 2023, as compared to $10,608,737 for the fiscal year ended June 30, 2022. The change in operating expenses is attributed to an increase of $1,282,754 in general and administrative expenses from increased website development, professional fees and internet services offset by a decrease of $2,900,709 in impairment loss and a decrease in compensation and benefits of $1,017,971 as we reduced our head count and stock options issued to employees.
Other Income (Expense)
Other income was $1,336,008, for the fiscal year ended June 30, 2023, as compared to other expense of $(1,141,117) for the fiscal year ended June 30, 2022. The change was principally caused by decrease in interest expense by $575,508, increase in other income by $519,733 and an increase in gain on extinguishment of debt of $1,381,885.
Liquidity and Capital Resources
Since inception, we have financed our operations from a combination of:
| ● | issuance and sales of our common stock; | |
| ● | issuance of notes payable with related and non-related parties; | |
| ● | issuance of convertible notes payable with related and non-related parties; | |
| ● | borrowing under our revolving convertible notes payable with related party; | |
| ● | cash advances from related parties; and | |
| ● | cash generated from operations. |
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We have experienced operating losses since our inception and had a total accumulated deficit of $48,725,037 as of June 30, 2023. We expect to incur additional cost and require additional capital as we continue to implement our expansion plan. During the fiscal year ended June 30, 2023 and 2022, our cash used in operations was $7,159,556 and $4,876,154, respectively.
Our primary short-term cash requirements are to fund working capital, lease obligations and short-term debt, including current maturities of long-term debt. Working capital requirements can vary significantly from period to period, particularly as a result of additional development expense.
Our ability to fund our cash needs will depend, in part, on our ability to generate cash in the future, which depends on future financial results. Our future results are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our control. Our future access to, and the availability of credit on acceptable terms and conditions, is impacted by many factors, including capital market liquidity and overall economic conditions.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. We have incurred recurring losses and as of June 30, 2023, had an accumulated deficit of $48,725,037. For the year ended June 30, 2023, we sustained a net loss of $6,386,117. These factors, among others, raise substantial doubt about our ability to continue as a going concern for the next twelve months from the date these financial statements were issued. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should we be unable to continue as a going concern. Our continuation as a going concern is contingent upon our ability to obtain additional financing and to generate revenue and cash flow to meet our obligations on a timely basis. We will continue to seek to raise additional funding through debt or equity financing during the next twelve months. Management believes that actions presently being taken to obtain additional funding provide the opportunity for us to continue as a going concern. There is no guarantee we will be successful in achieving these objectives.
We cannot be sure that future funding will be available to us on acceptable terms, or at all. Due to often volatile nature of the financial markets, equity and debt financing may be difficult to obtain.
We may seek to raise any necessary additional capital through a combination of private or public equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. To the extent that we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights or future revenue streams on terms that may not be favorable to us. If we raise additional capital through private or public equity offerings, the ownership interest of our existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our shareholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Convertible Note Payable – Related Party
In June 2016, our Chief Executive Officer, William Mobley (CEO), loaned us $111,000, at an interest rate of 12% per annum. The loan matured on December 31, 2017, is in default and remains as an on-demand liability of the Company. As of the fiscal years ended June 30, 2023 and June 30, 2022, accrued interest charges related to this loan were $19,003, and $10,191, respectively. During the fiscal years ended June 30, 2023 and June 30, 2022, we did not pay any interest towards this loan. The note is convertible into shares of common stock at a conversion price of $0.25 per share. In accordance with ASC 470, the embedded beneficial conversion is recognized separately and was measured at its intrinsic value. As of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due to William Mobley was $86,051, and $94,733, respectively.
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Notes Payable – Related Parties
Between July 2018 and April 2018, a related party, a company owned by our CEO, Public Wire, loaned us $66,380, at an interest rate of 12% per annum. The notes representing the loan originally matured on dates ranging from April 1, 2019 to January 1, 2020. Effective June 30, 2021, we amended the original promissory note with Public Wire and combined principal and interest from the previous notes under one new loan. In addition, we extended the maturity date to June 30, 2024. As of the fiscal years ended June 30, 2023 and June 30, 2022, accrued interest related to this loan was $21,411 and $10,697, respectively. During the fiscal years ended June 30, 2023 and June 30, 2022, we did not pay interest related to this loan. As of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due was $110,700 and $99,836, respectively.
On June 6, 2022, an employee loaned us $12,000, at an interest rate of 6% per annum. The note matured on August 1, 2022. As of the fiscal years ended June 30, 2023 and June 30, 2022, accrued interest related to this loan was $0 and $47, respectively. As of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due was $0 and $12,047, respectively.
Revolving Convertible Note Payable – Related Party
On July 1, 2018, we signed a revolving convertible note agreement with Nextelligence, which was amended and restated as of July 2, 2018, for an amount up to $500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrued interest at 12% per annum, and was due and payable on July 1, 2020. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest was convertible into shares of our common stock at a conversion price of $0.25 per share. The loan matured on July 1, 2020, was in default and remained as an on-demand liability of ours until June 30, 2021. On June 30, 2021, we entered into a new revolving convertible promissory note with Nextelligence for an amount up to $2,500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrues interest at 12% per annum. The borrowing limit was increased to $6,000,000 pursuant to a first amendment to the note dated June 13, 2022. Pursuant to a second amendment to the note dated July 17, 2023, the borrowing limit was increased to $10,000,000 and the maturity date extended to June 30, 2025. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per share. For the fiscal years ended June 30, 2023 and June 30, 2022, we, in various installments, borrowed $1,067,859 and $2,907,220, respectively, in additional proceeds from this loan. As of the fiscal years ended June 30, 2023 and June 30, 2022, the balance of unpaid accrued interest was $892,007 and $326,666, respectively, related to this loan. In addition, as of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due was $5,711,599 and $4,675,781, respectively.
During the fiscal years ended June 30, 2022, we recognized a beneficial conversion feature related to this note of $3,036,978 and $806,909 in the amortization of the beneficial conversion feature as interest expense. See Note 8 for further discussion of the beneficial conversion feature. We adopted ASU 2020-06 in the first quarter of fiscal year 2023, and as such, have not recognized any beneficial conversion feature or amortization expense during the twelve months ended June 30, 2023. The balance of the revolving convertible notes payable to related parties, net of debt discount, as of the fiscal years ended June 30, 2023 and June 30, 2022 was $4,819,592 and $1,385,316, respectively.
Convertible Note Payable
In March 2022, a third party loaned us $250,000, at an interest rate of 10% per annum. The note was convertible into shares of common stock at a conversion price of $2.00 per share with 50,000 warrants to purchase shares of our common stock at $1.75. On June 5, 2022, per agreement between us and the third party, the note is to be converted into 256,250 shares of our common stock at an amended conversion price of $1.00 per share, and additionally, upon conversion, increase the 50,000 warrants to 256,250 warrants granted to the lender. As of the amendment dated June 5, 2022, we evaluated the debt for extinguishment or debt modification under FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, and determined extinguishment was applicable as a result of the addition of a substantive conversion feature. Under the rules, we extinguished the debt, which included the capitalized interest through June 5, 2022. The resulting loss on extinguishment was valued at $23,722. During the fiscal years ended June 30, 2023 and 2022, we did not pay any interest towards this loan. The 256,250 shares of our common stock were issued on September 16, 2022, and as such, the liability associated with this note was classified as common stock subscriptions on the balance sheet for the fiscal years ended June 30, 2023 and June 30, 2022 at a value of $0 and $256,250, respectively.
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Notes Payable
On September 15, 2016, we entered into an agreement with U.S. Premium Finance to provide financing in an aggregate amount of $1,967,450 for the insurance premium associated with both D&O and Workers Compensation policies. Both policies commenced September 15, 2016, and provided coverage for the next 36 months, expiring September 15, 2019. The loan bears interest at a floating rate per annum equal to the greater of either (i) 4.99% or (ii) 4.99% plus the Wall Street Journal Prime Rate. During the year ended June 30, 2019 and 2018, the interest rate on the loan was 4.99%. We were required to pay monthly principal and interest of approximately $58,957, paid over 36 months, with the final payment on October 15, 2019.
The U.S. Premium Finance agreement dated September 15, 2016 was secured against all rights, title, and interest associated with the D&O and Workers Compensation policies. As part of the legal costs associated with obtaining premium financing, on September 19, 2016, we agreed to pay a loan origination fee in the amount of $98,250. The loan origination fee was recorded as a debt discount and amortized over the life on the policy, maturing September 2019.
On April 18, 2017, we entered into an additional agreement with U.S. Premium Finance. We received $568,935 in net proceeds from them premium financing agreement. The loan bears interest at a floating rate per annum equal to the greater of either (i) 4.99% or (ii) 4.99% plus the Wall Street Journal Prime Rate. During the year ended June 30, 2019 and 2018, the interest rate on the loan was 4.99%. We were required to pay monthly principal and interest of approximately $29,705, paid over 20 months, with the final payment on December 15, 2018.
The U.S. Premium Finance agreement dated April 18, 2017 was secured against all rights, title, and interest associated with the general liability insurance policy. As part of the legal costs associated with obtaining premium financing, on April 18, 2017, we incurred and capitalized a loan origination fee in the amount of $28,348. The loan origination fee was amortized over the life of the policy, maturing December 2018. As of June 30, 2022 and 2021, there were no prepaid loan origination fees; as the amount was fully amortized.
On November 13, 2019, we settled the outstanding liability with U.S. Premium Finance, in which we agreed to pay $1,000,000 in various installments, with the last payment due on December 5, 2022. During the year ended June 30, 2020, in accordance with the agreement, we reduced the principal on the balance sheet and recognized a $774,009 gain on forgiveness of debt. In adherence to the conditions of the agreement, we paid $275,000 towards the outstanding balance of the loan as of June 30, 2020. In addition, as of November 13, 2019, we had accrued approximately $162,350 in interest, which was reduced to zero based on the settlement amount and we recognized as a gain on forgiveness of debt, of $162,350. As of June 30, 2023 and 2022 the balance due as of June 30, 2023 and 2022 was $650,000, all of which is current. We are in default on the outstanding liability.
On October 22, 2019, we entered into a promissory note with an unrelated party for the amount of $250,000, at an interest at 6% per annum. Effective June 30, 2021 we combined all previous principal ($250,000) and interest ($25,356) related to this loan and extend the maturity date to June 30, 2024 as per the second amendment to the agreement. As of the fiscal years ended June 30, 2023 and June 30, 2022, accrued interest charges related to this loan were $33,043 and $16,521, respectively. During the fiscal years ended June 30, 2023 and June 30, 2022, we did not pay any interest towards this loan. As of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due to was $308,399, and $291,878, respectively.
Between March 2022 and June 2022, an unrelated third party loaned us $200,000, at an interest rate of 6% per annum. In August 2022, the unrelated third party loaned us an additional $100,000. The notes matured on March 1, 2023, and were in default until a renewal and consolidating note was entered into as of August 1, 2023 in the principal amount of $320,383.50. The interest rate under the renewal note is 6% per annum, and it matures on July 31, 2024. As of the fiscal years ended June 30, 2023 and June 30, 2022, accrued interest related to these loans were $18,805 and $1,693, respectively. During the fiscal years ended June 30, 2023 and June 30, 2022, we did not pay interest related to these loans. As of the fiscal years ended June 30, 2023 and June 30, 2022, the outstanding principal and interest due was $318,805 and $201,693, respectively.
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On November 18, 2022, we entered into a loan agreement with two unrelated parties for the aggregate amount of $200,000, at an interest rate of 6% compounded annually. The loan matures on December 1, 2024. As of June 30, 2023, accrued interest related to the loan was $7,364. During the fiscal year ended June 30, 2023, we did not pay interest on the loan. As of June 30, 2023, the outstanding principal and interest due on the loan was $207,364.
Notes payable as of June 30, 2023 and 2022 summarized as follows:
| June 30, | ||||||||||||
| Lender | Interest Rate | Maturity | 2023 | 2022 | ||||||||
| U.S. Premium Finance | 4.99% | 12/5/2022 | $ | 650,000 | $ | 650,000 | ||||||
| Unrelated third party | 6.00% | 6/30/2024 | 275,356 | 275,356 | ||||||||
| Unrelated third party | 6.00% | 3/1/2023 | 300,000 | 200,000 | ||||||||
| Unrelated third party | 6.00% | 12/1/2024 | 200,000 | - | ||||||||
| 1,425,356 | 1,125,356 | |||||||||||
| Less notes payable - current | 950,000 | 850,000 | ||||||||||
| Notes payable, net of current portion | $ | 475,356 | $ | 275,356 | ||||||||
Warrant Modification
Effective as of June 15, 2023, the Company authorized and approved the reissuance of 79 expired warrants (“Expired Warrants”) to purchase an aggregate of 15,275,924 shares of the Company’s common stock, at a purchase prices from $0.25 to $4.00 per share, all of which had expired without being exercised, and the modification of 62 outstanding warrants (“Reissued Warrants”) to purchase an aggregate of 8,211,250 shares of the Company’s common stock, at a purchase prices from $1.75 to $3.00 per share, that by their terms will expire if not exercised on or prior to dates ranging from February 10, 2024 to September 30, 2025, to reissued the Expired Warrants and modify the Reissued Warrants (collectively, “Warrant Modification”) by extending the expiration date to December 31, 2025 and maintaining all other terms in the original warrant agreements.
The value of the Warrant Modification to purchase an aggregate of 23,487,174 shares was calculated using the Black-Scholes-Merton option pricing model. The incremental fair value attributable to the Expired Warrants and Reissued Warrants, which was measured at the amount equal to the incremental value reflecting in the change in fair value of the warrants before and after the Warrant Modification, was calculated at $9,848,947 and was treated as a deemed dividend and is reflected as “Deemed dividend on warrant modification” in the accompanying statement of operations. Accordingly, the Warrant Modification was recorded as an increase in additional paid in capital with a corresponding decrease to retained earnings.
We utilized an option pricing model to fair value our common stock as of June 15, 2023. The significant inputs were as follows: volatility of 71.1%, term of 2 years and risk-free rate of 4.55%. The valuation determined the fair value of our common stock to be $0.90125 as of June 15, 2023.
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The Black-Scholes-Merton option pricing model includes the following assumptions to determine the fair value attributable immediately before and after the warrant modification effective June 15, 2023:
| Immediately | ||||||||
| Before | After | |||||||
| Assumptions: | ||||||||
| Common stock fair value | $ | .90 | $ | .90 | ||||
| Risk-free interest rate | 4.12-5.21 | % | 4.43 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Expected volatility | 64-83 | % | 81.55 | % | ||||
| Expected life (in years) | .66-2.3 | 2.55 | ||||||
Cash Flows
The following table provides detailed information about our net cash flows for the periods indicated:
| For the years end June 30, | ||||||||
| 2022 | 2021 | |||||||
| Net cash used in operating activities | $ | (7,159,556 | ) | $ | (4,876,154 | ) | ||
| Net cash used in investing activities | (4,253 | ) | (2,145,034 | ) | ||||
| Net cash provided by financing activities | 8,797,470 | 6,712,261 | ||||||
| Net (decrease) increase in cash and cash equivalents | $ | 1,634,494 | $ | (308,927 | ) | |||
Operating Activities
For the fiscal year ended June 30, 2023, cash used in operating activities increased by $2,283,402 or 46.83% due to our net loss of $6,386,117 offset by non-cash expense of $1,753,752, which consisted of $40,018 of depreciation and amortization, $790 of bad debt expense, $1,449,338 gain on settlement of accounts payable, $68,899 of inventory write-off, $84,927 of amortization of right-of-use assets, operating, $1,344 of amortization of right-of-use assets, financing, $108,436 of stock based compensation and negative working capital of $(2,527,191), including a decrease in accounts receivable of $9,457, decrease in deferred offering cost of $65,044, increase in other current assets of $18,967, decrease in right-of-use liabilities of $71,898, decrease in accounts payable and accrued expenses of $2,871,086, increase in accounts payable and accrued expenses – related party of $584,820 and a decrease in deferred revenue of $224,561.
Investing Activities
For the fiscal year ended June 30, 2023, cash used in investing activities decreased by $2,140,781 or 99.8%. The change was attributed to the purchase of property and equipment of $4,253.
Financing Activities
For the fiscal year ended June 30, 2023, cash provided by financing activities increased by $2,085,209 or 31.07%. The change was attributed to proceeds from issuance of common stock of $6,855,000, bank overdraft of $(47,160), proceeds from common stock to be issued of $1,250,000, payments on finance leases of $(1,344), proceeds from notes payable – related party of $2,500, repayments on notes payable – related party of $(32,034), proceeds from revolving notes payable $1,067,858, repayment on revolving notes payable $(597,500), and proceeds from convertible notes payable of $300,000.
Critical Accounting Policies and Estimates
Our financial statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. The preparation of these financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. We evaluate these estimates and assumptions on an ongoing basis. We base our estimates on the information currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. As of June 30, 2023, our previous estimates had not materially deviated from our results.
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An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made; if different estimates reasonably could have been used; or if changes in the estimate that are reasonably likely to occur periodically could materially impact the financial statements. While our significant accounting policies are described in more detail in the notes to our financial statements included in this prospectus, we believe the following accounting policies to be critical to the estimates and assumption used in the preparation of our financial statements.
Revenue Recognition
Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration we expect to receive in exchange for those goods or services. Our contracts include various product or services or a combination of both, which are generally capable of being distinct and are accounted for as separate performance obligations. Our contracts may contain multiple distinct performance obligations.
We estimate the transaction price of a contract based on the expected value for which a significant reversal of revenue is not expected to occur. We generally determine stand-alone selling prices based on the prices charged to customers.
In arrangements with multiple performance obligations, the estimated transaction price of each contract is allocated to each distinct performance obligation based on relative stand-alone selling price (“SSP”). For performance obligations routinely sold separately, the SSP is determined by evaluating such stand-alone sales. For those performance obligations that are not routinely sold separately, the SSP is determined based on market conditions and other observable inputs.
The following table presents our revenue on a disaggregated basis:
For the Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Subscriptions | $ | 503,419 | $ | 295,720 | ||||
| Product Sales | 441 | 4,964 | ||||||
| Other Revenues | 3,340 | 2,533 | ||||||
| Total | $ | 507,200 | $ | 303,217 | ||||
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Our cash and cash equivalents are exposed to credit risk, subject to federal deposit insurance, in the event of default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheet. The cash accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2023, our cash balance exceeded the FDIC insured limit by $1,384,494.
For accounts receivable, we perform ongoing credit evaluations of customers to assess the probability of accounts receivable collection based on a number of factors, including past transaction experience with the customer, evaluation of their credit history, and review of the invoicing terms of the contract. Accounts receivables are reported net of an allowance for doubtful accounts when applicable. The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the accounts receivable balance at each reporting date. Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. We recognized bad debt expense for the fiscal years ended June 30, 2023 and June 30, 2022 of $790 and $7,509, respectively. The balance of allowance for doubtful accounts as of the fiscal years ended June 30, 2023 and June 30, 2022 was $0.
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Cost of Revenue
Cost of revenue consists primarily of hosting, product development, infrastructure costs and the salaries and benefits related to employees in software engineering, facilities-related expenses, and information technology associated with supporting those functions. Hosting costs consist of content streaming, maintaining our internet service and creating and serving advertisements through third-party ad servers. We make payments to third-party ad servers in the period in which the advertising impressions are delivered or click-through actions occur, and accordingly records this as a cost of revenue in the related period. We incur product development expenses primarily for improvements to our, the apps, development of new advertising products and development and enhancement of the guide and streaming system. Product development costs are generally expensed as incurred. Certain website development and internal use software development costs may be capitalized when specific criteria are met. In such cases, the capitalized amounts are amortized to cost of revenue over the useful life of the related application once the application is placed in service.
Impairment of Long-lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360-10-05. “Property, Plant and Equipment”. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, we will recognize an impairment loss equal to the difference between it carrying amount and its estimated fair value. As of the fiscal years ended June 30, 2023 and June 30, 2022, we recognized $0 and $2,900,709, respectively, in impairment losses, as the carrying amount exceeded the assets’ estimated undiscounted net cash flows.
Sales and Marketing
Sales and marketing consist primarily of contracts with third-party operators as well as employee-related costs, including, and commissions related to employees in sales, sales support and marketing departments. In addition, sales and marketing expenses include external sales and marketing expenses such as third-party marketing, branding, advertising, public relations expenses, commissions, facilities-related expenses, and infrastructure costs.
Fair Value of Financial Instruments
We account for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 — assets and liabilities whose significant value drivers are unobservable.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to all classes of common shareholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings (loss) per share is determined in the same manner as basic earnings (loss) per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase would be anti-dilutive.
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The following table provides the number of common stock equivalents not included in diluted income per share, because the effects are anti-dilutive, for the fiscal years ended June 30, 2023 and June 30, 2022, respectively:
For
the Fiscal Year Ended | ||||||||
| 2023 | 2022 | |||||||
| Convertible debt and liabilities | 25,556,836 | 21,448,572 | ||||||
| Options | 1,615,324 | 1,792,176 | ||||||
| Warrants | 26,112,174 | 23,826,641 | ||||||
| Total | 53,284,334 | 47,067,389 | ||||||
Stock Based Compensation
Stock based compensation issued is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis. We will recognize compensation expense, measured as the fair value of the stock-based compensation on grant date, when a performance condition is considered probable of occurring. For purposes of determining the variables used in the calculation of stock-based compensation issued to employees, we perform an analysis of current market data and historical data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of warrants granted any fluctuations in these calculations could have a material effect on the results presented in our Statements of Operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.
Loss Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to us but which will only be resolved when one or more future events occur or fail to occur. Our management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against us or unasserted claims that may result in such proceedings, our legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
Modifications to Equity-classified Instruments
In accounting for modifications of equity-classified warrants, it is our policy to determine the impact by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation (“ASC 718”). The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the statements of operations to the extent the modified instrument has a higher fair value; however, in certain circumstances, such as when an entire class of warrants are modified, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the warrant modification.
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Recently Issued Accounting Pronouncements
In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 in the first quarter of fiscal year 2023 using the modified retrospective method of transition which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result, the cumulative effect of the accounting change increased the carrying amount of the convertible notes, net by $2,963,799, increased retained earnings by $1,530,468, and reduced additional paid-in capital by $4,494,267.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that we adopt as of the specified effective date. We do not believe that the impact of recently issued standards that are not yet effective will have a material impact on our financial position or results of operations upon adoption.
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Overview
We are an entertainment-based content discovery, aggregation and management company that provides SmartGuide® digital interactive technology for consumers to organize today’s numerous sources of online media similar to a traditional on-screen television, or TV, guide. Initially, we licensed our technology to Telebrands Corp., or Telebrands, who distributed subscriptions to consumers through retailers under the brand known as Rabbit TV from 2012 through 2016. In July 2016, we began offering our product directly to consumers under our own brand, SelectTV. In October 2019, we began selling subscriptions to SelectTV as a direct-to-consumer retail product in the form of a packaged “cord cutting kit” through TV Infomercials, utilizing a toll-free phone number and ecommerce ordering system, with delivery of the product to consumers via the United States (U.S.) Postal Service.
In October 2022, due to falling retail sales through our retail big box channels following the covid outbreak and increasing difficulties in global supply chain management, the former SelectTV.com paid subscription service and packaged SelectTV Streaming TV Kits were terminated. We rebranded as FreeCast.com and unveiled a free registration subscription model. Our revenue streams include subscription revenue from additional monthly content bundles, product revenue from selling digital high-definition TV antennas, and other revenue from licensing, advertising, and referral fees.
We also distribute numerous licenses to retail, device manufacturers/distributors (mobile, tablets, set top boxes, “smart” TV’s, streaming equipment, gaming systems), as well as co-branding for hotel/hospitality, broadband carriers, telecommunications, and promotion companies.
The following table shows the aggregate number of subscribers at the end of each fiscal period presented in this prospectus.
| Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Subscribers (1) | 742,336 | 541,776 | ||||||
| (1) | Subscribers who have paid for their subscription or logged into their account within the past 36 months. |
The basis of our service platform is our proprietary content aggregation technology that automatically crawls the Internet to locate commercial-quality entertainment content from thousands of sources, including free, paid and subscription-based content. Additionally, we subscribe to the top entertainment data services such as Gracenote (owned by Nielson), Xperi, and Reelgood whom provide real-time updates. Our technology then sorts through and manages all available commercial-quality digital media, including both live and on-demand video from free, subscription and pay-per-view (PPV) services. All of this information is then incorporated into our interactive SmartGuide presented to consumers in a familiar easy-to-use cable-like TV guide via the Internet and as a software application, on all Wi-Fi enabled devices.
The SmartGuide uses images and related information on customized guide pages to provide subscribers with an easy way to explore all of the available media choices from one centralized account, regardless of the device or location. Upon selecting content to consume, the subscriber is directed to the original source of the content. If content is available for free, the subscriber is transferred to the website providing the content. If content is available through a subscription service (such as Netflix or Hulu), we allow the subscriber to log-in to the service through our SmartGuide and the subscriber is then directed to the subscription service’s website. If the content is PPV, the subscriber is directed to the page requiring payment for the PPV service. We do not manipulate or distribute the source content, and the provider of the content retains all rights to and management of content.
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Because we link subscribers directly to third-party content sources and in no way manipulate, store, retransmit or distribute this content, we are not subject to licensing fees or restrictions by third-party content suppliers. We are not responsible for the availability or content of these external websites, nor do we endorse, warrant or guarantee the products, services or information described or offered. All logos and trademarks used in the guide are the sole property of their respective owners. We believe that this is a complementary relationship in which we directly supply free traffic to content suppliers, much like the print-based model employed by TV Guide in past decades.
Our SmartGuide technology is currently available on computers, “smart” phones, tablets, streaming devices and “smart” TV’s. It is available directly to consumers, branded as FreeCast.com, and will also be distributed by third parties, both as FreeCast.com and under other licensed brand names and partnerships.
Industry Overview
The way people consume entertainment has changed dramatically in recent years. The global digital media market, which includes cable and satellite TV as well as Internet-based subscription services like Sling TV, Netflix, Hulu, Disney+, Apple and Amazon. The global video streaming market size was valued at $455.45 billion in 2022 and is projected to grow from $554.33 billion in 2023 to approximately $1.9 trillion by 2030, exhibiting a compounded annual growth rate of 19.3% during the forecast period as reported by Fortune – Business Insights. Due in part to the continued decline of traditional cable and satellite TV households; excluding virtual Multichannel Video Programming Distributors, which deliver live TV over the internet.
Audiences increasingly cancel their pay TV subscriptions, and after almost a decade of gradual decline, the number of pay TV households in the U.S. dropped to 65.1 million in 2022. According to the latest data reported by Statista, around half of U.S. households do not have a traditional TV subscription, a trend that is already transforming the pay TV landscape and its players. By 2027, PwC’s Global Entertainment & Media Outlook 2023-2027 predicts millions more U.S. homes will have walked away, reducing total penetration to 49.9 million, down from almost 100 million as recently as 2016, meaning pay TV will be present in just 38% of total U.S. homes.
Meanwhile, it is clear that connected TVs (TVs that can be connected to the internet and access content beyond what is available via the normal offering from a cable provider, or other devices that use a TV as a display and can connect to the internet to access content) and OTT (Over-the-Top, which refers to film and television content provided via a high-speed Internet connection rather than a cable or satellite provider) are growing faster than ever. As of April 2023, according to Statista, the number of OTT video users worldwide stood at around 3.5 billion, with penetration rates surging in countries like the United Kingdom, Canada, and the U. S.
Furthermore, while consumers used to be able to watch a particular television program on a particular channel at a particular time (also known as broadcast tv), the majority of consumers now watch television in a digital streaming fashion. Broadcast usage decreased to 20%, down 5.4% year over year. Streaming services, on the other hand, accounted for 38.7% of total U.S. TV usage, a new record high for the category. Streaming usage has sky-rocketed 25.3% in the past year from 2022 to 2023, as reported by Statista.
Options are great for consumers when it comes to deciding what to watch, but they are also decidedly complicated for an industry that continues to fragment and search for unique ways to influence consumer behavior. According to the Nielsen MediaTech Trender, 33% of adults have a rough idea what they want to watch, but are not exactly sure, and 22% do not know what they want to watch before tuning in. These habits vary by age; adults 18-34 are most open to browsing for content, as 30% have no idea what to watch and 40% have a rough idea beforehand.
We expect the trends toward digital streaming video consumption to continue and believe that we are uniquely positioned to take advantage of this market with our products.
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Sources of Revenue
We derive revenue from the following sources:
| ● | For subscribers who sign up using our free registration subscription service, we offer a variety of content provider bundles for an additional monthly fee ranging from $2.99 to $19.99; | |
| ● | We also earn fees when subscribers make one-time purchases of any pay-per-view (PPV) media through our SmartGuide; | |
| ● | We receive a fee for advertising on our guide pages provided, and for in-video/pre-roll ads by Google, pursuant to the standard terms and conditions of Google’s AdSense program; | |
| ● | We receive fees through affiliate programs for content providers that have such programs for PPV programs that are purchased through our SmartGuide; and | |
| ● | We receive fees for third-party related products (such as antennas or streaming devices to connect to a subscriber’s television) that are purchased through our SmartGuide. |
In Development
We continue to advance our technology stack with client/customer services, all of which are anticipated to bring value-added features and revenues to us, including the following:
We have announced a plan to launch FreeCast Home, a network attached streaming device which receives local over-the-air (OTA) broadcast channels, combined with FreeCast current streaming services, delivering free services to all Wi-Fi-enabled video devices in the home where FreeCast’s freely downloadable app is installed and utilized. This program intends to introduce a newly designed, lower cost device, with inclusion of 5G internet bandwidth delivery, currently in development.
We are developing a hyper-targeted data advertising platform based on a consumer’s combined “experiential data journey” across all streaming services, allowing us to identify both a consumer’s interests and areas of disinterest, in order to serve the highest-value ads. Plus, advanced recommendations for media content that would be of specific interest to the consumer.
A Global Services and Content Management System is being constructed under a partnership with Amazon’s AWS to onboard media content programmers, digital broadcast channels, and subscription video on demand brands with an instant, turnkey operations, and advertising platform for servicing their subscriptions or channels to non-US global countries.
Channel Builder (FASTChannels) – End-to-end software solution for development of digital (Free Ad-Supported TV) FAST channels with robust support for leading advertising formats in addition to distribution technology that allows for integration to all major providers (OTT, OTA, etc.). Existing robust integrations with leading dynamic advertising insertion (DAI) solutions and internal cross platform hyper-targeted DAI solutions enable this platform to monetize at a rate higher than traditional TV
Our Competitive Strengths
We believe that we have a number of distinct advantages over competitors and are well positioned to fill the gaps in key market segments:
| ● | While traditional TV providers rely on fixed terrestrial hardwired infrastructure and first-party or proprietary devices and software ecosystems, our service is delivered via the Internet. | |
| ● | Most of the products of our competitors are often limited in terms of the library of content available. For example, Netflix does not provide the same content as Amazon Prime, and neither will direct a subscriber to content available on the competing service. Because our SmartGuide catalogues content but does not distribute any content, we are able to direct subscribers to any service that has the program they would like to watch available, whether free or fee based. | |
| ● | Many of our competitors provide services that are often tied to a single home-based device. Our SmartGuide, however, is device agnostic and may be used on any device with Internet access, thanks to a robust web-based interface and apps available on major platforms including Android TV. | |
| ● | Unlike competitors, our subscribers continue to generate post-sale revenue through advertising on our guide pages and payments made to us through affiliate programs if subscribers purchase media or other hardware products through our service. |
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Our Growth Strategies
Through FreeCast.com, brand partners, and/or co-branding, we plan to accelerate our licensing platform to device makers, bandwidth providers, MDU properties, and other large communities of users, giving them a no-cost monetizable means to offer a competitive TV service to their customers without a large investment in new infrastructure.
Our growth strategy includes offering our FreeCast Home device, Value Channel bundle subscription service, other third-party subscriptions, pay-per-view, and advertising opportunities to these co-partnered users in exchange for negotiated commissions.
We launched DAI and our FAST (Free Advertising Supported TV) Channel Builder in early 2023, which we anticipate will increase advertising revenue and breadth of content across our platform with partner channel launches beginning January 2024.
We are completing testing of our fully integrated virtual wallet system, MediaPay, and expect to launch it in late 2023 or January 2024. MediaPay will allow our subscribers to manage all subscriptions and billings with easy cancelation. This unified payment for subscriptions and entertainment services along with our initiative to license our platform to global bandwidth distributors and content providers in various countries should reduce subscriber churn and increase revenue.
We are developing extensive relationships with mobile device manufacturers and distributors for preloading of FreeCast streaming TV services platform in mobile “smart” phones in exchange for negotiated commissions.
Competition
While there are many players in the online video space, our offering is unique and thus does not currently have direct, analogous competitors. Generally, any provider of online media that may appear to compete with us often in fact enjoys a mutually beneficial relationship, where their offering is captured and catalogued by our SmartGuide, which benefits our service, and we in turn send traffic and eyeballs to them as a result.
There are, however, several entities that provide services that are similar to the individual features or components of our own SmartGuide. They include:
| ● | Amazon Prime Video, through which Amazon also sells packages of content from HBO, Showtime, and others, which appear within the same interface for Prime Video subscribers. | |
| ● | Viacom’s PlutoTV business, which assembles online content from various sources into linear channels which are made available online, similar to the Live Channels offering within SelectTV. | |
| ● | Websites like Yidio and CanIStream.It that function as basic media search engines and point users to legal streaming sources of specified shows and movies. | |
| ● | Roku, TiVo, Amazon’s FireTV and Apple TV, which are devices that aim to serve as media managers, though these are all hardware-centric solutions and little more than app managers, in contrast to our device-agnostic approach and unified media interface for all content. |
As competition in the online television space increases, we expect this to strengthen the value proposition of our product, making it more appealing to potential commercial partners and to consumers as well.
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Operations
FreeCast licenses extensive entertainment data from Gracenote (a Nielsen company) and Reelgood. This data is to create the most comprehensive and up-to-date catalog of content from thousands of sources directly available from the World Wide Web by using in combination with FreeCast’s own proprietary aggregation technology. The links are then compiled into our SmartGuide for use by our subscribers. We market our service through various channels, including online advertising, broad-based media, such as television and radio, as well as various strategic partnerships. We utilize the services of third-party cloud computing providers, more specifically, Amazon Web Services.
The initial two-year term of the Gracenote license agreement began on March 25, 2019. The license agreement automatically renews for successive one-year terms, unless either party notifies the other in writing at least 90 days before the end of the initial or renewal term of its desire to not renew, in which event the license agreement expires at the end of the then-current term. Gracenote may also terminate the license agreement in the event of a change of control that results in us controlling, or being controlled by, or being under common control with, any competitor or customer of Gracenote or its affiliates. Gracenote may also terminate the license agreement or cease providing data to us if we fail to pay any invoice within 60 days after we receive such invoice. We pay Gracenote a monthly license fee of $5,210, which increases to $7,500 when we reach 750,001 active monthly users. After the initial two-year term, the monthly license fee increases by five percent with each anniversary of the beginning date.
The initial one-year term of the Guidebox/Reelgood license agreement began on February 1, 2019. The license agreement automatically renews for successive one-year terms, unless either party notifies the other in writing at least 30 days before the end of the initial or renewal term of its desire to not renew, in which event the license agreement expires at the end of the then-current term. Either party may terminate the license agreement if the other party fails to cure a material breach of the license agreement within 30 days after the non-breaching party provides written notice of such breach. Guidebox/Reelgood may also terminate the license agreement upon a change of majority control of our current owners by sale of stock or assets, merger or otherwise. We pay Guidebox/Reelgood a monthly license fee that fluctuates depending on the data we request, with a minimum monthly fee of $5,000.
Seasonality
Our subscriber growth exhibits a seasonal pattern that reflects variations in when consumers buy Internet-connected devices and when they tend to increase video watching. As a consequence, subscriber growth is generally greatest in the fourth and first quarters (October through March), slowing in the second quarter (April through June) and then accelerating in the third quarter (July through September).
Employees
As of June 30, 2023, we had 33 full-time employees, one part-time employee and 50 contract employees. Our employees are not covered by a collective bargaining agreement, and we consider our relations with our employees to be good.
Marketing
Our product is marketed and sold online through our website, FreeCast.com, and through various affiliates who may distribute the product or a branded version of the underlying SmartGuide.
The product is also be marketed through traditional pay-per-click, social and online advertising networks such as Google Adwords, Bing, Facebook, Twitter, and others, along with organic search engine optimization, or SEO, methods. We are also establishing licensing partnerships through compatible service providers, such as bandwidth resellers, telecommunications providers, device manufacturers and media marketing partners. Commercially, we intend to market to MDU companies who manage or develop apartments, condominiums, student housing, planned communities, and the hospitality sector (hotels, short stay).
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Facilities
Our headquarters are located in approximately 10,080 square feet of a building located in Orlando, Florida for which we pay $10,038 per month, with 5% annual increases, which includes the proportionate share of operating expenses (as defined in the lease). On October 31, 2023, we entered into a First Amendment to our lease agreement for our headquarters with Anson Logistics Assets LLC. The amendment extends the term of our lease until October 31, 2028.
Intellectual Property
Our intellectual property consists of:
| ● | Our Media Content Management System by which we organize and deliver content to our customers. | |
| ● | Our Web Bot Media Crawler which gathers online content, including free, PPV, and subscription-based media. | |
| ● | Our Media & Link Validator which ensures reliability of the content offered by our service. |
Our Media Content Management System is our proprietary technology (which we purchased from Nextelligence on January 2, 2015). Our Web Bot Media Crawler and Media & Link Validator are web-based applications that install in the end-user’s browser and any supported email functions or chat functions with search and certain other features (the “Technology”). The Technology is licensed to us by Nextelligence pursuant to a Technology License and Development Agreement we entered into with Nextelligence on June 30, 2011, which was amended and restated on October 19, 2012, amended on July 1, 2013, amended and restated a second time on July 31, 2014 and further revised to terminate all payments to Nextelligence pursuant to the agreement, effective on June 30, 2016 (the “Technology Agreement”).
In connection with the Technology Agreement, we issued 20,004,000 shares of our common stock to Nextelligence. The Technology Agreement expires on June 30, 2054, unless it’s terminated earlier based on termination events as defined in the Technology Agreement.
Although we have an exclusive license to the Technology pursuant to the Technology Agreement, including any improvements, modifications, maintenance or enhancements thereto, the Technology is owned by Nextelligence and we are not permitted to alter or enhance the Technology. Therefore, any alteration or enhancement of the Technology developed by our CEO who is also the controlling shareholder of Nextelligence, will be owned by Nextelligence. We could lose our right to use such Technology in the event of, among other things, a breach of the Technology Agreement, our bankruptcy or insolvency, or a change of control in us. The Technology Agreement provides that we and Nextelligence must keep the other’s proprietary information confidential.
We rely on a combination of trademark, fair trade practice, copyright and trade secret protection laws, as well as confidentiality procedures and contractual provisions, to protect our intellectual property rights. We also enter into confidentiality agreements with our employees and any third parties who may access our proprietary information, and we rigorously control access to our proprietary technology and information. We may seek to patent certain of our intellectual property in the future.
Other Information
We were incorporated on June 21, 2011 in the State of Florida. Our principal executive offices are located at 6901 TPC Drive, Suite 200, Orlando, Florida 32822. Our telephone number is (407) 374-1603.
We maintain two websites, www.FreeCast.com and www.SmartGuide.tv. The information contained on our websites is not, and should not be interpreted to be, a part of this prospectus.
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Emerging Growth Company Status
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, which we refer to as the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. Accordingly, we have included detailed compensation information for only our three most highly compensated executive officers and have not included a compensation discussion and analysis of our executive compensation programs in this prospectus. In addition, for so long as we are an “emerging growth company,” we will not be required to:
| ● | engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes–Oxley Act; | |
| ● | comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
| ● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes;” or | |
| ● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparison of the chief executive officer’s compensation to median employee compensation. |
In addition, the JOBS Act provides that an “emerging growth company” can use the extended transition period for complying with new or revised accounting standards, which we have elected to take advantage of.
We will remain an “emerging growth company” until the earliest to occur of:
| ● | our reporting $1.07 billion or more in annual gross revenues; | |
| ● | our issuance, in a three-year period, of more than $1 billion in non-convertible debt; | |
| ● | the end of the fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million on the last business day of our second fiscal quarter; and | |
| ● | June 30, 2029. |
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information about our executive officers, key employees and directors as of the date of this Registration Statement.
| Name | Age | Position | ||
| William A. Mobley, Jr. | 60 | Chief Executive Officer and Chairman of the Board of Directors | ||
| Jonathan D. Morris | 47 | Chief Financial Officer; Director | ||
| Gary Engel | 53 | Chief Marketing Officer | ||
| David Gust | 63 | Director |
None of the events listed in Item 401(f) of Regulation S-K has occurred during the past ten years and that is material to the evaluation of the ability or integrity of any of our directors, director nominees or executive officers. The following is a brief biography of each of our named executive officers and directors. Each of our named executive officers currently works full-time for us, and we have no reason to believe that will change in the foreseeable future.
William A. Mobley, Jr. founded our Company in 2011 and has served as our Chief Executive Officer and Chairman of our board of directors since then. Before founding FreeCast, in 1999, Mr. Mobley formed Nextelligence, Inc., a technology solution and business management expertise provider, of which he is the Chief Executive Officer, a director and majority shareholder. Additionally, between 1993 and 2008, Mr. Mobley founded and was an officer and director of a number of online business solution companies, including Web2 Corp, Personal Portal Online, and World Commerce Online, and online media companies, including MegaMedia Networks and ImageCafe.com. Based on Mr. Mobley’s role as our founder, his position as the Chief Executive Officer, and his executive level experience in Internet-based media industry, our board of directors believes that Mr. Mobley has the appropriate set of skills to serve as a member of the board.
Jonathan Morris has served as our Chief Financial Officer and a member of our board of directors since May 29, 2020. Mr. Morris has over 23 years of experience as a finance executive, principal, operator and advisor. In addition to being a full-time employee of FreeCast and serving as our Chief Financial Officer, Mr. Morris advises several newly organized blank check companies on a limited basis as a consultant and an officer. He holds the title of Chief Financial Officer with Twelve Seas Investment Company II (where he also serves as a director) and Twelve Seas Investment Company IV TMT, and the title of Chief Development Officer with TLG Acquisition One Corp. Mr. Morris also advises and holds the title of Chief Financial Officer for Hush Aerospace LLC, a small private start-up company. Prior to joining us, Mr. Morris served as Chief Financial Officer at Imageware Systems, Inc. from May 2020 to December 2020, and from August 2015 to February 2020 he led principal investments and structuring as President and Senior Managing Director at a large private family office. Prior to that, at Blackstone Group, Inc., he focused on telecom and technology investments and served on the board of SunGard AS. From 2005 to 2012 Mr. Morris was part of the TMT Investment Banking Group of Credit Suisse. Mr. Morris began his career in 1997 within the private equity division of Lombard, Odier et Cie, private bank in Switzerland and subsequently went to work as an associate at GAIN Capital, a currency hedge fund from 1999 to 2003. Mr. Morris earned his B.S. in Economics and Finance from the University of Virginia and his M.B.A. from Georgetown University. Based on Mr. Morris’ position as the Chief Financial Officer, and his executive level financial experience, our board of directors believes that Mr. Morris has the appropriate set of skills to serve as a member of the board.
Gary Engel has served as our Chief Marketing Officer since May 1, 2023. Prior to joining us, Mr. Engel served as Director of Owned Media, DTC Marketing, Subscriber Growth and Media at Warner Bros. Discovery, Inc. since November 2018, where he was responsible for meeting subscriber and revenue targets within established ROI constraints as well as strategize and execute marketing plans for acquisition and retention of subscribers for HBO Max and Discovery +. Prior to that, Mr. Engel worked for A+E Networks from May 2007 to December 2017 serving in different capacities, including as Vice President, Marketing Analytics from September 2014 to December 2017 and Vice President, Linear, Digital and DTC Media Planning and Strategy from May 2007 to September 2014. Mr. Engel earned his B.A. in Economics from the State University of New York at Albany.
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David Gust has served as a member of our board of directors since May 31, 2013. Since January 1, 2021, Mr. Gust has held the position of Chief Executive Office of Alternative Claims Management in Winter Park, Florida, and since February 2019, Mr. Gust has also served as Managing Director and Chief Financial Officer for Frontline Performance Group From October 2006 to February 2019, Mr. Gust held the position of vice president at Hilton Worldwide, Inc., working in marketing innovation and new product introduction. Prior to Hilton, Mr. Gust was the Chief Executive Officer of MegaMedia Networks/MegaChannels.com, an online streaming video portal for 2 years, Vice President at Hard Rock International, leading the brand management of 104 cafes in 34 countries for almost 4 years, and with the Walt Disney Company for over 13 years, most recently as the Vice President of Business Development, working on such projects as Disney Vacation Club, ESPN Zone, EuroDisney, Walt Disney World Master Planning, and the infrastructure development of various resorts. Mr. Gust received a bachelor’s degree in finance from Eastern Illinois University. Based on Mr. Gust’s extensive experience in and in-depth understanding for marketing, our board of directors believes that Mr. Gust has the appropriate set of skills to serve as a member of the board.
Family Relationships
There are no family relationships among our directors or executive officers.
Director Independence
Upon the completion of this offering, we expect that our common stock will be listed on Nasdaq. Nasdaq rules require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. We expect to appoint two additional directors who are independent under Nasdaq rules to our board of directors subject to and effective upon the listing of our common stock on Nasdaq.
Our board of directors has reviewed the independence of our directors, as well as our director nominees who will join our board of directors upon the closing of the offering, based on the listing standards of Nasdaq. Based on this review, our board of directors determined that Mr. David Gust is independent within the meaning of Nasdaq rules. In making this determination, our board of directors considered the relationships that this non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining his independence. As required under applicable Nasdaq rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.
Board Committees
Our board of directors has established standing committees in connection with the discharge of its responsibilities. These committees include an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our board of directors has adopted a written charter for each of the committees addressing the respective committee’s purpose and responsibilities. Upon completion of this offering, a copy of the charters for each of these three committees will be available on our website. Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
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Audit Committee
The Audit Committee will be responsible for, among other matters:
| ● | appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm; | |
| ● | discussing with our independent registered public accounting firm the independence of its members from its management; | |
| ● | reviewing with our independent registered public accounting firm the scope and results of their audit; | |
| ● | approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; | |
| ● | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; | |
| ● | reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; | |
| ● | coordinating the oversight by our board of directors of our code of business conduct and our disclosure controls and procedures | |
| ● | establishing procedures for the confidential or anonymous submission of concerns regarding accounting, internal controls or auditing matters; and | |
| ● | reviewing and approving related-person transactions. |
Upon completion of this offering, our Audit Committee will consist of Mr. David Gust. Rule 10A-3 under the Exchange Act require us to have one independent Audit Committee member upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent Audit Committee members within one year of the date of this prospectus. Our board of directors has affirmatively determined that Mr. David Gust meets the definition of “independent director” for purposes of serving on an Audit Committee under Rule 10A-3 and Nasdaq rules. Our board of directors has determined that none of our independent directors qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Compensation Committee
The Compensation Committee will be responsible for, among other matters:
| ● | reviewing key employee compensation goals, policies, plans and programs; | |
| ● | reviewing and approving the compensation of our directors and executive officers; | |
| ● | reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and | |
| ● | appointing and overseeing any compensation consultants or advisors. |
Upon completion of this offering, our Compensation Committee will consist of Mr. David Gust. The Nasdaq rules require us to have one independent Compensation Committee member upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent Compensation Committee members within one year of the date of this prospectus.
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Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee will be responsible for, among other matters:
| ● | identifying, reviewing and evaluating candidates to serve on our board of directors consistent with criteria approved by our board of directors; | |
| ● | evaluating director performance on our board of directors and applicable committees of our board of directors and determining whether continued service on its board of directors is appropriate; | |
| ● | evaluating, nominating and recommending individuals for membership on our board of directors; and | |
| ● | evaluating nominations by shareholders of candidates for election to our board of directors. |
Upon completion of this offering, our Nominating and Corporate Governance Committee will consist of Mr. David Gust. The Nasdaq rules require us to have one independent Nominating and Corporate Governance Committee member upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent Nominating and Corporate Governance Committee members within one year of the date of this prospectus.
Risk Oversight
Our board of directors will oversee a company-wide approach to risk management. Our board of directors will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our board of directors will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.
Specifically, our Compensation Committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our Audit Committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interests. Our board of directors will be responsible for overseeing the management of risks associated with the independence of our board of directors.
Term of Office
Our amended and restated articles of incorporation provide that our board of directors will be classified into three classes of directors as nearly equal in number as possible, designated: Class I, Class II and Class III, with each director serving for a term ending on the date of the third succeeding annual meeting following the annual meeting at which such director was elected, or until their successor shall have been duly elected and qualified. Mr. Mobley’s current term as a director was to end on the date of our annual meeting in 2021. However, since we did not have an annual meeting after our fiscal years ended June 30, 2021, 2022 or 2023, Mr. Mobley’s current term as a director ends on the date of our next annual meeting. Mr. Gust’s current term as a director was to end on the date of our annual meeting in 2022, however it will now end on the date of our annual meeting immediately following our next annual meeting. Mr. Morris’ current term as a director was to end on the date of our annual meeting in 2023, however it will now end on the date of our annual meeting immediately following the annual meeting at which Mr. Gust’s current term as a director ends.
Compensation Committee Interlocks and Insider Participation
All compensation and related matters after this offering will be reviewed by our Compensation Committee.
Code of Business Conduct and Ethics
Upon or prior to completion of this offering, our board of directors will adopt a Code of Business Conduct and Ethics that applies to our directors, officers and employees. Upon completion of this offering, a copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller or persons performing similar functions.
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Summary Compensation Table
The following table provides information regarding the compensation paid during the fiscal years ended June 30, 2023 and 2022 to our principal executive officer, principal financial officer and certain of our other executive officers, who are collectively referred to as “named executive officers” elsewhere in this prospectus.
| Name and Principal Position | Year | Salary | Bonus | Option Awards | All Other Compensation | Total | |||||||||||||||||
| William A. Mobley, Jr. | 2023 | $ | 250,000 | $ | - | $ | - | $ | 30,000 | (1) | $ | 280,000 | |||||||||||
| Chief Executive Officer | 2022 | $ | 250,000 | $ | - | $ | - | $ | 30,000 | (1) | $ | 280,000 | |||||||||||
| Jonathan Morris | 2023 | $ | 250,000 | $ | - | $ | - | $ | - | $ | 250,000 | ||||||||||||
| Chief Financial Officer | 2022 | $ | 250,000 | $ | - | $ | - | $ | - | $ | 250,000 | ||||||||||||
| Gary Engel | 2023 | $ | 32,308 | (2) | $ | - | $ | 7,666 | (3) | $ | - | $ | 39,974 | ||||||||||
| Chief Marketing Officer | 2022 | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||
| (1) | Consists of an automobile allowance. |
| (2) | Employment began May 1, 2023, represents pro-rata annual salary of $210,000. |
| (3) | Represents a warrant to purchase 25,000 shares of our common stock, exercisable at $3.00 per share, issued in connection with entering into an employment agreement, effective May 1, 2023. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. |
Equity Compensation Plan Information
The following table sets forth information as of June 30, 2023 about shares of our common stock outstanding and available for issuance under our 2021 Incentive Award Plan.
| Number of securities to be issued upon exercise of outstanding options and rights | Weighted- average exercise price of outstanding options, warrants, and rights | Number of securities remaining available for future issuance under the current equity compensation plan | ||||||||||
| 2021 Incentive Award Plan (1)(2) | 1,615,324 | $ | 2.00 | 4,384,676 | ||||||||
| (1) | Plan was approved by our board of directors on June 25, 2021 for officers, employees, directors and consultants, and was approved by our shareholders on June 10, 2022. |
| (2) | The plan authorizes the granting of stock options and other awards to purchase up to 6,000,000 shares of our common stock. |
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2021 Incentive Award Plan
We have adopted a 2021 Incentive Award Plan (“Award Plan”), which became effective on June 25, 2021 and was approved by our shareholders on June 10, 2022. The principal purpose of the Award Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the Award Plan are summarized below.
Share Reserve. Under the Award Plan, 6,000,000 shares of our common stock will be initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance bonus awards, performance stock unit awards, dividend equivalents or other stock or cash-based awards.
The following counting provisions will be in effect for the share reserve under the Award Plan:
| ● | to the extent that an award expires, lapses or is terminated, converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged for cash, surrendered, repurchased or cancelled, in any case, in a manner that results in the company acquiring the underlying shares at a price not greater than the price paid by the participant or not issuing the underlying shares, such unused shares subject to the award at such time will be available for future grants under the Award Plan; | |
| ● | to the extent shares are tendered or withheld to satisfy any tax withholding obligation with respect to any award under the Award Plan, such tendered or withheld shares will be available for future grants under the Award Plan; | |
| ● | to the extent shares subject to stock appreciation rights are not issued in connection with the stock settlement of stock appreciation rights on exercise thereof, such shares will be available for future grants under the Award Plan; | |
| ● | the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the Award Plan; and | |
| ● | shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the Award Plan. |
In addition, the sum of the grant date fair value of all equity-based awards and the maximum that may become payable pursuant to all cash-based awards to any individual for services as a non-employee director during any calendar year may not exceed $50,000.
Administration. The compensation committee of our board of directors is expected to administer the Award Plan unless our board of directors assumes authority for administration. The board of directors may delegate its powers to a committee, which, to the extent required to comply with Rule 16b-3, is intended to be comprised of “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. The Award Plan provides that the board of directors or leadership development, belonging and compensation committee may delegate its authority to grant awards other than to individuals subject to Section 16 of the Exchange Act or officers or directors to whom authority to grant awards has been delegated.
Subject to the terms and conditions of the Award Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the Award Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the Award Plan. Our board of directors may at any time remove the leadership development, belonging and compensation committee as the administrator and revest in itself the authority to administer the Award Plan.
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Eligibility. Awards under the Award Plan may be granted to individuals who are then our officers, employees or consultants or are the officers, employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. However, only employees of our company or certain of our subsidiaries may be granted incentive stock options, or ISOs.
Awards. The Award Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock unit awards, performance bonus awards, performance stock units, other stock- or cash-based awards and dividend equivalents, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.
| ● | Nonstatutory Stock Options, or NSOs, will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years. | |
| ● | Incentive Stock Options, or ISOs, will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the Award Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant. | |
| ● | Restricted Stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock typically may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse; however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire. | |
| ● | Restricted Stock Units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied. | |
| ● | Stock Appreciation Rights, or SARs, may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the Award Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the Award Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator. |
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| ● | Performance Bonus Awards and Performance Stock Units are denominated in cash or shares/unit equivalents, respectively, and may be linked to one or more performance or other criteria as determined by the administrator. | |
| ● | Other Stock- or Cash-Based Awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock- or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The administrator will determine the terms and conditions of other stock- or cash-based awards, which may include vesting conditions based on continued service, performance and/or other conditions. | |
| ● | Dividend Equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted alone or in tandem with awards other than stock options or SARs. Dividend equivalents are converted to cash or shares by such formula and such time as determined by the administrator. In addition, dividend equivalents with respect to an award subject to vesting will either (i) to the extent permitted by applicable law, not be paid or credited or (ii) be accumulated and subject to vesting to the same extent as the related award. |
Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.
The Award Plan also provides that unless otherwise provided by administrator or otherwise directed by the holder of an option or SAR, each vested and exercisable option and SAR outstanding on the automatic exercise date with an exercise price per share that is less than the fair market value per share as of such date will automatically be exercised on such date.
Adjustments of Awards. The administrator has broad discretion to take action under the Award Plan, as well as make adjustments to the terms and conditions of existing and future awards, to prevent the dilution or enlargement of intended benefits and facilitate necessary or desirable changes in the event of certain transactions and events affecting our common stock, such as stock dividends, stock splits, mergers, acquisitions, consolidations, and other corporate transactions. In addition, in the event of certain non-reciprocal transactions with our shareholders known as “equity restructurings,” the administrator will make equitable adjustments to the Award Plan and outstanding awards.
Change in Control. In the event of a change in control, unless the administrator elects to terminate an award in exchange for cash, rights or other property, or cause an award to accelerate in full prior to the change in control, such award will continue in effect or be assumed or substituted by the acquirer, provided that any performance-based portion of the award will be subject to the terms and conditions of the applicable award agreement. In the event the acquirer refuses to assume or replace awards granted, prior to the consummation of such transaction, awards issued under the Award Plan (other than any portion subject to performance-based vesting) will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. The administrator may also make appropriate adjustments to awards under the Award Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.
Amendment and Termination. The administrator may terminate, amend or modify the Award Plan at any time and from time to time. However, we must generally obtain shareholder approval to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule), and generally no amendment may materially and adversely affect any outstanding award without the affected participant’s consent. Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional shareholder approval.
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No incentive stock options may be granted pursuant to the Award Plan after the tenth anniversary of the effective date of the Award Plan. Any award that is outstanding on the termination date of the Award Plan will remain in force according to the terms of the Award Plan and the applicable award agreement.
Overview of Our Fiscal 2023 and 2022 Executive Compensation
Our executive compensation program consisted of the following components of compensation in 2023 and 2022:
Base Salary. Each named executive officer receives a base salary for the expertise, skills, knowledge and experience they offer to our management team. Base salaries are periodically adjusted to reflect:
| ● | The nature, responsibilities, and duties of the officer’s position; | |
| ● | The officer’s expertise, demonstrated leadership ability, and prior performance; | |
| ● | The officer’s salary history and total compensation, including annual cash incentive awards and annual equity incentive awards; and | |
| ● | The competitiveness of the officer’s base salary. |
Each named executive officer’s base salary for the fiscal year of 2023 and 2022 is listed in the 2023 and 2022 Summary Compensation Table.
Equity Incentive Awards.
Pursuant to the Award Plan, we granted Mr. Mobley options to purchase an aggregate of 250,008 shares of our common stock at an exercise price of $2.00 per share on June 25, 2021. A total of 41,668 options vested on July 1, 2021, and then 1/18th of the remaining unvested options vest on the first day of each month, beginning August 1, 2021 and continuing each successive month until the option is 100% vested.
We issued Mr. Mobley warrants to purchase an aggregate of 10,000,000 shares of our common stock at an exercise price of $0.25 per share in 2012, all of which expired on or prior to December 30, 2022. On June 15, 2023, we issued Mr. Mobley new warrants to purchase an aggregate of 10,000,000 shares of our common stock at an exercise price of $0.25 per share in exchange for the expired warrants. The warrants are immediately exercisable and expire on December 31, 2025.
Pursuant to the Award Plan, we granted Mr. Morris options to purchase an aggregate of 250,008 shares of our common stock at an exercise price of $2.00 per share on June 25, 2021. A total of 41,668 options vested on July 1, 2021, and then 1/18th of the remaining unvested options vest on the first day of each month, beginning August 1, 2021 and continuing each successive month until the option is 100% vested.
We sold Mr. Morris, for $50.00, warrants to purchase 100,000 shares of our common stock at an exercise price of $1.75 per share. The warrants vested ratably over 12 months from May 29, 2020 and expired on May 29, 2023. On June 15, 2023, we issued Mr. Morris new warrants to purchase 100,000 shares of our common stock at an exercise price of $1.75 per share in exchange for the expired warrants. The warrants are immediately exercisable and expire on December 31, 2025.
We issued Mr. Engel warrants to purchase 25,000 shares of our common stock, exercisable at $3.00 per share, in connection with entering into an employment agreement, effective May 1, 2023. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026.
Other Benefits. We are obligated to provide to one or more of the named executive officers with an automobile allowance. In the fiscal year ended June 30, 2023, we paid Mr. Mobley an automobile allowance of $30,000.
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Employment Agreements
On July 1, 2013, we entered into an employment agreement with William A. Mobley, Jr., pursuant to which Mr. Mobley agreed to act as our Chief Executive Officer, which employment agreement was initially amended on July 1, 2014 and amended for a second time on July 1, 2019 (as amended, the “Mobley Employment Agreement”). Pursuant to the terms of the Mobley Employment Agreement, Mr. Mobley is entitled to receive an annual salary of $250,000 and an automobile allowance of $2,500 per month. The term of the Mobley Employment Agreement continues until June 30, 2024. An annual cash bonus may be paid at the discretion of our board of directors. Pursuant to the terms of the Mobley Employment Agreement, Mr. Mobley may only be terminated by us upon his death, disability or for cause, as defined in the Mobley Employment Agreement.
Effective May 29, 2020, we entered into an employment agreement with Mr. Jonathan Morris to serve as our Chief Financial Officer (the “Morris Employment Agreement”). The initial term of the Morris Employment Agreement expired on May 29, 2021. The Morris Employment Agreement automatically renews on a month-to-month basis until either party terminates it. Under the Morris Employment Agreement, Mr. Morris received an annual salary of $250,000 during the initial one-year term, and he receives $250,000 per annum thereafter until a new extension is executed between the parties. In conjunction with Mr. Morris entering into the employment agreement, we sold Mr. Morris, for $50.00, a warrant to purchase 100,000 shares of our common stock, exercisable at $1.75 per share. The warrants vested ratably over 12 months from the effective date of the Morris Employment Agreement, and expired on May 29, 2023. We issued Mr. Morris new warrants to purchase 100,000 shares of our common stock in exchange for the expired warrants. The new warrants have the same exercise price as the expired warrants, are immediately exercisable and expire on December 31, 2025. Mr. Morris also has the option to receive additional warrants in lieu of a pro-rated portion of his annual salary on a one warrant per $1 basis. Each such additional warrant will also have an exercise price of $1.75, vest immediately and expire 36 months from the date of issuance. An annual bonus may be paid at the discretion of our board of directors. If Mr. Morris is terminated by us as a result of death, permanent disability or for cause, or if Mr. Morris terminates his employment for other than good reason, he shall receive payment in respect of compensation earned but not yet paid. If Mr. Morris is terminated by us other than due to his death, disability or for cause, or if Mr. Morris terminates his employment for good reason, he will receive as severance: (i) continued payment of 12 months of his base salary then in effect; (ii) a lump sum payment of the prorated portion of any bonus earned for that year; (iii) accelerated vesting of 50% of unvested warrants; and (iv) continued health insurance coverage then in effect for 12 months following the date of termination. Under the Morris Employment Agreement, while Mr. Morris is employed by us and for a period of one year from and after the date that his employment by us ceases or terminates for any reason, he is prohibited from directly or indirectly competing against us.
Effective May 1, 2023, we entered into an employment agreement with Mr. Gary Engel to serve as our Chief Marketing Officer (the “Engel Employment Agreement”). The initial term of the Engel Employment Agreement expires on April 30, 2024. The Engel Employment Agreement automatically renews on a month-to-month basis until either party terminates it. Under the Engel Employment Agreement, Mr. Engel received an annual salary of $210,000 during the initial one-year term, and he receives $210,000 per annum thereafter until a new extension is executed between the parties. In conjunction with Mr. Engel entering into the employment agreement, we issued him a warrant to purchase 25,000 shares of our common stock, exercisable at $3.00 per share. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. Mr. Engel is also entitled to earn a discretionary commission equal to two percent (2%) of the pre-tax gross revenues driven vertically from his department on an annualized basis and paid to us immediately following any or all Cost of Sales expenses, subtractions, debts, fees, and commissions to all third-parties; including but not limited to advertising/media fees, content/programming partners, distribution/marketing vendors, device manufacturers, app stores, various other partnership payments as may be determined in the sole discretion of the our board of directors. Any such commission shall be paid quarterly following 90 days of accounting reconciliations. If Mr. Engel is terminated by us as a result of death, permanent disability or for cause, or if Mr. Engel terminates his employment for any reason, he shall receive payment in respect of compensation earned but not yet paid. If Mr. Engel is terminated by us other than due to his death, disability or for cause, he shall receive payment in respect of compensation earned but not yet paid, as well as continued payment of three months of his base salary then in effect. Under the Engel Employment Agreement, while Mr. Engel is employed by us and for a period of one year from and after the date that his employment by us ceases or terminates for any reason, he is prohibited from directly or indirectly competing against us.
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information regarding all outstanding equity awards held by our named executive officers as of June 30, 2023.
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | ||||||||||
| William A. Mobley, Jr. | 250,008 | - | $ | 2.00 | June 24, 2031 | |||||||||
| Jonathan Morris | 250,008 | - | $ | 2.00 | June 24, 2031 | |||||||||
| Gary Engel | 2,083 | 22,917 | (1) | 3.00 | May 1, 2026 | |||||||||
| (1) | On May 1, 2023, warrants to purchase 25,000 shares of common stock were issued. Warrants vests ratably over 12 months and may be exercised at any time from the vesting date up to and including May 1, 2026. On June 1, 2023, warrants to purchase 2,083 shares of common stock vested. Beginning July 1, 2023, and continuing on the first day of each successive month until all of the warrants are vested, 2,083 warrants vest and become exercisable. |
Option Exercises and Stock Vested
No officers or directors exercised options, and no stock vested during the fiscal year ended 2023 except for warrants to purchase 2,083 shares of common stock that vested on June 1, 2023, as described in footnote (1) to the above table.
Non-Executive Director Compensation
The non-executive members of our board of directors have not received any compensation prior to this offering and no arrangements have been entered into in relating to compensation after this offering. Following this offering, our board of directors will establish a compensation package for the non-executive members of our board of directors.
Compensation Committee Interlocks and Insider Participation
None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or the board of directors of any other entity that has one or more officers serving as a member of our board of directors.
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CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
From July 30, 2017 through October 31, 2019, we deferred some of William A. Mobley, Jr.’s compensation, including all of his compensation in 2018. As of June 30, 2023, his accrued compensation total was $377,893. On January 3, 2017, our board of directors approved the payment of the deferred compensation and repayment of the amount due in accounts payable in shares of our common stock in lieu of cash at the price of $0.25 per share, at Mr. Mobley’s sole discretion.
As of June 30, 2023, we owed Nextelligence $213,696 for cash collected on behalf of Nextelligence from sales that occurred prior to June 30, 2017. On January 3, 2017, our board of directors approved the repayment of the amount due in accounts payable in shares of our common stock in lieu of cash at the price of $0.25 per share, at Nextelligence’s sole discretion.
On June 30, 2011, we entered into a Technology License and Development Agreement, which was amended and restated on October 19, 2012, amended on July 1, 2013 and amended and restated a second time on July 31, 2014 and further revised to terminate all payments by us pursuant to the agreement, effective June 30, 2016, with Nextelligence, which is majority owned and controlled by William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman of our board of directors. The Technology Agreement provides us with an exclusive license to certain technology from Nextelligence and for Nextelligence to provide all further development, improvement, modification, maintenance, management and enhancement services related to such technology. Nextelligence is our largest shareholder more than 40% of our outstanding common stock prior to this offering. In connection with the Technology Agreement, we issued 20,004,000 shares of our common stock to Nextelligence. The Technology Agreement expires on June 30, 2054, unless it’s terminated earlier based on termination events as defined in the Technology Agreement.
On July 1, 2018, we signed a revolving convertible note agreement with Nextelligence, which was amended and restated as of July 2, 2018, for an amount up to $500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrued interest at 12% per annum, and was due and payable on July 1, 2020. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest was convertible into shares of our common stock at a conversion price of $0.25 per share. The loan matured on July 1, 2020, was in default and remained as an on-demand liability of ours until June 30, 2021. On June 30, 2021, we entered into a new revolving convertible promissory note with Nextelligence for an amount up to $2,500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrues interest at 12% per annum. The borrowing limit was increased to $6,000,000 pursuant to a first amendment to the note dated June 13, 2022. Pursuant to a second amendment to the note dated July 17, 2023, the borrowing limit was increased to $10,000,000 and the maturity date extended to June 30, 2025. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per share. As of June 30, 2023, the outstanding principal and accrued interest due to Nextelligence was $5,711,599.
In June 2016, William A. Mobley, Jr. loaned us $111,000, at an interest rate of 12% per annum. The loan matured on December 31, 2017, was in default and remained as an on-demand liability of ours until June 30, 2021. In December 2016, we repaid $11,000 in outstanding principal. We also repaid approximately $50,000 during the fiscal year-end June 30, 2018. The loan was convertible into shares of common stock at a conversion price of $0.25 per share. On June 30, 2021, we entered into a new convertible promissory note with Mr. Mobley for a loan in the principal amount of $82,509. Outstanding principal accrues interest at 12% per annum, and is due and payable on June 30, 2024. In lieu of repayment, at Mr. Mobley’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per. As of June 30, 2023, the outstanding principal and accrued interest due to Mr. Mobley was $86,051.
Between July 2017 and December 2018, Public Wire, LLC, a wholly-owned subsidiary of Nextelligence, loaned us in various installments a total of $66,380. The notes representing the loan matured on dates ranging from April 1, 2019 to January 1, 2020. The loan was in default and remained as an on-demand liability of ours until June 30, 2021. On June 30, 2021, we entered into a new promissory note with Public Wire, LLC for a loan in the principal amount of $89,139. Outstanding principal accrues interest at 12% per annum, and is due and payable on June 30, 2024. As of June 30, 2023, the outstanding principal and accrued interest due to Public Wire was $110,551.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 9, 2023, certain information concerning the beneficial ownership of our common stock by: (i) each shareholder known by us to own beneficially five percent or more of our outstanding common stock or series a common stock; (ii) each director; (iii) each named executive officer; and (iv) all of our executive officers and directors as a group, and their percentage ownership and voting power.
The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option, or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. As of November 9, 2023, we had 45,414,626 shares of common stock outstanding.
| Name and Address of Beneficial Owner (1) | Number of Shares Beneficially Owned | Percentage Total Voting Power Before Offering | Percentage Total Voting Power After Offering | |||||||||
| William A. Mobley, Jr. (2) | 67,678,498 | 72.89 | % | % | ||||||||
| Jonathan Morris (3) | 350,008 | *% | % | |||||||||
| David Gust | - | -% | % | |||||||||
| Gary Engel (4) | 10,415 | *% | % | |||||||||
| All officers and directors as a Group (four persons) | 68,038,921 | 72.99 | % | % | ||||||||
| Nextelligence, Inc. (5) | 54,565,940 | 67.59 | % | % | ||||||||
| * | Less than 1%. |
| (1) | Unless otherwise indicated, the address of such individual is c/o FreeCast, Inc., 6901 TPC Drive, Suite 200, Orlando, Florida 32822. |
| (2) | Consists of: (i) 991,138 shares of common stock held of record by Mr. Mobley; (ii) 355,840 shares of common stock underlying an immediately convertible promissory note held by Mr. Mobley; (iii) 10,000,000 shares of common stock underlying immediately exercisable warrants held of record by Mr. Mobley; (iv) 250,008 shares of common stock underlying immediately exercisable options held of record by Mr. Mobley; (v) 1,511,572 shares of common stock underlying immediately convertible deferred compensation owed to Mr. Mobley; (vi) 19,247,085 shares of common stock held of record by Nextelligence, for which William A. Mobley, Jr. is an officer, director and majority shareholder; (vii) 34,464,072 shares of common stock underlying an immediately convertible promissory note held by Nextelligence; (viii) 854,783 shares of common stock underlying an immediately convertible accounts payable owed to Nextelligence; and (ix) 4,000 shares of common stock held of record by Telebrands for which Mr. Mobley acts as trustee pursuant to a Voting Trust Agreement. Mr. Mobley may be deemed to be the beneficial owner of the securities held of record by Telebrands Corp. and subject to the Voting Trust Agreement by virtue of his position as trustee thereof. Mr. Mobley disclaims beneficial ownership of the securities held of record by Telebrands for which he acts as trustee pursuant to the Voting Trust Agreement. |
| (3) | Consists of: (i) 100,000 shares of common stock underlying immediately exercisable warrants held of record by Mr. Morris; and (ii) 250,008 shares of common stock underlying immediately exercisable options held of record by Mr. Morris. |
| (4) | Mr. Engel received warrants to purchase 25,000 shares of our common stock on May 1, 2023 in connection with entering into an employment agreement with us. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. |
| (5) | Consists of: (i) 19,247,085 shares of common stock held of record by Nextelligence, Inc.; (ii) 854,783 shares of common stock underlying an immediately convertible accounts payable owed to Nextelligence; and (iii) 34,464,072 shares of common stock underlying an immediately convertible promissory note held by Nextelligence. William A. Mobley, Jr. is an officer, director and majority shareholder of Nextelligence. |
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Voting Trust Agreement
On October 15, 2012, we entered into a Voting Trust Agreement with Telebrands and William A. Mobley, Jr. The Voting Trust Agreement appoints William A. Mobley, Jr. as the trustee of all the shares of our common stock owned by Telebrands at any time (the “Entrusted Shares”). Telebrands currently owns 4,000 shares of our common stock. Telebrands had warrants to purchase up to 20,000,000 shares of our common stock, but the last of such warrants expired on October 14, 2022. Pursuant to the Voting Trust Agreement, Mr. Mobley is entitled to exercise all rights relating to the voting and disposition of the Entrusted Shares, provided, however, Mr. Mobley is not allowed to effect a disposition or permit registration of the Entrusted Shares with the Securities and Exchange Commission or any state securities administrators unless Nextelligence, Inc., which is majority owned and controlled by Mr. Mobley, simultaneously effects a disposition or permits registration of an identical proportion of our voting securities held by Nextelligence on the same terms and conditions. In addition, Mr. Mobley may not permit a disposition or registration of any voting securities of the Company that Nextelligence holds unless he simultaneously effects a disposition or registration of an identical proportion of the Entrusted Shares on the same terms and conditions.
The term of such trust ends upon the earlier to occur, of: (i) Mr. Mobley ceases to be an affiliate of the Company, as defined in the Voting Trust Agreement; or (ii) the disposition of all of the Entrusted Shares.
We are obligated to indemnify Mr. Mobley against any liabilities, damages, claims, taxes, deficiencies, assessments, losses, penalties, interest, costs and expenses paid or incurred by him in connection with the Voting Trust Agreement, unless those paid or incurred are a result of the gross negligence, willful misconduct or bad faith of Mr. Mobley.
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General
Our charter authorizes the issuance of up to 200,000,000 shares of common stock, par value $0.0001 per share and 5,000,000 shares of preferred stock, par value $0.0001 per share.
Common Stock
As of June 30, 2023, we had 44,164,626 shares of our common stock outstanding. Holders of our common stock are entitled to elect the class of directors that are up for election in a given year, and each share of our common stock entitles the holder to one vote, either in person or by proxy, at meetings of shareholders. All matters, other than the election of directors, at meetings of shareholders are decided by a majority of the votes cast at such meeting, either in person or by proxy.
Shareholders are not permitted to vote their shares cumulatively. Accordingly, the holders of more than fifty percent (50%) of our common stock can elect all directors entitled to be elected.
Preferred Stock
No shares of preferred stock are currently outstanding. Our board of directors may designate the authorized but unissued shares of the Preferred Stock with such rights and privileges as our board of directors may determine. As such, our board of directors may issue 5,000,000 preferred shares and designate the conversion, voting and other rights and preferences without notice to our shareholders and without shareholder approval.
Transfer Agent
The transfer agent for our common stock is Issuer Direct Corporation, Raleigh, North Carolina.
Listing
We have applied to have our common stock listed on the Nasdaq Capital Market under the symbol “CAST.”
Holders
As of June 30, 2023, there were 44,164,626 shares of common stock outstanding, which were held by approximately 207 record shareholders.
Shares Eligible For Future Sale
Prior to this offering, there has been no market for our common stock, and a liquid trading market for our common stock may not develop or be sustained after this offering. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our common stock. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market prices for our shares of common stock, and our ability to raise equity capital in the future. Although we have applied to have our common stock approved for listing on the Nasdaq Capital Market under the symbols “CAST,” we cannot assure you that there will be an active public market for our common stock.
Based on the number of shares outstanding as of the date of this prospectus, upon completion of this offering, ________ shares of common stock will be outstanding, or_________ if the over-allotment option is exercised in full. Of the shares to be outstanding immediately after the completion of this offering, the ________ shares of common stock sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by our “affiliates,” as that term is defined in Rule 144 under the Securities Act.
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The remaining shares of common stock will be “restricted securities” under Rule 144.
Subject to the lock-up agreements described below and the provisions of Rule 144 and 701 under the Securities Act, these restricted securities will be available for sale in the public market as follows:
| Date Available for Sale | Shares Eligible for Sale | Description | ||
| Date of Prospectus | Shares sold in the offering that are not subject to a lock-up | |||
| 90 Days after Date of Prospectus | Shares saleable under Rules 144 and 701 that are not subject to a lock-up | |||
| 180 Days after Date of Prospectus | Lock-up released; shares saleable under Rules 144 and 701 |
In addition, of the _______ shares of our common stock that are issuable upon the exercise of stock options outstanding as of the date of this prospectus, _______ options to purchase shares of common stock were exercisable as of that date, and upon exercise these shares will be eligible for sale subject to the lock-up agreements described below and/or Rules 144 and 701 under the Securities Act.
Rule 144
In general, under Rule 144 as currently in effect, once we have been subject to the reporting requirements under the Exchange Act for at least 90 days, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the six months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months, would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.
An affiliate of ours who has beneficially owned restricted shares of our common stock for at least one year (or six months, provided that such sale occurs after we have been subject to the reporting requirements under the Exchange Act for at least 90 days) would be entitled to sell, within any three-month period, a number of shares that does not exceed the greater of:
| ● | 1% of shares of our common stock then outstanding; or | |
| ● | the average weekly trading volume of shares of our common stock on the Nasdaq during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC. |
Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to manner of sale provisions, notice requirements and the availability of current public information about us.
Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares.
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Lock-up Agreements
We, all of our directors, officers and holders of one percent (1%) or more of our common stock or securities exercisable for or convertible into our common stock outstanding immediately prior to this offering have entered into lock-up agreements with respect to the disposition of their shares. See “Underwriting — Lock-Up Agreements” for additional information.
Equity Incentive Plan
We intend to file one or more registration statements on Form S-8 under the Securities Act to register our shares issued or reserved for issuance under our 2021 Incentive Award Plan. The first such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.
Registration Rights
The following table provides information about certain warrants issued to certain of our executive officers and employees that have registration rights. The registration rights contained in the warrants permit the holder of the warrant, at any time and from time to time, to require us to register the warrant and the shares underlying the warrant. Such persons have entered into lock-up agreements pursuant to which they will not be permitted to sell our securities for 180 days after the closing of this offering.
| Name | Shares Underlying Warrant | Date Exercisable | Exercise Price | Termination Date | ||||||||
| William A. Mobley, Jr. | 2,500,000 | June 15, 2023 | $ | 0.25 | December 31, 2025 | |||||||
| William A. Mobley, Jr. | 2,500,000 | June 15, 2023 | $ | 0.25 | December 31, 2025 | |||||||
| William A. Mobley, Jr. | 2,500,000 | June 15, 2023 | $ | 0.25 | December 31, 2025 | |||||||
| William A. Mobley, Jr. | 2,500,000 | June 15, 2023 | $ | 0.25 | December 31, 2025 | |||||||
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Our Articles of Incorporation and Bylaws, subject to the provisions of Florida Law, contain provisions which allow the corporation to indemnify any person against liabilities and other expenses incurred as the result of defending or administering any pending or anticipated legal issue in connection with service to us if it is determined that person acted in good faith and in a manner which he reasonably believed was in the best interest of the corporation. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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We have entered into an underwriting agreement with Maxim Group LLC acting as the underwriters and book running manager with respect to this offering (“Maxim” or the “Representative”). Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters and the underwriters have agreed to purchase from us, at the public offering price per share less the underwriting discounts set forth on the cover page of this prospectus.
The underwriters are committed to purchase all the shares of common stock offered by us other than those covered by the option to purchase additional shares described below, if they purchase any shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriters’ obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
| Underwriters | Number of Shares | |||
| Maxim Group LLC | ||||
| Total | ||||
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriters may be required to make in respect thereof.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Over-allotment Option
We have granted the underwriters an over-allotment option. This option, which is exercisable for up to 45 days after the closing of the offering permits the underwriters to purchase a maximum of ___ additional shares (15% of the total number of shares offered in this offering) from us to cover over-allotments, if any. If the underwriters exercise all or part of this option, it will purchase shares covered by the option at the public offering price per share that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the total offering price to the public will be $_____ and the total net proceeds, before expenses, to us will be $____.
Discount
The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their over-allotment option.
| Per Share | Total With No Exercise of Over- Allotment Option | Total With Full Exercise of Over- Allotment Option | ||||||||||
| Public offering price | $ | $ | $ | |||||||||
| Underwriting discount (8%) | $ | $ | $ | |||||||||
| Proceeds, before expenses, to us | $ | $ | $ | |||||||||
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The underwriters propose to offer the shares offered by us to the public at the public offering price per share set forth on the cover of this prospectus. In addition, the underwriters may offer some of the shares to other securities dealers at such price less a concession of $ per share. If all of the shares offered by us are not sold at the public offering price per share, the underwriters may change the offering price per share and other selling terms by means of a supplement to this prospectus.
We will pay the out-of-pocket accountable expenses of the underwriters in connection with this offering. The underwriting agreement, however, provides that in the event the offering is terminated, any advance expense deposits paid to the underwriters will be returned to the extent that offering expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).
We have agreed to pay the underwriters’ reasonable accountable expenses relating to the offering, including (a) all filing fees incurred in clearing this offering with FINRA; (b) fees, expenses and disbursements relating to background checks of our officers and directors; (c) all fees, expenses and disbursements relating to the registration, qualification or exemption of securities offered under the securities laws of foreign jurisdictions designated by the underwriters; (d) stock transfer or stamp taxes, if any, payable upon the transfer of shares of our common stock to the underwriters; (e) the costs associated with bound volumes of the public offering materials as well as Lucite cube mementos; (f) the cost associated with the underwriter’s use of book-building and compliance software for the offering, (g) the underwriters’ actual accountable road show expenses for the offering; and (h) in the event of a closing, up to $165,000 for the fees of the underwriters’ counsel (for which we have paid a $25,000 advance) and up to $50,000 in the event there is not a closing (inclusive of the $25,000 advance).
We have granted to the underwriters an irrevocable right of first participation to act as a co-manager with at least 75.0% of the economics for any and all future public and private equity and debt (excluding commercial bank debt) offerings until eighteen (18) months after completion of this offering.
We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $___.
Discretionary Accounts
The underwriters do not intend to confirm sales of the securities offered hereby to any accounts over which they have discretionary authority.
Representative Warrants
We have agreed to issue the Representative Warrants to the Representative, which enables the Representative to purchase up to a total of 8% of the shares of common stock sold in this offering, at an exercise price equal to 110% of the public offering price). The Representative Warrants are exercisable commencing on a date which is 180 days from the effective date of the registration statement relating to this offering, and will expire on a date which is no more than five (5) years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G). The Representative Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Representative (or its permitted assignees under the Rule) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from effectiveness. In addition, the Representative Warrants provide for unlimited “piggyback” registration rights at our expense with respect to the underlying shares of common stock during the five-year period from the commencement of sales of this offering. We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the Representative Warrants exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
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Lock-Up Agreements
We and our directors, officers and holders of one percent (1%) or more of our outstanding shares of common stock as of the effective date of the registration statement related to this offering (and all holders of securities exercisable for or convertible into shares of common stock) shall enter into customary “lock-up” agreements in favor of Maxim pursuant to which such persons and entities shall agree, for a period of 180 days after the effective date of the registration statement related to this offering, that they shall neither offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities without Maxim’s prior written consent, including the issuance of shares of common stock upon the exercise of currently outstanding convertible securities.
Electronic Offer, Sale and Distribution of Shares
A prospectus in electronic format may be made available on the websites maintained by the underwriters, if any, participating in this offering and the underwriters participating in this offering may distribute prospectuses electronically. The underwriters may agree to allocate a number of shares for sale to its online brokerage account holders. Internet distributions will be allocated by the underwriters that will make Internet distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of, nor incorporated by reference into, this prospectus or the Registration Statement of which this prospectus forms a part, has not been approved or endorsed by us or the underwriters in their capacity as underwriters, and should not be relied upon by investors.
Stabilization
In connection with this offering, the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate-covering transactions, penalty bids and purchases to cover positions created by short sales.
| ● | Stabilizing transactions permit bids to purchase shares so long as the stabilizing bids do not exceed a specified maximum and are engaged in for the purpose of preventing or retarding a decline in the market price of the shares while the offering is in progress. | |
| ● | Over-allotment transactions involve sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any short position by exercising their over-allotment option or purchasing shares in the open market. | |
| ● | Syndicate covering transactions involve purchases of shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the over- allotment option. If the underwriters sell more shares than could be covered by exercise of the over-allotment option and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering. | |
| ● | Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the shares originally sold by that syndicate member are purchased in stabilizing or syndicate covering transactions to cover syndicate short positions. |
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock. As a result, the price of our common stock or warrants in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on Nasdaq, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
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Passive Market Making
In connection with this offering, the underwriters may engage in passive market making transactions in our common stock on Nasdaq in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before the commencement of offers or sales of the shares and extending through the completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.
Other Relationships
The underwriters and their respective affiliates may, in the future provide various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees. However, except as disclosed in this prospectus, we have no present arrangements with the underwriters for any further services.
Offer Restrictions Outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Determination of Offering Price
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated between the underwriters and us. In determining the initial public offering price of our common stock, the underwriters will consider, among other things:
| ● | the prospects for our company and the industry in which we operate; | |
| ● | our financial information; | |
| ● | financial and operating information and market valuations of publicly traded companies engaged in activities similar to ours; | |
| ● | the prevailing conditions of U.S. securities markets at the time of this offering; | |
| ● | the recent market prices of, and the demand for, publicly traded shares of generally comparable companies; | |
| ● | our past and present financial and operating performance; and | |
| ● | other factors deemed relevant by us and the underwriters. |
Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.
Miscellaneous
A prospectus in electronic format may be made available on websites maintained by the underwriters. These websites and the information contained on these websites, or connected to these websites, are not incorporated into and are not a part of this prospectus. The underwriters may agree to allocate a number of shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representative of the underwriters to underwriters that may make Internet distributions on the same basis as other allocations. In connection with the offering, the underwriters or syndicate members may distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
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The validity of the shares of our common stock offered hereby has been passed upon for us by Bahnsen Legal Group, PLLC, Boca Raton, Florida. Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel to the underwriters.
Sadler, Gibb & Associates, LLC, independent registered public accounting firm, has audited our financial statements as June 30, 2023 and 2022 and for each of the two years in the period ended June 30, 2023 as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Sadler, Gibb & Associates, LLC’s report which includes an explanatory paragraph about the existence of substantial doubt concerning the Company’s ability to continue as a going concern, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1, which includes amendments and exhibits, under the Securities Act and the rules and regulations under the Securities Act for the registration of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information that is in the registration statement and its exhibits and schedules. Certain portions of the registration statement have been omitted as allowed by the rules and regulations of the SEC. Statements in this prospectus that summarize documents are not necessarily complete, and in each case you should refer to the copy of the document filed as an exhibit to the registration statement. You may read and copy the registration statement, including exhibits and schedules filed with it, and reports or other information we may file with the SEC from the SEC’s Internet site at www.sec.gov.
Upon completion of this offering, we will become subject to information and periodic reporting requirements of the Exchange Act and we will file annual, quarterly and current reports, proxy statements, and other information with the SEC.
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Index to Financial Statements
CONTENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of FreeCast, Inc.:
Opinion on the Financial Statements
We have audited the accompanying balance sheets of FreeCast, Inc. (“the Company”) as of June 30, 2023 and 2022, the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended June 30, 2023 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended June 30, 2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Sadler, Gibb & Associates, LLC
We have served as the Company’s auditor since 2019.
Draper, UT
November 13, 2023
F-2
BALANCE SHEETS
| June 30, 2023 | June 30, 2022 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | 1,634,494 | $ | 833 | ||||
| Accounts receivable, net | 3,613 | 13,860 | ||||||
| Inventory | - | 68,899 | ||||||
| Other currents assets | 58,398 | 39,431 | ||||||
| Total current assets | 1,696,505 | 123,023 | ||||||
| NON-CURRENT ASSETS: | ||||||||
| Property and equipment, net | 44,108 | 64,529 | ||||||
| Intangible assets, net | - | 15,343 | ||||||
| Security deposits | 126,145 | 126,145 | ||||||
| Deferred S-1 offering costs | - | 65,044 | ||||||
| Operating lease, right-of-use asset | 33,986 | 118,913 | ||||||
| Financing lease, right-of-use asset | 2,060 | 3,404 | ||||||
| Total non-current assets | 206,299 | 393,378 | ||||||
| TOTAL ASSETS | $ | 1,902,804 | $ | 516,401 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Account payable and accrued expenses | $ | 1,669,277 | $ | 3,091,025 | ||||
| Bank overdraft | - | 47,160 | ||||||
| Accounts payable and accrued expenses - related party | 1,523,891 | 939,189 | ||||||
| Current portion of operating lease obligation | 37,419 | 75,224 | ||||||
| Current portion of finance lease obligation | 1,514 | 1,343 | ||||||
| Notes payable, current portion | 950,000 | 850,000 | ||||||
| Notes payable - related party, current | - | 12,000 | ||||||
| Current portion of deferred revenue | 94,700 | 229,182 | ||||||
| Total current liabilities | 4,276,801 | 5,245,123 | ||||||
| LONG TERM LIABILITIES: | ||||||||
| Deferred revenue, net of current portion | 88,071 | 178,150 | ||||||
| Notes payable, net of current portion | 475,356 | 275,356 | ||||||
| Notes payable - related parties, net of current portion | 89,289 | 89,139 | ||||||
| Convertible notes payable - related parties, net of current portion | 67,048 | 84,582 | ||||||
| Revolving convertible notes payable - related parties, net of current portion and debt discount | 4,819,592 | 1,385,316 | ||||||
| Operating lease obligation, net of current portion | - | 34,093 | ||||||
| Finance lease obligation, net of current portion | 546 | 2,061 | ||||||
| Total long-term liabilities | 5,539,902 | 2,048,697 | ||||||
| TOTAL LIABILITIES | 9,816,703 | 7,293,820 | ||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Preferred stock, $0.0001 par value, 5,000,000 shares authorized; and no shares issued and outstanding | - | - | ||||||
| Common stock, $0.0001 par value, 200,000,000 authorized, 44,164,626 and 37,053,376 shares issued and outstanding, respectively | 4,430 | 3,718 | ||||||
| Common stock subscriptions, 1,250,000 and 256,250 shares, respectively | 1,250,000 | 256,250 | ||||||
| Additional paid-in capital | 39,556,708 | 26,983,054 | ||||||
| Accumulated deficit | (48,725,037 | ) | (34,020,441 | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | (7,913,899 | ) | (6,777,419 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 1,902,804 | $ | 516,401 | ||||
The accompanying notes are an integral part of these financial statements
F-3
STATEMENTS OF OPERATIONS
| For the Years Ended | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| REVENUE: | ||||||||
| Subscription | $ | 503,419 | $ | 295,720 | ||||
| Product sales | 441 | 4,964 | ||||||
| Other revenue | 3,340 | 2,533 | ||||||
| TOTAL REVENUE | 507,200 | 303,217 | ||||||
| COST OF REVENUE: | ||||||||
| Cost of revenue | 220,147 | 157,285 | ||||||
| TOTAL COST OF REVENUE | 220,147 | 157,285 | ||||||
| GROSS PROFIT | 287,053 | 145,932 | ||||||
| OPERATING COSTS AND EXPENSES: | ||||||||
| Compensation and benefits | 2,871,804 | 3,889,775 | ||||||
| Sales and marketing | 364,246 | 327,879 | ||||||
| Impairment of assets | - | 2,900,709 | ||||||
| General and administrative | 4,773,128 | 3,490,374 | ||||||
| TOTAL OPERATING EXPENSES | 8,009,178 | 10,608,737 | ||||||
| LOSS FROM OPERATIONS | (7,722,125 | ) | (10,462,805 | ) | ||||
| OTHER INCOME (EXPENSE): | ||||||||
| Interest expense | (632,307 | ) | (1,207,815 | ) | ||||
| Other (expense) income, net | 518,977 | (755 | ) | |||||
| Gain on the settlement of accounts payable | 1,449,338 | - | ||||||
| Gain on the settlement of debt | - | 67,453 | ||||||
| TOTAL OTHER INCOME (EXPENSE) | 1,336,008 | (1,141,117 | ) | |||||
| NET LOSS BEFORE INCOME TAX | (6,386,117 | ) | (11,603,922 | ) | ||||
| Income tax expense (benefit) | - | - | ||||||
| NET LOSS | $ | (6,386,117 | ) | $ | (11,603,922 | ) | ||
| Deemed dividend on warrant modification | (9,848,947 | ) | - | |||||
| Net loss attributable to common shareholders | (16,235,064 | ) | (11,603,922 | ) | ||||
| Net loss per common share – basic and diluted | $ | (0.40 | ) | $ | (0.32 | ) | ||
| Weighted average common shares outstanding – basic and diluted | 40,225,866 | 36,257,664 | ||||||
The accompanying notes are an integral part of these financial statements
F-4
STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR YEARS ENDED JUNE 30, 2023 AND 2022
| Common Stock | Common Stock Subscriptions | Additional Paid-in | Accumulated | Total Stockholders’ | ||||||||||||||||||||
| Shares | Amount | Amount | Capital | Deficit | Deficit | |||||||||||||||||||
| Balance as of June 30, 2021 | 34,873,376 | $ | 3,500 | $ | - | $ | 19,293,405 | $ | (22,416,519 | ) | $ | (3,119,614 | ) | |||||||||||
| Common stock and warrants issued for cash | 2,180,000 | 218 | - | 3,309,782 | - | 3,310,000 | ||||||||||||||||||
| Stock-based compensation | - | - | - | 1,306,906 | - | 1,306,906 | ||||||||||||||||||
| Common stock subscriptions | - | - | 256,250 | - | - | 256,250 | ||||||||||||||||||
| Contingent warrants granted with convertible debt | - | - | - | 23,720 | - | 23,720 | ||||||||||||||||||
| Beneficial conversion feature | - | - | - | 3,049,241 | - | 3,049,241 | ||||||||||||||||||
| Net loss | - | - | - | - | (11,603,922 | ) | (11,603,922 | ) | ||||||||||||||||
| Balance as of June 30, 2022 | 37,053,376 | $ | 3,718 | $ | 256,250 | $ | 26,983,054 | $ | (34,020,441 | ) | $ | (6,777,419 | ) | |||||||||||
| Cumulative effect of adoption of ASU 2020-06 | - | - | - | (4,494,267 | ) | 1,530,468 | (2,963,799 | ) | ||||||||||||||||
| Balance as of July 1, 2022 | 37,053,376 | $ | 3,718 | $ | 256,250 | $ | 22,488,787 | $ | (32,489,973 | ) | $ | (9,741,218 | ) | |||||||||||
| Common stock and warrants issued for cash | 6,855,000 | 686 | - | 6,854,314 | - | 6,855,000 | ||||||||||||||||||
| Stock-based compensation | - | - | - | 108,436 | - | 108,436 | ||||||||||||||||||
| Common stock subscriptions | - | - | 1,250,000 | - | - | 1,250,000 | ||||||||||||||||||
| Deemed dividends for warrant modification | - | - | - | 9,848,947 | (9,848,947 | ) | - | |||||||||||||||||
| Shares issued to settle common stock subscriptions | 256,250 | 26 | (256,250 | ) | 256,224 | - | - | |||||||||||||||||
| Net loss | - | - | - | - | (6,386,117 | ) | (6,386,117 | ) | ||||||||||||||||
| Balance as of June 30, 2023 | 44,164,626 | 4,430 | 1,250,000 | 39,556,708 | (48,725,037 | ) | (7,913,899 | ) | ||||||||||||||||
The accompanying notes are an integral part of these financial statements
F-5
STATEMENTS OF CASH FLOWS
| For the Years Ended, | ||||||||
| June 30, 2023 | June 30, 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITES: | ||||||||
| Net Loss | $ | (6,386,117 | ) | $ | (11,603,922 | ) | ||
| Reconciliation of net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization expense | 40,018 | 52,938 | ||||||
| Bad debt expense | 790 | 7,509 | ||||||
| Inventory write-off | 68,899 | 31,045 | ||||||
| Amortization of operating lease expense, right of use asset | 84,927 | 71,525 | ||||||
| Gain on settlement of accounts payable | 1,449,338 | - | ||||||
| Gain on forgiveness of PPP loan | - | (91,176 | ) | |||||
| Loss on extinguishment of debt | - | 23,720 | ||||||
| Stock-based compensation | 108,436 | 1,306,906 | ||||||
| Amortization of debt discount | - | 806,908 | ||||||
| Impairment of assets | - | 2,900,709 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 9,457 | 52,330 | ||||||
| Inventory | - | (71,259 | ) | |||||
| Other current assets | (18,967 | ) | (31,141 | ) | ||||
| Deferred offering costs | 65,044 | (65,044 | ) | |||||
| Operating lease liability | (71,898 | ) | (82,047 | ) | ||||
| Financing lease liability | 1,334 | 140 | ||||||
| Accounts payable and accrued expenses | (2,871,086 | ) | 1,496,498 | |||||
| Accounts payable and accrued expenses - related party | 584,820 | 354,553 | ||||||
| Deferred revenue | (224,561 | ) | (36,346 | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | (7,159,556 | ) | (4,876,154 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Capitalization of software development costs | - | (2,136,302 | ) | |||||
| Purchase of property and equipment | (4,253 | ) | (8,732 | ) | ||||
| NET CASH USED IN INVESTING ACTIVITES | (4,253 | ) | (2,145,034 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITES: | ||||||||
| Proceeds from issuance of common stock and warrants | 6,855,000 | 3,310,000 | ||||||
| Proceeds from common stock to be issued | 1,250,000 | - | ||||||
| Payments on finance lease | (1,344 | ) | (1,192 | ) | ||||
| Bank overdraft | (47,160 | ) | 47,160 | |||||
| Proceeds from notes payable - related party | 2,500 | 20,500 | ||||||
| Repayments on notes payable – related party | (32,034 | ) | (124,677 | ) | ||||
| Proceeds from revolving notes payable | 1,067,858 | 3,023,470 | ||||||
| Repayments on revolving notes payable | (597,500 | ) | - | |||||
| Proceeds from issuance of convertible notes payable | 300,000 | 250,000 | ||||||
| Proceeds from notes payable | - | 222,000 | ||||||
| Repayments on notes payable | - | (35,000 | ) | |||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES: | 8,797,470 | 6,712,261 | ||||||
| Net change in cash | 1,633,661 | (308,927 | ) | |||||
| Cash, beginning of period | 833 | 309,760 | ||||||
| Cash, end of period | $ | 1,634,494 | $ | 833 | ||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid for interest | $ | - | $ | - | ||||
| Cash paid of income taxes | $ | - | $ | - | ||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Issuance of Beneficial Conversion Feature | $ | - | $ | 3,049,241 | ||||
| Common shares issued to settle subscriptions | $ | 256,250 | $ | - | ||||
| Conversion of debt to equity | $ | - | $ | 256,250 | ||||
The accompanying notes are an integral part of these financial statements
F-6
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023 and 2022
Note 1 – Organization and Description of Business
FreeCast, Inc. (the “Company”) developed and markets an interactive digital media guide that facilitates access to a virtual library of entertainment media. The Company is based in Orlando, Florida and was founded in 2011 as a Florida Corporation. The Company’s primary products are SmartGuide and Select TV. Both SmartGuide and Select TV utilize the Company-designed proprietary technology that searches, and aggregates internet distributed streaming media into an electronic media guide. SmartGuide is licensable to brands/manufacturers of devices with large online user bases, while Select TV is a retail package that is sold by monthly and/or annual subscriptions.
Going Concern
The Company’s has incurred recurring losses from operations since inception, accumulating a deficit of approximately $48.7 million as of June 30, 2023. For the years ended June 30, 2023 and 2022, the Company incurred a net loss of approximately $6.4 million and $11.6 million, respectively. The Company may incur additional losses and negative operating cash flows in the future. Failure to generate sufficient revenues, reduce spending or raise additional capital could adversely affect the Company’s ability to achieve its intended business objectives. These matters, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
Since the inception of the Company in 2011, the operations of the Company have been funded primarily through sales of common stock to private investors, debt financing and exchange of common stock for services received by the Company. Management cannot be certain that additional funding will be available on acceptable terms, or at all. Management plans include raising additional capital through the sale of equity and debt securities, along with exploring additional avenues to increase revenues. To the extent that the Company raises additional funds by issuing equity securities, the Company’s shareholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact the Company’s ability to conduct business.
The accompanying financial statements for the years ended June 30, 2023 and 2022 have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. During the remaining 2023 calendar year, management intends to raise additional debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be consummated or obtained in sufficient amounts necessary to meet the Company’s needs. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
COVID-19
There has been outbreaks in several countries, including the United States, of the highly transmissible and pathogenic coronavirus (“COVID-19”). The outbreak of such Covid-19 resulted in a widespread health crisis that adversely affected general commercial activity and the economies and financial markets of many countries, including the United States. Although to date, the Company has not been adversely affected by Covid-19, the measures taken by the governments of countries affected could adversely affect the Company’s business, financial condition, and results of operations.
F-7
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements have been prepared in accordance with GAAP and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.
Use of Estimates
The preparation of these financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and disclosure in the accompanying notes. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: accounts receivable realization, the valuation allowance on deferred tax assets, the valuation of the Company’s common stock, options, warrants and revenue recognition.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposits, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.
Accounts receivable
Accounts receivables are carried at original invoice amount less an estimate made for holdbacks and doubtful receivables based on a review of all outstanding amounts. The Company determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition, credit history, and current economic conditions and set up an allowance for doubtful accounts when collection is uncertain. Customers’ accounts are written off when all attempts to collect have been exhausted. Recoveries of accounts receivable previously written off are recorded as income when received. The balance of allowance for doubtful accounts as of June 30, 2023 and 2022 is $0.
Inventory
Merchandise inventory consists solely of finished goods and is valued at the lower of cost (first-in, first-out) or net realizable value. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in a reduction in the rate of orders and reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. For the fiscal year ended June 30, 2023, the Company recognized a provision to reduce inventory by $68,899 as the inventory was deemed obsolete. As of June 30, 2023 and 2022, the reserve for inventory obsolescence aggregated $68,899 and $0, respectively.
Property and Equipment
Property and Equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to five years. Maintenance and repairs are charged against expense as incurred.
F-8
Leases
Effective July 1, 2019, we adopted ASC 842, Leases. Under ASC 842, we determine if a contractual arrangement is, or contains, a lease at the inception date. Right-of-use (“ROU”) assets and liabilities related to operating leases and finance leases are separately reported in the balance sheets.
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. When the rate implicit to the lease cannot be readily determined, we utilize our incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that a lessee would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment. Operating lease ROU assets also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term.
The ROU assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Lease liabilities are increased by interest and reduced by payments each period, and the ROU asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the ROU asset result in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred.
Intangible Assets
Intangible assets are comprised of application software development costs and for internal use are capitalized and amortized over an estimated useful life of three years. Costs related to the design or maintenance of internal-use software and application development are expensed as incurred. As of June 30, 2023, the balance in intangible assets was $0.
Impairment of Long-lived Assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable as prescribed by ASC Topic 360-10-05. “Property, Plant and Equipment”. If the carrying amount of the asset, including any intangible assets associated with that asset, exceeds its estimated undiscounted net cash flow, before interest, the Company will recognize an impairment loss equal to the difference between it carrying amount and its estimated fair value. As of June 30, 2023 and 2022, the Company recognized $0 and $2,900,709, respectively, in impairment losses, as the carrying amount exceeded the assets’ estimated undiscounted net cash flows.
Income Taxes
The Company accounts for income taxes under ASC 740 “Income Taxes,” which codified SFAS 109, “Accounting for Income Taxes” and FIN 48 “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
FASB issued ASC 740-10 “Accounting for Uncertainty in Income Taxes”. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. This standard 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. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.
In the twelve months ended June 30, 2022, the effective rate also included disallowed expenses used to substantiate the expected forgiveness of the loan secured under the Paycheck Protection Program (the “PPP”) established under the Coronavirus Aid, Relief and Economic Security Act enacted March 27, 2020 (the “CARES Act”). Accordingly, loan proceeds used to pay for payroll and select overhead costs may substantiate the forgiveness of the PPP loan but become non-deductible expenses for tax purposes.
F-9
Revenue Recognition
Revenue is recognized upon transfer of control of promised goods or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company’s contracts include various product or services or a combination of both, which are generally capable of being distinct and are accounted for as separate performance obligations. The Company’s contracts may contain multiple distinct performance obligations.
The Company estimates the transaction price of a contract based on the expected value for which a significant reversal of revenue is not expected to occur. We generally determine stand-alone selling prices based on the prices charged to customers.
In arrangements with multiple performance obligations, the estimated transaction price of each contract is allocated to each distinct performance obligation based on relative stand-alone selling price (“SSP”). For performance obligations routinely sold separately, the SSP is determined by evaluating such stand-alone sales. For those performance obligations that are not routinely sold separately, the SSP is determined based on market conditions and other observable inputs.
Subscription Revenue
The Company no longer generates subscription revenue through renewal sales of Rabbit TV and Rabbit TV Plus, or through Select TV and Streaming TV Kits, which operated as the successor products to Rabbit TV and Rabbit TV Plus. In October 2022, the Company’s SelectTV.com paid subscription service and packaged SelectTV Streaming TV Kits were discontinued. The Company rebranded to the corporate namesake FreeCast.com, and relaunched its SmartGuide as a free registration subscription service. SmartGuide is the Company’s internet distributed streaming media guide that searches and aggregates media content on the web and facilitates access to its customers through Wi-Fi-enabled devices that support streaming video.
The Company does, however, sell monthly subscriptions for premium content purchased through its SmartGuide for varying fees for different content. Revenue from such premium subscription fees is recognized on a gross basis over the service period as the Company is deemed to be the principal in the relationship with the end user. The Company controls the content before transferring it to the end user and has latitude in establishing pricing. The Company both retransmits and “ingests” and distributes content.
Subscription revenue is derived from online sales through search engine optimization, search engine marketing, various marketing advertising services, the utilization of resellers in the form of publishers that promote upcoming retail promotions and packages, as well as direct sales to subscribers of our Value Channels subscription service. Value Channels subscription contains 17 cable channels and sells on a monthly subscription or annual fee. Value Channels is integrated into the initial FreeCast.com free registration and then offered as an upgrade. Both FreeCast.com (free registration) and Value Channels is available in various streaming Smart TV models (Google TV’s, Amazon Fire TV’s, LG, Samsung, TCL, Sony, and others), plus Streaming Devices (Amazon Fire, Google ChromeCast, Apple TV), PC’s/Laptops and mobile apps for Android and iOS devices.
Subscription revenue is recognized ratably on a straight-line basis over the duration of the subscription period, generally ranging from one month to five years. If the subscriber renews early, then the expiration date is extended by the renewal period, and the additional subscription fee is deferred and amortized over the additional months purchased by the subscriber. The Company no longer offers SelectTV lifetime subscriptions, which was initially deferred and recognized over a five-year period. All subscription fees are collected at the time of purchase.
F-10
Deferred revenue balances as of June 30, 2023 and 2022:
| As of June 30, | ||||||||
| 2023 | 2022 | |||||||
| Deferred revenue, current portion | 94,700 | 229,182 | ||||||
| Deferred revenue, non-current portion | 88,071 | 178,150 | ||||||
| Total deferred revenue | $ | 182,771 | $ | 407,332 | ||||
Deferred revenue reflects consideration invoiced prior to the completion of performance obligations and revenue recognition. Deferred revenue consists primarily of subscriptions for multiple months purchased upfront and recognized ratably over the term of the subscription. Revenue recognized during the year ended June 30, 2023 from amounts included in the total deferred revenue as of June 30, 2022 was $228,640. Revenue recognized during the year ended June 30, 2022 from amounts included in the total deferred revenue as of June 30, 2021 was $194,071. Revenue allocated to remaining performance obligations during the year ended June 30, 2023 that is included the deferred revenue balance as of June 30, 2023 was $4,079. Revenue allocated to remaining performance obligations during the year ended June 30, 2022 that is included the deferred revenue balance as of June 30, 2022 was $157,725.
Product Sales
Beginning in 2023, in conjunction with the release of our new product FreeCast Home, we started recognizing contracts with customers from product sales requiring performance up to delivery, as well as contracts with customers that contain a subscription portion that causes revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. For our physical product sales, our performance obligations are satisfied at that time.
Other Revenue
Other revenue includes licensing, advertising and referral fee revenue. The Company generates revenue through free registrations of FreeCast.com by partnering with retailers, manufacturers, operators and/or distributors of streaming devices, mobile phones, broadband carriers, broadcasters, property management, multi-dwelling developers, builders, and various mass consumer communities of streaming tv watchers. A FreeCast.com license is freely provided per registered consumer marketed by distributors in exchange for a negotiated revenue sharing percentage with each distributor on a case-by-case basis. Affiliate commissions are earned and then shared from third-party advertisement service providers, pay-per-view movie or series distributors, and live events tickets sales for such things as professional boxing or concerts. These license arrangements have not resulted in significant revenue to date.
The Company generates advertising revenue pursuant to arrangements with advertising agencies and brokers. Under these arrangements, it provides the agencies and brokers the ability to sell advertising on its service directly to advertisers. The Company reports this revenue net of amounts due to agencies and brokers because the Company is neither the primary obligor under these arrangements, nor does it set the pricing or establish or maintain the relationship with the advertisers.
Referral fee revenue is generated through premium services which are also available on our platform, for an additional fee, to allow single or time-limited use of private, decrypted viewing of movies, sporting events, concerts or other types of events.
F-11
The following table presents the Company’s revenue on a disaggregated basis:
| For the Years Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Subscriptions | $ | 503,419 | $ | 295,720 | ||||
| Product Sales | 441 | 4,964 | ||||||
| Advertising and other revenues | 3,340 | 2,533 | ||||||
| Total | $ | 507,200 | $ | 303,217 | ||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents and trade accounts receivable. Cash and cash equivalents of the Company are exposed to credit risk, subject to federal deposit insurance, in the event of default by the financial institutions holding its cash and cash equivalents to the extent of amounts recorded on the balance sheet. The cash accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of June 30, 2023, the Company’s cash balance exceeded the FDIC insured limit by $1,384,494.
For accounts receivable, the Company performs ongoing credit evaluations of customers to assess the probability of accounts receivable collection based on a number of factors, including past transaction experience with the customer, evaluation of their credit history, and review of the invoicing terms of the contract. Accounts receivables are reported net of an allowance for doubtful accounts when applicable. The allowance for doubtful accounts reflects management’s best estimate of probable losses inherent in the accounts receivable balance at each reporting date. Management determines the allowance based on known troubled accounts, historical experience, and other currently available evidence. The Company recognized bad debt expense for the year ended June 30, 2023 and 2022 of $790 and $7,509, respectively. The balance of allowance for doubtful accounts as of June 30, 2023 and 2022 was $0.
Cost of Revenue
Cost of revenue consists primarily of hosting, product development, infrastructure costs and the salaries and benefits related to employees in software engineering, facilities-related expenses, and information technology associated with supporting those functions. Hosting costs consist of content streaming, maintaining our internet service and creating and serving advertisements through third-party ad servers. The Company makes payments to third-party ad servers in the period in which the advertising impressions are delivered or click-through actions occur, and accordingly records this as a cost of revenue in the related period. The Company incurs product development expenses primarily for improvements to the Company’s website, the apps, development of new advertising products and development and enhancement of the guide and streaming system. Product development costs are generally expensed as incurred. Certain website development and internal use software development costs may be capitalized when specific criteria are met. In such cases, the capitalized amounts are amortized to cost of revenue over the useful life of the related application once the application is placed in service.
Sales and Marketing
Sales and marketing consist primarily of contracts with third-party operators as well as employee-related costs, including, and commissions related to employees in sales, sales support and marketing departments. In addition, sales and marketing expenses include external sales and marketing expenses such as third-party marketing, branding, advertising, public relations expenses, commissions, facilities-related expenses, and infrastructure costs.
F-12
Fair Value of Financial Instruments
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 — assets and liabilities whose significant value drivers are unobservable.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to all classes of common shareholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings (loss) per share is determined in the same manner as basic earnings (loss) per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase would be anti-dilutive.
The following table provides the number of common stock equivalents not included in diluted income per share, because the effects are anti-dilutive, for the fiscal years ended June 30, 2023 and 2022, respectively.
| For the Fiscal Year Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Convertible debt and liabilities | 25,556,836 | 21,448,572 | ||||||
| Options | 1,615,324 | 1,792,176 | ||||||
| Warrants | 26,112,174 | 23,826,641 | ||||||
| Total | 53,284,334 | 47,067,389 | ||||||
Stock-Based Compensation
Stock-based compensation issued is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis. The Company will recognize compensation expense, measured as the fair value of the stock-based compensation on grant date, when a performance condition is considered probable of occurring. For purposes of determining the variables used in the calculation of stock-based compensation issued to employees, the Company performs an analysis of current market data and historical data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, the Company uses these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of warrants granted any fluctuations in these calculations could have a material effect on the results presented in the Company’s Statements of Operations. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on the Company’s financial statements.
F-13
Loss Contingencies
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed.
Modifications to Equity-classified Instruments
In accounting for modifications of equity-classified warrants, it is the Company’s policy to determine the impact by analogy to the share-based compensation guidance of ASC 718, Compensation - Stock Compensation (“ASC 718”). The model for a modified share-based payment award that is classified as equity and remains classified in equity after the modification is addressed in ASC 718-20-35-3. Pursuant to that guidance, the incremental fair value from the modification is recognized as an expense in the statements of operations to the extent the modified instrument has a higher fair value; however, in certain circumstances, such as when an entire class of warrants are modified, the measured increase in fair value may be more appropriately recorded as a deemed dividend, depending upon the nature of the warrant modification.
The Company modified certain equity-classified warrants in the year 2023 (see Note 8).
Recently Issued Accounting Pronouncements
In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company adopted ASU 2020-06 in the first quarter of fiscal year 2023 using the modified retrospective method of transition which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result, the cumulative effect of the accounting change increased the carrying amount of the convertible notes, net by $2,963,799, increased retained earnings by $1,530,468, and reduced additional paid-in capital by $4,494,267.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standard Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.
Note 3 – Inventory
Inventory consists of finished goods purchased for resale and is stated at the lower of cost (first in, first out method) or net realizable value. The Company recognized $68,899 and $31,045 in inventory obsolescence for the fiscal years ended June 30, 2023 and 2022, respectively, which is classified in cost of revenue in the Statements of Operations.
F-14
Note 4 – Property and Equipment
Property and equipment, net consisted of the following:
| June 30, | June 30, | |||||||
| 2023 | 2022 | |||||||
| Property and equipment | $ | 146,735 | $ | 142,482 | ||||
| Less: accumulated depreciation | (102,627 | ) | (77,953 | ) | ||||
| Property and equipment, net | $ | 44,108 | $ | 64,529 | ||||
Depreciation expense was $24,674 and $18,322 for the years ended June 30, 2023 and 2022, respectively, and is classified in general and administrative expenses in the Statements of Operations.
Note 5 – Intangible Assets
Intangible assets, net as of June 30, 2023 and 2022 consisted of the following:
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Internal Use Software | $ | 105,000 | $ | 105,000 | ||||
| Less accumulated amortization | (105,000 | ) | (89,657 | ) | ||||
| Net carrying value | $ | - | $ | 15,343 | ||||
During the fiscal years ended June 30, 2023 and 2022, the Company recorded total amortization expense of $15,343 and $34,616, respectively. During the years ended June 30, 2023 and 2022, the Company recorded an impairment associated with the internal use software assets of $0 and $2,900,710, respectively.
As of June 30, 2023, the Company has fully amortized the internal use software.
Note 6 – Deferred Offering Costs
As of June 30, 2023 and 2022, the Company had deferred offering costs of $0 and $65,044, respectively, related to the Company’s pending equity raise and filing of Form S-1 with the Securities and Exchange Commission. Costs incurred are in accordance with ASC 340-10-S25 and are deferred and netted against proceeds of the equity raise or expensed if no raise is completed. The Company elected to expense the entire deferred offering cost balance during the year ended June 30, 2023, due to the extended delay of over 90 days. The expense was recorded in general and administrative expense in the accompanying statement of operations.
F-15
Note 7 – Debt
Convertible Note Payable – Related Party
In June 2016, the Chief Executive Officer of the Company (“CEO”), William Mobley, loaned the Company $111,000, at an interest rate of 12% per annum. The loan matured on December 31, 2017, is in default and remains as an on-demand liability of the Company. As of June 30, 2023 and June 30, 2022, accrued interest charges related to this loan were $19,003, and $10,191, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay any interest towards this loan. The note is convertible into shares of common stock at a conversion price of $0.25 per share. In accordance with ASC 470, the embedded beneficial conversion is recognized separately and was measured at its intrinsic value (see Note 11). As of June 30, 2023 and June 30, 2022, the outstanding principal and interest due to William Mobley was $86,051, and $94,733, respectively.
Convertible Note Payable
In March 2022, a third party loaned the Company $250,000, at an interest rate of 10% per annum. The note was convertible into shares of common stock at a conversion price of $2.00 per share with 50,000 warrants to purchase shares of the Company’s common stock at $1.75. On June 5, 2022, per agreement between the Company and the third party, the note is to be converted into 256,250 shares of the Company’s common stock at an amended conversion price of $1.00 per share, and additionally, upon conversion, increased the 50,000 warrants to 256,250 warrants granted to the lender. As of the amendment dated June 5, 2022, the Company evaluated the debt for extinguishment or debt modification under FASB ASC Topic 470-50, Debt – Modifications and Extinguishments, and determined extinguishment was applicable as a result of the addition of a substantive conversion feature. Under the rules, the Company extinguished the debt, which included the capitalized interest through June 5, 2022. The resulting loss on extinguishment was valued at $23,722. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay any interest towards this loan. The 256,250 shares of the Company’s common stock were issued on September 16, 2022, and as such, the liability associated with this note was classified as common stock subscriptions on the balance sheet for the year ended June 30, 2023 and 2022 at a value of $0 and $256,250, respectively.
Notes Payable – Related Parties
Between July 2018 and April 2018, a related party, a Company owned by CEO, William Mobley, Public Wire, loaned the Company $66,380, at an interest rate of 12% per annum. The notes representing the loan originally matured on dates ranging from April 1, 2019 to January 1, 2020. Effective June 30, 2021, the Company amended the original promissory note with Public Wire and combined principal and interest from the previous notes under one new loan. In addition, the Company extended the maturity date to June 30, 2024. As of June 30, 2023 and 2022, accrued interest related to this loan was $21,411 and $10,697, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay interest related to this loan. As of June 30, 2023 and 2022, the outstanding principal and interest due to Public Wire was $110,700 and $99,836, respectively.
During June 2022, an employee loaned the Company $12,000, at an interest rate of 6% per annum. The note matured on August 1, 2022. As of June 30, 2023 and 2022, accrued interest related to this loan was $0 and $47, respectively. As of June 30, 2023 and 2022, the outstanding principal and interest due to Ms. Bevington was $0 and $12,047, respectively.
Revolving Convertible Notes Payable – Related Parties
On July 1, 2018, the Company signed a revolving convertible note agreement with Nextelligence, the majority shareholder, which was amended and restated as of July 2, 2018, for an amount up to $500,000; with any borrowings on this loan being at the Company’s complete discretion. Outstanding principal accrued interest at 12% per annum, and was due and payable on July 1, 2020. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest was convertible into shares of the Company’s common stock at a conversion price of $0.25 per share. The loan matured on July 1, 2020, was in default and remained as an on-demand liability of the Company’s until June 30, 2021. On June 30, 2021, the Company entered into a new revolving convertible promissory note with Nextelligence for an amount up to $2,500,000; with any borrowings on this loan being at the Company’s complete discretion. Outstanding principal accrues interest at 12% per annum. The borrowing limit was increased to $6,000,000 pursuant to a first amendment to the note dated June 13, 2022. Pursuant to a second amendment to the note dated July 17, 2023, the borrowing limit was increased to $10,000,000 and the maturity date extended to June 30, 2025. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per share. For the fiscal years ended June 30, 2023 and 2022, the Company in various installments borrowed $1,067,859 and $2,907,220, respectively, in additional proceeds from this loan. As of June 30, 2023 and June 30, 2022, the balance of unpaid accrued interest was $892,007 and $326,666, respectively, related to this loan. In addition, as of June 30, 2023 and June 30, 2022, the outstanding principal and interest due is $5,711,599 and $4,675,781, respectively.
F-16
During the fiscal year ended June 30, 2022 the Company recognized a beneficial conversion feature related to this note of $3,036,978 and $806,909 in the amortization of the beneficial conversion feature as interest expense. See Note 8 for further discussion of the beneficial conversion feature. The Company adopted ASU 2020-06 in the first quarter of fiscal year 2023, and as such, has not recognized any beneficial conversion feature or amortization expense during the twelve months ended June 30, 2023. The balance of the revolving convertible notes payable to related parties, net of debt discount, as of June 30, 2023 and 2022 was $4,819,592 and $1,385,316, respectively.
Notes Payable
On September 15, 2016, the Company entered into an agreement with U.S. Premium Finance to provide financing in an aggregate amount of $1,967,450 for the insurance premium associated with both D&O and Workers Compensation policies. Both policies commenced September 15, 2016, and provided coverage for the next 36 months, expiring September 15, 2019. The loan bears interest at a floating rate per annum equal to the greater of either (i) 4.99% or (ii) 4.99% plus the Wall Street Journal Prime Rate. During the year ended June 30, 2019 and 2018, the interest rate on the loan was 4.99%. The Company was required to pay monthly principal and interest of approximately $58,957, paid over 36 months, with the final payment on October 15, 2019.
The U.S. Premium Finance agreement dated September 15, 2016 was secured against all rights, title, and interest associated with the D&O and Workers Compensation policies. As part of the legal costs associated with obtaining premium financing, on September 19, 2016 the Company agreed to pay a loan origination fee in the amount of $98,250. The loan origination fee was recorded as a debt discount and amortized over the life on the policy, maturing September 2019.
On April 18, 2017, the Company entered into an additional agreement with U.S. Premium Finance. The Company received $568,935 in net proceeds from them premium financing agreement. The loan bears interest at a floating rate per annum equal to the greater of either (i) 4.99% or (ii) 4.99% plus the Wall Street Journal Prime Rate. During the year ended June 30, 2019 and 2018, the interest rate on the loan was 4.99%. The Company was required to pay monthly principal and interest of approximately $29,705, paid over 20 months, with the final payment on December 15, 2018.
The U.S. Premium Finance agreement dated April 18, 2017 was secured against all rights, title, and interest associated with the general liability insurance policy. As part of the legal costs associated with obtaining premium financing, on April 18, 2017 the Company incurred and capitalized a loan origination fee in the amount of $28,348. The loan origination fee was amortized over the life of the policy, maturing December 2018. As of June 30, 2022 and 2021, there were no prepaid loan origination fees; as the amount was fully amortized.
On November 13, 2019, the Company settled the outstanding liability with U.S. Premium Finance, in which the Company agreed to pay $1,000,000 in various installments, with the last payment due on December 5, 2022. During the year ended June 30, 2020, the Company, in accordance with the agreement, reduced the principal on the balance sheet and recognized a $774,009 gain on forgiveness of debt. In adherence to the conditions of the agreement, the Company paid $275,000 towards the outstanding balance of the loan as of June 30, 2020. In addition, as of November 13, 2019, the Company had accrued approximately $162,350 in interest, which was reduced to zero based on the settlement amount and the Company recognized as a gain on forgiveness of debt, of $162,350. As of June 30, 2023 and 2022 the balance due as of June 30, 2023 and 2022 was $650,000, all of which is current. The Company is in default on the outstanding liability (see note 9).
F-17
On October 22, 2019, the Company entered into a promissory note with unrelated third party for the amount of $250,000, at an interest at 6% per annum. Effective, June 30, 2021, the Company combined all previous principal ($250,000) and interest related ($25,356) to this loan and extend the maturity date to June 30, 2024 as per the second amendment to the agreement. As of June 30, 2023 and 2022, accrued interest charges related to this loan was $33,043 and $16,521, respectively. During the years ended June 30, 2023 and 2022, the Company did not pay any Interest towards this loan. As of June 30, 2023 and 2022, the outstanding principal and interest due was $308,399, and $291,878, respectively.
Between March 2022 and June 2022, an unrelated third party, loaned the Company $200,000, at an interest rate of 6% per annum. In August 2022, the unrelated third party loaned the Company an additional $100,000. The notes matured on March 1, 2023, and were in default until a renewal and consolidating note was entered into as of August 1, 2023 in the principal amount of $320,383.50. The interest rate under the renewal note is 6% per annum, and it matures on July 31, 2024. As of June 30, 2023 and 2022, accrued interest related to these loans were $18,805 and $1,693, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay interest related to these loans. As June 30, 2023 and 2022, the outstanding principal and interest due was $318,805 and $201,693, respectively.
On June 6, 2022, an employee of the Company, loaned us $12,000, at an interest rate of 6% per annum. The note matured on August 1, 2022, is in default and remains an on-demand liability of ours. As of June 30, 2022, accrued interest related to this loan was $47. During the fiscal year ended June 30, 2022, we did not pay interest related to this loan. As June 30, 2023 and 2022, the outstanding principal and interest due was $0 and $12,047, respectively. Additionally, in 2022, the employee loaned the Company $10,000 which was paid back prior to June 30, 2022.
On November 18, 2022, the Company entered into a loan agreement with two unrelated parties for the aggregate amount of $200,000, at an interest rate of 6% compounded annually. The loan matures on December 1, 2024. As of June 30, 2023, accrued interest related to the loan was $7,364. During the fiscal year ended June 30, 2023, the Company did not pay interest on the loan. As of June 30, 2023, the outstanding principal and interest due on the loan was $207,364.
Notes payable as of June 30, 2023 and 2022 summarized as follows:
| June 30, | ||||||||||||||
| Lender | Interest Rate | Maturity | 2023 | 2022 | ||||||||||
| U.S. Premium Finance | 4.99 | % | 12/5/2022 | $ | 650,000 | $ | 650,000 | |||||||
| Unrelated third party | 6.00 | % | 6/30/2024 | 275,356 | 275,356 | |||||||||
| Unrelated third party | 6.00 | % | 3/1/2023 | 300,000 | 200,000 | |||||||||
| Unrelated third party | 6.00 | % | 12/1/2024 | 200,000 | - | |||||||||
| 1,425,356 | 1,125,356 | |||||||||||||
| Less notes payable - current | 950,000 | 850,000 | ||||||||||||
| Notes payable, net of current portion | $ | 475,356 | $ | 275,356 | ||||||||||
F-18
Note 8 – Stockholders’ Equity
Preferred Stock
No shares of preferred stock are currently outstanding. The Board of Directors may designate the authorized but unissued shares of the Preferred Stock with such rights and privileges as the board of directors may determine. As such, our board of directors may issue 5,000,000 preferred shares and designate the conversion, voting and other rights and preferences without notice to our shareholders and without shareholder approval.
Common Stock
Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. 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 new or additional issue of shares of stock of any class, or of securities convertible into share of stock or any class, whether now hereafter authorized or whether issued for money, for consideration other than money, or by the way of dividend.
As of June 30, 2023, and 2022, the Company authorized to issue 200,000,000 common shares at a par value of $0.0001 per share.
As of June 30, 2023 and 2022, the Company had shares of common stock outstanding of 44,164,626 and 37,053,376, respectively.
In the year ended June 30, 2023, we sold to investors a total of 6,855,000 shares of our common stock and warrants to purchase an aggregate of 6,855,000 shares of our common stock for net proceeds of $6,855,000.
In the year ended June 30, 2022, we sold to investors a total of 2,180,000 shares of our common stock and warrants to purchase an aggregate of 1,306,250 shares of our common stock for net proceeds of $3,310,000.
Common Stock Subscriptions
In the year ended June 30, 2023, the Company received deposits in the amount of $1,250,000 for 1,250,000 common shares to be issued pursuant to the securities purchase agreement. These common shares were issued in July 2023.
In the year ended June 30, 2022, the Company converted a convertible note payable as discussed in note 7 for a value of $256,250 for 256,250 common shares to be issued pursuant to the securities purchase agreement. These common shares were issued in the year ended June 30, 2023.
Warrants
The Company from time-to-time issues warrants in conjunction with equity financing. In the year ended June 30, 2022, the Company issued warrants to purchase an aggregate of 1,306,250 (256,250 shares related to the common stock subscription) shares of common stock of the Company to non-employees in conjunction with common stock purchases of $1,306,250 ($256,250 related to the common stock subscription) in the aggregate.
During the period July 1, 2022 to June 12, 2023, the Company issued warrants to purchase an aggregate of 8,105,000 (1,250,000 shares related to the common stock subscription) shares of common stock of the Company to non-employees in conjunction with common stock purchases of $8,105,000 ($1,250,000 related to the common stock subscription) in the aggregate.
On May 1, 2023, the Company issued warrants to Gary Engel, the Company’s Chief Marketing Officer, to purchase 25,000 shares of our common stock, exercisable at $3.00 per share, issued in connection with entering into an employment agreement, effective May 1, 2023. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. Under the Black-Scholes-Merton option pricing model the fair value of the warrants at time of issuance was approximately $7,666, the Company will amortize the fair value over 12 months as compensation and benefits expense in accompany statement of operations. The significant inputs were as follows: common stock fair value of $.90, volatility of 92.1%, term of 3 years and risk-free rate of 3.85%.
F-19
Warrant Modification
Effective as of June 15, 2023, the Company authorized and approved the reissuance of 79 expired warrants (“Expired Warrants”) to purchase an aggregate of 15,275,924 shares of the Company’s common stock, at a purchase prices from $0.25 to $4.00 per share, all of which had expired without being exercised, and the modification of 62 outstanding warrants (“Reissued Warrants”) to purchase an aggregate of 8,211,250 shares of the Company’s common stock, at a purchase prices from $1.75 to $3.00 per share, that by their terms will expire if not exercised on or prior to dates ranging from February 10, 2024 to September 30, 2025, to reissued the Expired Warrants and modify the Reissued Warrants (collectively “Warrant Modification”) by extending the expiration date to December 31, 2025 and maintaining all other terms in the original warrant agreements.
The value of the Warrant Modification to purchase an aggregate of 23,487,174 shares was calculated using the Black-Scholes-Merton option pricing model. The incremental fair value attributable to the Expired Warrants and Reissued Warrants, which was measured at the amount equal to the incremental value reflecting in the change in fair value of the warrants before and after the Warrant Modification, was calculated at $9,848,947 and was treated as a deemed dividend and is reflected as “Deemed dividend on warrant modification” in the accompanying statement of operations. Accordingly, the Warrant Modification was recorded as an increase in additional paid in capital with a corresponding decrease to retained earnings.
The Company utilized an option pricing model to fair value the Company’s common stock as of June 15, 2023. The significant inputs were as follows: volatility of 71.1%, term of 2 years and risk-free rate of 4.55%. The valuation determined the fair value of the Company’s common stock to be $0.90125 as of June 15, 2023.
The Black-Scholes-Merton option pricing model includes the following assumptions to determine the fair value attributable immediately before and after the warrant modification effective June 15, 2023:
| Immediately | ||||||||
| Before | After | |||||||
| Assumptions: | ||||||||
| Common stock fair value | $ | .90 | $ | .90 | ||||
| Risk-free interest rate | 4.12-5.21 | % | 4.43 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Expected volatility | 64-83 | % | 81.55 | % | ||||
| Expected life (in years) | .66-2.3 | 2.55 | ||||||
Following is a summary of outstanding stock warrants as of the year ended June 30, 2023 and 2022:
| Number of Shares | Weighted Average Price | Weighted Average Remaining Life (years) | Intrinsic Value | |||||||||||||
| Warrants outstanding and exercisable of as of June 30, 2021 | 24,328,463 | $ | 0.53 | 1.6 | $ | 36,100,866 | ||||||||||
| Issued | 1,306,250 | 3.00 | - | - | ||||||||||||
| Expired and forfeited | (1,808,072 | ) | 1.75 | - | - | |||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Warrants outstanding and exercisable of as of June 30, 2022 | 23,826,641 | $ | 0.57 | 0.7 | $ | 58,034,239 | ||||||||||
| Issued | 24,445,924 | 1.60 | - | - | ||||||||||||
| Expired and forfeited | (22,160,391 | ) | 0.25 | - | - | |||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Warrants outstanding as of June 30, 2023 | 26,112,174 | $ | 1.55 | 2.6 | $ | 8,245,525 | ||||||||||
| Warrants exercisable as of June 30, 2023 | 26,089,257 | $ | 1.55 | 2.6 | $ | 8,245,525 | ||||||||||
F-20
| Exercise Price ($) | Warrants outstanding as of June 30, 2023 | Warrants outstanding as of June 30, 2022 | ||||||||
| $ | 0.25 | 10,274,033 | 19,000,000 | |||||||
| $ | 0.60 | 1,350,000 | 1,350,000 | |||||||
| $ | 1.75 | 4,916,891 | 2,035,391 | |||||||
| $ | 3.00 | 9,436,250 | 1,306,250 | |||||||
| $ | 4.00 | 135,000 | 135,000 | |||||||
| 26,112,174 | 23,826,641 | |||||||||
Stock Based Compensation - Stock Options
Effective June 25, 2021, the Board of Directors of FreeCast Inc. adopted the 2021 Equity Incentive Plan, (the “Incentive Plan”). The plan provides for both incentive stock options and non -qualified stock options to officers, directors, employees, and consultants of the company.
In the year ended June 30, 2023, the Company issued and granted 41,212 options to purchase the Company’s common stock to employees at a $2 exercise price, options expire between November 1, 2032 and May 20, 2033.
In the year ended June 30, 2022, the Company issued and granted 1,792,176 options to purchase the Company’s common stock to employees at a $2 exercise price, all options expire on June 25, 2031.
The Company recognizes stock-based compensation expense using a grant date fair-value to measure the costs related to stock-based payments, including stock options. The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option-pricing model and is recognized as expense over the requisite service period on a straight-line basis.
Following is a summary of outstanding stock options as of June 30, 2023 and 2022:
| Number of Shares | Weighted Average Price | Weighted Average Remaining Life (years) | Intrinsic Value | |||||||||||||
| Options as of June 30, 2021 | 1,792,176 | $ | 2.00 | 10.0 | $ | - | ||||||||||
| Issued | - | - | - | - | ||||||||||||
| Expired and forfeited | - | - | - | - | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Options as of June 30, 2022 | 1,792,176 | $ | 2.00 | 9.0 | $ | - | ||||||||||
| Issued | 41,212 | 2.00 | - | - | ||||||||||||
| Expired and forfeited | (218,064 | ) | - | - | - | |||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Options outstanding and exercisable of June 30, 2023 | 1,615,324 | $ | 2.00 | 8.02 | $ | - | ||||||||||
F-21
The following is the vesting terms associated with those shares:
| Tranche | Shares Granted |
Vesting Method | Vesting Terms | |||||
| Tranche 1 | 1,578,480 | Graded Vesting | 1/6th vested on July 1, 2021, remainder vests over the next 18th months using the graded vesting method, until the option is 100% vested. | |||||
| Tranche 2 | 31,324 | Straight-line | 1/24th will vest on a straight-line monthly basis until the option is 100% vested. | |||||
| Tranche 3 | 5,520 | Graded Vesting | 1/6th vests on grant date, remainder vests over the next 30 months using the graded vesting method, until the option is 100% vested. | |||||
| Total | 1,615,324 | |||||||
The Black-Scholes option-pricing model includes the following weighted average assumptions to determine the grant share-based awards:
| Years Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Assumptions: | ||||||||
| Risk-free interest rate | .24-.42 | % | .28 | % | ||||
| Expected dividend yield | 0 | % | 0 | % | ||||
| Expected volatility | 61.0-64.0 | % | 52.0 | % | ||||
| Expected life (in years) | 5.52 | 5.75-6.25 | ||||||
During the years ended June 30, 2023 and 2022, the Company recognized $108,436 and $1,306,903 in stock-based compensation expense related to those options issued for services rendered to employees during the years ended 2023 and 2022, respectively.
As of June 30, 2023 there was $27,913 respectively in unrecognized stock-based compensation related to unvested restricted stock agreements, net of estimated forfeitures.
Beneficial Conversion Feature
The Company had embedded conversion features that it accounted for under ASC 470 and was recognized separately at its intrinsic value. Intrinsic value was calculated as the difference between the conversion price and the fair value of the common stock multiplied by the number of shares into which the security is convertible. If the intrinsic value of the beneficial conversion feature was greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature would have been limited to the amount of the proceeds allocated to the convertible instrument.
During the year ended June 30, 2022, the Company recorded $3,049,241 of beneficial conversion features related to loans and accounts payable and accrued expenses that are convertible to shares of the Company’s common stock at a price less than the market price. In addition, during the year ended June 30, 2022, the Company recognized $819,172 as a debt discount and interest expense in conjunction with the amortization of the beneficial conversion feature.
The Company adopted ASU 2020-06 in the first quarter of fiscal year 2023 using the modified retrospective method of transition which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. As a result, the cumulative effect of the accounting change increased the carrying amount of the convertible notes, net by $2,963,799, increased retained earnings by $1,530,468, and reduced additional paid-in capital by $4,494,267. See Note 7.
F-22
Note 9 – Commitments and Contingencies
In October 2018, the Company entered into a two-year sublease agreement for approximately 3,360 square feet of office space in Orlando, Florida. In August 2020, the Company provided $117,336 in security deposit, and entered into a 39-month lease agreement which allowed the Company to expand its office space to 10,080 square feet; the lease matures October 31, 2023. As of June 30, 2023, the Company has 22 months remaining resulting in a future minimum lease payment under a non-cancellable lease of approximately $30,981.
In August 2022, CEBV, LLC, as assignee of Ameris Bank sued the Company and its chief executive officer (“CEO”), Bill Mobley, along with various other companies alleging the Company and Bill had received proceeds from a purported loan fraud scheme perpetrated by various third parties. No loans were made to the Company or Bill Mobley by Ameris Bank. On August 2, 2023, the court dismissed the case against the Company Bill Mobley without prejudice.
In December 2022, US Premium Finance (“USPF”) sued the Company and its CEO for nonpayment of a settlement agreement arising from a collection lawsuit involving two Premium Finance Agreements. These agreements, which the Company learned after entered into, were the product of the same loan scheme at the center of the CEBV, LLC lawsuit (see above). The Company and its CEO believe that the claims are without merit and intends to vigorously defend its position. The ultimate outcome of this litigation cannot presently be determined. However, in management’s opinion, the likelihood of a material adverse outcome is remote. Accordingly, adjustments, if any, that might result from the resolution of this matter have not been reflected in the financial statements.
Note 10 – Leases
On August 20, 2019, the Company entered into a 63-month lease agreement for an office copier that is expected to mature on October 20, 2024.
The Company currently has two active leases, an office lease, as well as an office copier under non-cancellable operating leases with initial terms typically ranging from 1 to 3 years. At contract inception, the Company reviews the facts and circumstances of the arrangement to determine if the contract is or contains a lease. The Company follows the guidance in Topic 842 to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if the Company has the right to direct use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to direct the use of an underlying asset, the Company considers if they have the right to direct how and for what purpose the asset is used throughout the period of use and if they control the decision-making right over the asset.
The Company’s lease terms may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when extension or termination options are present and include such options in the calculation of the lease term when it is reasonably certain that it will exercise those options.
The Company has elected to include both lease and non-lease components in the determination of lease payments. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments.
At commencement, lease-related assets and liabilities are measured at the present value of future lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company exercises judgment in determining the incremental borrowing rate based on the information available at when the lease commences to measure the present value of future payments.
F-23
Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.
Operating leases are included in other assets, current operating lease obligations, and operating lease obligations (less current portion) on the Company’s balance sheet. Finance leases are included in property, plant and equipment and current and long-term portion of finance lease obligations on the Company’s balance sheet. Short term leases with an initial term of 12 months or less are not presented on the balance sheet with expense recognized as incurred.
The following table presents lease assets and liabilities and their balance sheet classification:
| Classification | June 30, 2023 | June 30, 2022 | ||||||
| Operating Leases: | ||||||||
| Right-of-use Asset | $ | 33,986 | $ | 118,913 | ||||
| Current portion of operating lease obligation | $ | 37,419 | $ | 75,224 | ||||
| Operating lease obligation, less current portion | $ | - | $ | 34,093 | ||||
| Finance Leases: | ||||||||
| Right-of-use Asset | $ | 2,060 | $ | 3,404 | ||||
| Current portion of operating lease obligation | $ | 1,514 | $ | 1,343 | ||||
| Financing lease obligation, less current portion | $ | 546 | $ | 2,061 | ||||
The components of lease expense for the year ended June 30, 2023 and 2022, are as follows:
| Classification | June 30, 2023 | June 30, 2022 | ||||||
| Operating lease cost | $ | 84,294 | $ | 91,000 | ||||
| Finance Lease: | ||||||||
| Amortization of lease assets | 1,344 | 140 | ||||||
| Interest on lease liabilities | 336 | 487 | ||||||
| Total finance lease cost | $ | 1,680 | $ | 627 | ||||
Supplemental disclosures of cash flow information related to leases were as follows:
| June 30, 2023 | June 30, 2022 | |||||||
| Cash paid for operating lease liabilities | $ | 90,457 | $ | 87,822 | ||||
The weighted average lease term and discount rates are as follows:
| June 30, 2023 | ||||
| Operating Leases: | ||||
| Weighted average remaining lease term (months) | 5 | |||
| Weighted average discount rate | 12 | % | ||
| Finance Leases: | ||||
| Weighted average remaining lease term (months) | 16 | |||
| Weighted average discount rate | 12 | % | ||
F-24
Future payments due under leases reconciled to lease liabilities as follows:
| Finance Lease | Operating Lease | |||||||
| For the fiscal years ending June 30: | ||||||||
| 2024 | 1,680 | 38,556 | ||||||
| 2025 | 560 | - | ||||||
| Total undiscounted lease payments | 2,240 | 38,556 | ||||||
| Present value discount, less interest | (179 | ) | (1,137 | ) | ||||
| Lease Liabilities | $ | 2,060 | $ | 37,419 | ||||
Note 11 – Income Taxes
At June 30, 2023, the Company has approximately $37,796,072 of operating loss carryforwards for federal and $37,796,072 for Florida state tax purposes that may be applied against future taxable income. Of the $37.8 million of net operating losses, $8.4 million will begin to expire in the year 2032 if not utilized prior to that date. The remaining amount of $29.3 million will not have an expiration date but will be limited to 80% of taxable income. There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets. The valuation allowance increased by approximately $2,608,998 and $2,277,683 during the years 2023 and 2022, respectively. The deferred tax assets are approximately $10,337,000 and $7,742,000 at June 30, 2023 and 2022, respectively.
A reconciliation of the statutory U.S. Federal rate to the Company’s effective tax rate is as follows:
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Federal income tax benefit at statutory rate | 21.00 | % | 21.00 | % | ||||
| State income tax, net of federal benefits | 7.06 | % | 3.34 | % | ||||
| Permanent items | 1.72 | % | (4.71 | )% | ||||
| Prior period adjustments | 11.20 | % | - | % | ||||
| Change in valuation allowance | (40.99 | )% | (19.63 | )% | ||||
| Provision from income taxes | - | - | ||||||
The tax effect of temporary differences that gave rise to significant portion of the deferred tax assets / (liabilities) were as follows:
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| Net Operating loss carryforwards - Federal | $ | 7,937,175 | $ | 5,468,448 | ||||
| Net Operating loss carryforwards - State | 1,642,239 | 1,128,603 | ||||||
| Stock based compensation | 989,467 | 1,320,702 | ||||||
| Deferred Revenue | (281,666 | ) | (224,751 | ) | ||||
| Accrued Liabilities | 66,689 | 61,154 | ||||||
| Depreciation and Amortization | (3,263 | ) | (66,624 | ) | ||||
| Allowance for doubtful accounts | - | 54,111 | ||||||
| Valuation allowance | (10,350,641 | ) | (7,741,643 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The Company’s ability to realize its deferred tax assets depends upon the generation of sufficient future taxable income to allow for the utilization of the deductible temporary difference carryforwards. At this time, based on current facts and circumstances, management believes that is not likely that the Company will realize the benefits for its deferred tax assets, and a valuation allowance has been recorded on the same.
The Company does not have any recorded unrecognized tax benefit for uncertain tax positions as of June 30, 2023 and 2022.
F-25
Note 12 – Related Parties
In June 2016, the Chief Executive Officer of the Company (“CEO”), William Mobley loaned the Company $111,000, at an interest rate of 12% per annum. The loan originally matured on December 31, 2017, however effective June 30, 2021, the Company amended the original promissory note with William Mobley and combined all previous principal and interest under one new note, that matures June 30, 2024. As of June 30, 2023 and June 30, 2023, accrued interest charges related to this loan were $19,003, and $10,191, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay any interest towards this loan. The note is convertible into shares of common stock at a conversion price of $0.25 per share. In accordance with ASC 470, the embedded beneficial conversion is recognized separately and was measured at its intrinsic value (see Note 11). As of June 30, 2023 and June 30, 2022, the outstanding principal and interest due to William Mobley was $86,051, and $94,773, respectively.
Between July 2018 and April 2018, a related party, a Company owned by CEO, William Mobley, Public Wire, loaned the Company $89,139, at an interest rate of 12% per annum. The notes representing the loan originally matured on dates ranging from April 1, 2019 to January 1, 2020. Effective June 30, 2021, the Company amended the original promissory note with Public Wire and combined principal and interest from the previous notes under one new loan. In addition, the Company extended the maturity date to June 30, 2024. As of June 30, 2023 and 2022, accrued interest related to this loan was $21,411 and $10,697, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay interest related to this loan in. As of June 30, 2023 and 2022, the outstanding principal and interest due to Public Wire was $110,700 and $99,836, respectively.
During June 2022, an employee of the Company loaned the Company $12,000, at an interest rate of 6% per annum. The note matures on August 1, 2022. As of June 30, 2023 and 2022, accrued interest related to this loan was $0 and $47, respectively. During the fiscal years ended June 30, 2023 and 2022, the Company did not pay interest related to this loan. As of June 30, 2023 and 2022, the outstanding principal and interest due to Ms. Bevington was $0 and $12,047, respectively.
On July 1, 2018, the Company signed a revolving convertible note agreement with Nextelligence; the majority shareholder, for an amount up to $1,000,000; with any borrowings on this loan being at the complete discretion of the Company. For the fiscal years ended June 30, 2023 and 2022, the Company in various installments borrowed $1,067,859 and $2,907,220, respectively, in additional proceeds from this loan. The loan accrues interest at a rate of 12% per annum. Effective June 30 2021, the loan was extended to mature June 30, 2024 and increased the borrowing limit from $1M to $2.5M, as stated in the third amendment to the revolving convertible note. June 30, 2023 and June 30, 2022, the balance of unpaid accrued interest was $892,007 and $326,666, respectively, related to this loan. In addition, as of June 30, 2023 and June 30, 2022, the outstanding principal and interest due is $5,711,480 and $4,675,781, respectively.
Note 13 – Subsequent Events
The Company follows the guidance in FASB ASC 855-10 for the disclosure of subsequent events. The Company evaluated subsequent events through the date the financial statements were issued and determined that except for the events discussed in Note 7 and the following subsequent events, there have been no additional subsequent events that would require recognition in the financial statements or disclosure in the notes to the financial statements:
From July 1, 2023 through November 9, 2023, Nextelligence advanced the Company $2,650,000 in the aggregate in connection with the revolving convertible note agreement.
The Company amended the lease agreement for our headquarters located in Orlando, Florida with Anson Logistics Assets LLC. The amendment extends the term of the lease until October 31, 2028.
F-26
FreeCast, Inc.
shares of common stock
PROSPECTUS
, 2023
Through and including , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealers’ obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or membership.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses, all of which will be borne by the registrant, in connection with the sale and distribution of the securities being registered, other than the underwriting discounts and commissions. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the Nasdaq Capital Market listing fee.
| SEC registration fee | $ | 3,693.54 | ||
| FINRA filing fee | $ | 3,249.50 | ||
| Nasdaq Capital Market listing fee | $ | 5,000 | ||
| Accounting fees and expenses* | $ | |||
| Legal fees and expenses* | $ | |||
| Printing and Engraving* | $ | |||
| Transfer agent and registrar fees* | $ | |||
| Miscellaneous* | $ |
| * | To be provided by amendment. |
Item 14. Indemnification of Directors and Officers.
Pursuant to Section 607.0850 of the Florida Revised Statutes, we have the power to indemnify any person made a party to any lawsuit by reason of being a director or officer of the Registrant, or serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Our Articles of Incorporation and Bylaws provide that the Registrant shall indemnify its directors and officers to the fullest extent permitted by Florida law.
With regard to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by a director, officer or controlling person of the Corporation in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the common shares being registered, we will, unless in the opinion of our counsel the matter has been settled by a controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by us is against public policy as expressed in the Securities Act, and will be governed by the final adjudication of such case.
II-1
Item 15. Recent Sales of Unregistered Securities.
The information below lists all of the securities sold by us during the past three years which were not registered under the Securities Act:
On June 15, 2023, we issued 79 new warrants to accredited investors to purchase an aggregate of 15,275,924 shares of our common stock in exchange for 79 warrants to purchase 15,275,924 shares of our common stock that had expired without being exercised. Exercise prices remained the same, and ranged from $0.25 to $4.00 per share. All of the warrants were immediately exercisable upon issuance, and all of the warrants expire on December 31, 2025. The offer and issuance of the warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering and/or Section 3(a)(9) of the Securities Act as securities exchanged by us with our existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange. Each warrant recipient had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the warrants.
During the period from December 13, 2022 through May 20, 2023, we granted options to purchase 19,372 shares of our common stock to three employees pursuant to our 2021 Incentive Award Plan. The options were granted and issued in reliance upon the exemption from the registration provisions of the Securities Act set forth in Rule 701 in that the securities were granted and issued pursuant to a written compensatory benefit plan, and the number of securities granted and issued in reliance upon this rule during the previous consecutive 12-month period does not exceed 15% of our outstanding shares of common stock.
We entered into one year employment agreement with Gary Engel, effective May 1, 2023. In conjunction with Mr. Engel entering into the employment agreement, we issued Mr. Engel a warrant to purchase 25,000 shares of our common stock, exercisable at $3.00 per share. The warrant vests ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1, 2026. The warrant was offered and issued in reliance upon the exemption from the registration provisions of the Securities Act set forth in Rule 701 in that the securities were offered and sold pursuant to a written contract relating to compensation, and the number of securities granted and issued in reliance upon this rule during the previous consecutive 12-month period does not exceed 15% of our outstanding shares of common stock.
During the period from November 4, 2022 through June 30, 2023, we sold an aggregate of 6,215,000 shares of our common stock and warrants to purchase 6,215,000 shares of our common stock, at an exercise price of $3.00 per share, to 39 accredited investors at a purchase price of $1.00 per share for an aggregate purchase price of $6,215,000, of which we received $6,215,000. The offer, sale and issuance of such common stock and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The investors in each of these transactions had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and represented to us that they could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the certificate representing the shares issued in these transactions. Each investor in these transactions represented to us in connection with their purchase that they were an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
During the period from September 20, 2022 through October 4, 2022, we sold an aggregate of 890,000 shares of our common stock and warrants to purchase 890,000 shares of our common stock, at an exercise price of $3.00 per share, to eight accredited investors at a purchase price of $1.00 per share for an aggregate purchase price of $890,000, of which we received $890,000. The offer, sale and issuance of such common stock and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The investors in each of these transactions had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and represented to us that they could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the certificate representing the shares issued in these transactions. Each investor in these transactions represented to us in connection with their purchase that they were an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
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On October 4, 2022, we granted options to purchase 21,840 shares of our common stock to two employees pursuant to our 2021 Incentive Award Plan. The options were granted and issued in reliance upon the exemption from the registration provisions of the Securities Act set forth in Rule 701 in that the securities were granted and issued pursuant to a written compensatory benefit plan, and the number of securities granted and issued in reliance upon this rule during the previous consecutive 12-month period does not exceed 15% of our outstanding shares of common stock.
On September 16, 2022, we issued 256,250 shares of our common stock to Equity Trust Company Custodian FBO Michael D. Lafollette IRA in connection with the conversion of principal and accrued interest of a convertible note in the amount of $256,250. The investor had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that it was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
Between July 26, 2022 and September 2, 2022, we sold 1,000,000 shares of our common stock to Equity Trust Company Custodian FBO Michael D. Lafollette IRA at a purchase price of $1.00 per share, and issued the investor a warrant to purchase 1,000,000 shares of our common stock, at an exercise price of $3.00 per share. The investor had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that it was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On May 25, 2022, we sold 50,000 shares of our common stock to John McCrossin at a purchase price of $1.00 per share, and issued him a warrant to purchase 50,000 shares of our common stock, at an exercise price of $3.00 per share. Mr. McCrossin had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that he was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On March 28, 2022, we entered into a convertible promissory note with Equity Trust Company Custodian FBO Michael D. Lafollette IRA for a loan in the principal amount of $250,000. Equity Trust Company Custodian FBO Michael D. Lafollette IRA additionally received warrants to purchase 50,000 shares of our common stock, at an exercise price of $1.75 per share. Outstanding principal accrues interest at 10% per annum, and was due and payable on June 30, 2022. In lieu of repayment, at Equity Trust Company Custodian FBO Michael D. Lafollette IRA’s option, all or part of the outstanding principal and accrued interest was convertible into shares of our common stock at a conversion price of $2.00 per share. On June 5, 2022, per agreement between the Company and Equity Trust Company Custodian FBO Michael D. Lafollette IRA, the note is to be converted into 256,250 shares of the Company’s common stock at an amended conversion price of $1.00 per share, and additionally, upon conversion, increased the 50,000 warrants to 256,250 warrants granted to the lender. The offer, sale and issuance of this convertible promissory note was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The third party took the convertible note for investment purposes only and not with a view to or for sale in connection with any distribution thereof. On June 10, 2022, per agreement between the third party and us, the note was to convert into 256,250 shares of our common stock at the amended $1.00 conversion rate, and the investor was issued warrants to purchase 256,250 shares of our common stock, at an exercise price of $3.00 per share. The common shares associated with conversion were issued on September 16, 2022. The investor had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that he was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
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On February 9, 2022, we sold 500,000 shares of our common stock to each of Paul Becker and Michael Boyko at a purchase price of $1.00 per share, and issued each investor a warrant to purchase 500,000 shares of our common stock, at an exercise price of $3.00 per share. Each investor had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that he was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
On December 21, 2021, we sold 25,000 shares of our common stock to Herman Fasching at a purchase price of $2.00 per share. Mr. Fasching had access to information concerning us and our business prospects and acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and represented to us that he was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the securities issued in this transaction. The offer, sale and issuance of the shares were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering.
During the period from July 1, 2021 through October 15, 2021, we sold an aggregate of 1,105,000 shares of our common stock to 23 accredited investors at a price of $2.00 per share for an aggregate purchase price of $2,210,000. The offer, sale and issuance of the shares were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and represented to us that they could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the certificate representing the shares issued in these transactions. Each of the recipients of securities in these transactions represented to us in connection with their purchase that they were an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
On June 30, 2021, we entered into a revolving convertible promissory note with Nextelligence for an amount up to $2,500,000; with any borrowings on this loan being at our complete discretion. Outstanding principal accrues interest at 12% per annum, and is due and payable on June 30, 2024. In lieu of repayment, at Nextelligence’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per share. As of June 30, 2021, the outstanding principal due to Nextelligence was $1,431,895. The offer, sale and issuance of this convertible promissory note was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. Nextelligence took the convertible note for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
II-4
On June 30, 2021, we entered into a convertible promissory note with William A. Mobley, Jr., our founder, Chief Executive Officer and Chairman of our board of directors, for a loan in the principal amount of $82,509. Outstanding principal accrues interest at 12% per annum, and is due and payable on June 30, 2024. In lieu of repayment, at Mr. Mobley’s option, all or part of the outstanding principal and accrued interest is convertible into shares of our common stock at a conversion price of $0.25 per share. The offer, sale and issuance of this convertible promissory note was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. William A. Mobley, Jr. took the convertible note for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
On June 25, 2021, we granted options to purchase 1,792,176 shares of our common stock to 24 employees pursuant to our 2021 Incentive Award Plan, which was approved by our board of directors and became effective on the same date. The options were granted and issued in reliance upon the exemption from the registration provisions of the Securities Act set forth in Rule 701 in that the securities were granted and issued pursuant to a written compensatory benefit plan, and the number of securities granted and issued in reliance upon this rule during the previous consecutive 12-month period does not exceed 15% of our outstanding shares of common stock.
During the fiscal year ended June 30, 2021, we sold an aggregate of 1,121,750 shares of our common stock for an aggregate purchase price of $3,949,000; 852,750 of the shares were sold at a purchase price of $4.00 per share for an aggregate purchase price of $3,411,000, and the remaining 269,000 shares were sold at a purchase price of $2.00 per share for an aggregate purchase price of $538,000. We also sold one investor warrants to purchase 135,000 shares of our common stock at an exercise price of $2.00 per share. The offer, sale and issuance of the shares and warrants were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and represented to us that they could bear the risks of the investment and could hold the securities for an indefinite period of time, and appropriate legends were affixed to the certificate representing the shares issued in these transactions. Each of the recipients of securities in these transactions represented to us in connection with their purchase that they were an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act.
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Item 16. Exhibits and Financial Statement Schedules.
(a) The following exhibits are filed as part of this Registration Statement:
| * | To be filed with amendment |
| # | Denotes management compensation plan or contract. |
II-6
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Orlando, Florida, on November 13, 2023.
| FREECAST, INC. | ||
| By: | /s/ William A. Mobley, Jr. | |
| Name: William A. Mobley, Jr. | ||
| Title: Chief Executive Officer | ||
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints each of William A. Mobley, Jr. and Jonathan Morris his true and lawful attorney-in-fact, with full power of substitution and re-substitution for him and in his name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this registration statement (and to any registration statement filed pursuant to Rule 462 under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact or his substitute, each acting alone, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ William A. Mobley, Jr. | Chief Executive Officer and Chairman of the Board of Directors | November 13, 2023 | ||
| William A. Mobley, Jr. | (principal executive officer) | |||
| /s/ Jonathan Morris | Chief Financial Officer and Director | November 13, 2023 | ||
| Jonathan Morris | (principal accounting and financial officer) | |||
| /s/ David Gust | Director | November 13, 2023 | ||
| David Gust |
II-8
Exhibit 3.1
FreeCast, Inc.
Articles of Amendment and Restatement
Pursuant to the applicable provisions of the Florida Statutes, FreeCast, Inc., a Florida corporation, does hereby amend and restate its Articles of Incorporation.
1. The name of the corporation whose Articles of Incorporation are being amended and restated by these Articles of Amendment and Restatement is FreeCast, Inc., a Florida corporation.
2. The Amended and Restated Articles of Incorporation of FreeCast, Inc., a Florida corporation, shall read as follows:
Amended and Restated Articles of Incorporation
of
FreeCast. Inc.
The undersigned does hereby make, subscribe and file these Amended and Restated Articles of Incorporation:
ARTICLE I
Corporate Name
The name of this corporation is: FreeCast, Inc.
ARTICLE II
Capital Stock
The total number of shares of capital stock which this corporation shall have the authority to issue is Two Hundred Five Million (205,000,000) shares, consisting of Five Million (5,000,000) shares of Preferred Stock having a par value of $.0001 per share and Two Hundred Million (200,000,000) shares of Common Stock having a par value of $.0001 per share.
The Board of Directors of this corporation is authorized, subject to the limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series and, by filing articles of amendment pursuant to the applicable law of the State of Florida, to establish from time to time the number of shares of Preferred Stock to be included in each such series and to determine and fix the designations, powers, preferences and rights of the shares of each such series (including without limitation the voting rights, dividend rights and preferences, liquidation rights and preferences, and conversion rights, if any, thereof) and the qualifications, limitations and restrictions thereof.
All shares of Common Stock shall be identical with each other in every respect, and the holders thereof shall be entitled to one vote for each share of Common Stock upon all matters upon which the shareholders have the right to vote.
The holders of record of any outstanding shares of Preferred Stock shall be entitled to dividends if, when and as declared by the Board of Directors of the corporation, at such rate per share, if any, and at such time and in such manner, as shall be determined and fixed by the Board of Directors of the corporation in the articles of amendment authorizing the series of Preferred Stock of which such shares are a part. No dividends shall be declared and paid, or declared and set aside for payment, on the shares of Common Stock unless and until all dividends, current and accumulated, if any, accrued on the outstanding shares of Preferred Stock shall be declared and paid or a sufficient amount shall have been set aside for the payment thereof.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, the holders of record of the outstanding shares of Preferred Stock shall be entitled to receive such amount, if any, for each share of Preferred Stock, as the Board of Directors of the corporation shall determine and fix in the articles of amendment authorizing the series of Preferred Stock of which such shares of Preferred Stock are a part, and no more. If the assets of the corporation shall not be sufficient to pay to all holders of Preferred Stock the amounts to which they would be entitled in the event of a voluntary or involuntary liquidation, dissolution or winding up of the corporation, then the holders of record of each series of Preferred Stock which is entitled to share in the assets of the corporation in any such event shall be entitled to share in the assets of the corporation to the extent, if any, and in the manner, determined by the Board of Directors of the corporation in the articles of amendment authorizing the series of Preferred Stock of which such shares are a part, and no more, and, in any such case, the holders of record of shares of Preferred Stock of the same series shall be entitled to share ratably in accordance with the number of shares of Preferred Stock of the series so held of record by them to the extent, if any, that the series is entitled to share in the assets of the corporation in such event. No payment shall be made to the holders of shares of Common Stock of the corporation in the event of the voluntary or involuntary liquidation, dissolution or winding up of the corporation unless the holders of record of shares of Preferred Stock shall have been paid the full amount to which they shall be entitled in such event or unless a sufficient amount shall have been set aside for such payment.
Upon the effectiveness of any “combination,” as such term is defined in Section 607.10025(1) of the Florida Business Corporation Act, the authorized shares of the classes or series affected by the combination shall not be reduced or otherwise affected by the percentage by which the issued shares of such class or series were reduced as a result of the combination.
ARTICLE III
Board of Directors
The business and affairs of the corporation shall be managed by or under the direction of a Board of Directors consisting of not less than one nor more than fifteen persons. The exact number of directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors.
| 2 |
The directors of the Corporation shall be classified, with respect to the time for which they severally hold office, into three classes, Class I, Class II and Class III, each of which shall be as nearly equal in number as possible. At the 2014 annual meeting of shareholders, the Class I directors shall be elected to a term of office to expire at the 2015 annual meeting of shareholders, the Class II directors shall be elected to a term of office to expire at the 2016 annual meeting of shareholders, and the Class III directors shall be elected to a term of office to expire at the 2017 annual meeting of shareholders. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. Notwithstanding the foregoing provisions of this Article III, each director shall serve until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal from office.
Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, and the directors so chosen shall hold office for a term expiring at the next annual meeting of shareholders. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock then outstanding, any director, or the entire Board of Directors, may be removed from office at any time, with or without cause, but only by the affirmative vote of the holders of not less than a majority of the voting power of all of the shares of the corporation entitled to vote for the election of directors.
ARTICLE IV
Indemnification
This corporation shall indemnify and hold harmless its directors, officers, employees, attorneys and agents to the fullest extent permitted by laws of the State of Florida, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee, attorney or agent and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, this corporation shall not be obligated to indemnify any director, officer, employee, attorney or agent (or his or her heirs, executors or personal or legal representatives) in connection with any suit, action or proceeding (or part thereof) initiated by such person unless such suit, action or proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article IV shall include the right to be paid by this corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by this corporation of an undertaking by or on behalf of the person receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by this corporation under this Article IV.
| 3 |
The rights to indemnification and to the advancement of expenses conferred in this Article IV shall not be exclusive of any other right which any person may have or hereafter acquire under these Amended and Restated Articles of Incorporation (as now or hereafter in effect), the corporation’s Bylaws (as now or hereafter in effect), any statute, agreement, vote of shareholders or disinterested directors, or otherwise.
This corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee, attorney or agent against any liability which may be asserted against him or her or incurred by him or her or on his or her behalf in such capacity, or arising out of his or her status as such, whether or not this corporation would have the power to indemnify him or her against such liability.
No amendment, modification, alteration, change, supplement or repeal of all or any portion of this Article IV, nor the amendment, modification, alteration, change, supplement or repeal of all or any portion of the Bylaws, inconsistent with the provisions of this Article IV shall adversely affect the rights to indemnification and to the advancement of expenses of a director, officer, employee, attorney or agent existing at the time of such amendment, modification, alteration, change, supplement or repeal with respect to any act or omission occurring prior to the time of such amendment, modification, alteration, change, supplement or repeal.
ARTICLE V
Affiliated Transactions
The corporation expressly elects not to be governed by Section 607.0901 of the Florida Business Corporation Act, as amended from time to time, relating to affiliated transactions.
ARTICLE VI
Control Share Acquisitions
The corporation expressly elects not be governed by Section 607.0902 of the Florida Business Corporation Act, as amended from time to time, relating to control share acquisitions.
ARTICLE VII
Amendment
The corporation reserves the right to amend, alter, change or repeal any provision contained in these Amended and Restated Articles of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred on the shareholders of the corporation hereunder are granted subject to this reservation. These Amended and Restated Articles of Incorporation may be amended in the manner provided by law.
| 4 |
3. The foregoing Amended and Restated Articles of Incorporation of FreeCast, Inc., a Florida corporation, shall supercede the Articles of Incorporation of FreeCast, Inc. and all amendments thereto.
4. These Articles of Amendment and Restatement of FreeCast, Inc., a Florida corporation, were required to be approved by the Board of Directors and the shareholders of the corporation. These Articles of Amendment and Restatement were duly adopted by the unanimous vote of all of the members of the Board of Directors of FreeCast, Inc., a Florida corporation, at a telephonic meeting thereof duly called and held on December 24, 2013 and by the written consent of the shareholders of FreeCast, Inc., a Florida corporation, owning more than a majority of the issued and outstanding shares of Common Stock of the corporation as of December 24, 2013.
5. The only voting group entitled to vote on the amendments contained in these Articles of Amendment and Restatement was the holders of shares of Common Stock of FreeCast, Inc., a Florida corporation. The number of votes cast in favor of such amendment by the members of such voting group was sufficient for approval by that voting group.
IN WITNESS WHEREOF, the corporation, by and through its undersigned director and officer thereunto duly authorized, has executed these Articles of Amendment and Restatement on December 24, 2013.
| FreeCast, Inc. | ||
| By |  | |
| William A. Mobley, Jr. | ||
| Chairman of the Board and Chief Executive Officer | ||
| 5 |
Exhibit 3.2
Amended and Restated
Bylaws
of
FreeCast, Inc.,
a Florida corporation,
As Adopted On
December 30, 2013
TABLE OF CONTENTS
| Page | |||||
| ARTICLE I | DEFINITIONS | 1 | |||
| ARTICLE II | SHAREHOLDERS | 2 | |||
| 2.01 | Place of Meetings | 2 | |||
| 2.02 | Annual Meeting | 2 | |||
| 2.03 | Special Meeting | 2 | |||
| 2.04 | Fixing Record Date | 2 | |||
| 2.05 | Notice of Meetings of Shareholders | 3 | |||
| 2.06 | Waivers of Notice | 3 | |||
| 2.07 | List of Shareholders | 3 | |||
| 2.08 | Quorum of Shareholders; Adjournment | 4 | |||
| 2.09 | Voting of Shares | 4 | |||
| 2.10 | Ballots | 4 | |||
| 2.11 | Proxies | 4 | |||
| 2.12 | Selection and Duties of Inspectors at Meeting of Shareholders | 4 | |||
| 2.13 | Organization and Conduct of Meeting | 5 | |||
| 2.14 | Order of Business | 6 | |||
| 2.15 | Action by Shareholders Without a Meeting | 6 | |||
| ARTICLE III | DIRECTORS | 7 | |||
| 3.01 | General Powers | 7 | |||
| 3.02 | Nominations for Directors | 7 | |||
| 3.03 | Number; Qualification; Term of Office | 8 | |||
| 3.04 | Election | 8 | |||
| 3.05 | Newly Created Directorships and Vacancies | 8 | |||
| 3.06 | Resignations | 8 | |||
| 3.07 | Removal of Directors | 8 | |||
| 3.08 | Compensation | 9 | |||
| 3.09 | Place and Time of Meetings of the Board | 9 | |||
| 3.10 | Annual Meeting | 9 | |||
| 3.11 | Regular Meetings | 9 | |||
| 3.12 | Special Meetings | 9 | |||
| 3.13 | Adjourned Meetings | 10 | |||
| 3.14 | Waiver of Notice | 10 | |||
| 3.15 | Organization | 10 | |||
| 3.16 | Quorum of Directors | 10 | |||
| 3.17 | Action by the Board | 10 | |||
| ii |
| Page | |||||
| ARTICLE IV | COMMITTEES OF THE BOARD | 11 | |||
| ARTICLE V | OFFICERS | 11 | |||
| 5.01 | Officers | 11 | |||
| 5.02 | Removal of Officers | 11 | |||
| 5.03 | Resignations | 12 | |||
| 5.04 | Vacancies | 12 | |||
| 5.05 | Compensation | 12 | |||
| 5.06 | Chairman of the Board | 12 | |||
| 5.07 | President | 12 | |||
| 5.08 | Vice Presidents | 12 | |||
| 5.09 | Secretary | 13 | |||
| 5.10 | Treasurer | 13 | |||
| 5.11 | Assistant Secretaries and Assistant Treasurers | 13 | |||
| ARTICLE VI | CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. | 14 | |||
| 6.01 | Execution of Contracts | 14 | |||
| 6.02 | Loans | 14 | |||
| 6.03 | Checks, Drafts, Etc. | 14 | |||
| 6.04 | Deposits | 14 | |||
| ARTICLE VII | STOCK AND DIVIDENDS | 14 | |||
| 7.01 | Certificates Representing Shares | 14 | |||
| 7.02 | Transfer of Shares | 15 | |||
| 7.03 | Transfer and Registry Agents | 15 | |||
| 7.04 | Lost, Destroyed, Stolen and Mutilated Certificates | 15 | |||
| 7.05 | Regulations | 15 | |||
| 7.06 | Restrictions on Transfer | 15 | |||
| 7.07 | Dividends, Surplus, Etc. | 16 | |||
| iii |
| Page | |||||
| ARTICLE VIII | INDEMNIFICATION | 16 | |||
| ARTICLE IX | BOOKS AND RECORDS | 17 | |||
| 9.01 | Books and Records | 17 | |||
| 9.02 | Form of Records | 17 | |||
| 9.03 | Inspection of Books and Records | 17 | |||
| ARTICLE X | SEAL | 18 | |||
| ARTICLE XI | FISCAL YEAR | 18 | |||
| ARTICLE XII | SECURITIES OF OTHER ENTITIES | 18 | |||
| ARTICLE XIII | GENDER | 18 | |||
| ARTICLE XIV | AMENDMENTS | 19 | |||
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Amended and Restated
Bylaws
of
FreeCast, Inc.
(a Florida corporation)
ARTICLE I
DEFINITIONS
As used in these Bylaws, unless the context otherwise requires, and regardless of whether or not capitalized, the term:
“Articles of Incorporation” means the Amended and Restated Articles of Incorporation of the Corporation as filed with the Secretary of State of the State of Florida on December 26, 2013, as amended, supplemented or restated from time to time.
“Assistant Secretary” means an Assistant Secretary of the Corporation.
“Assistant Treasurer” means an Assistant Treasurer of the Corporation.
“Board” means the Board of Directors of the Corporation.
“Business Corporation Act” means the Florida Business Corporation Act, Section 607.0101 et seq. of the Florida Statutes, as amended from time to time.
“Bylaws” means the amended and restated bylaws of the Corporation, as amended, supplemented or restated from time to time.
“Chairman” means the Chairman of the Board of the Corporation.
“Corporation” means FreeCast, Inc., a Florida corporation.
“Directors” means the directors of the Corporation.
“President” means the President of the Corporation.
“Secretary” means the Secretary of the Corporation.
“Shareholders” means the shareholders of the Corporation.
“Treasurer” means the Treasurer of the Corporation.
“Vice President” means a Vice President of the Corporation.
ARTICLE II
SHAREHOLDERS
2.01 Place of Meetings. Every meeting of shareholders shall be held at the office of the Corporation or at such other place within or without the State of Florida as shall be specified or fixed in the notice of such meeting or in the waiver of notice thereof.
2.02 Annual Meeting. A meeting of shareholders shall be held annually for the election of directors and the transaction of any other business that may come before the meeting. The time and place of the meeting shall be as determined by the Board and designated in the notice of meeting.
2.03 Special Meetings. A special meeting of shareholders, unless otherwise prescribed by statute, may be called at any time by the Board, by the Chairman or by the holders of not less than twenty-five percent (25%) of the outstanding shares entitled to vote at any meeting of the shareholders. At any special meeting of shareholders only such business may be transacted as is related to the purpose or purposes of such meeting set forth in the notice thereof given pursuant to Section 2.05 of the Bylaws or in any waiver of notice thereof given pursuant to Section 2.06 of the Bylaws.
2.04 Fixing Record Date. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or for the purpose of determining shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a date as the record date for any such determination of shareholders. Such date shall not be more than seventy days before the date of such meeting, nor more than sixty days prior to any other action. If no such record date is fixed, then:
(a) the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day immediately preceding the day on which notice is given, or, if notice is waived, at the close of business on the day immediately preceding the day on which the meeting is held.
(b) the record date for determining shareholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board is necessary, shall be the day on which the first written consent is expressed.
(c) the record date for determining shareholders for any purpose other than those specified in Sections 2.04(a) and 2.04(b) shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
When a determination of shareholders entitled to notice of or to vote at any meeting of shareholders has been made as provided in this Section 2.04, such determination shall apply to any adjournment thereof, unless the Board fixes a new record date for the adjourned meeting.
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2.05 Notice of Meetings of Shareholders. Except as otherwise provided in Sections 2.04 and 2.06 of the Bylaws, whenever under the Business Corporation Act or the Articles of Incorporation or the Bylaws, shareholders are required or permitted to take any action at a meeting, written notice shall be given stating the place, date and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called. A copy of the notice of any meeting shall be given, personally or by mail, not less than ten nor more than sixty days before the date of the meeting, to each shareholder entitled to notice of or to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, with postage prepaid, directed to the shareholder at his address as it appears on the records of the Corporation. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent of the Corporation that the notice required by this Section 2.05 has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, and at the adjourned meeting any business may be transacted that might have been transacted at the meeting as originally called. If, however, the adjournment is for more than one hundred twenty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
2.06 Waivers of Notice. Whenever notice is required to be given to any shareholder under any provision of the Business Corporation Act or the Articles of Incorporation or the Bylaws, a written waiver thereof, signed by the shareholder entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a shareholder at a meeting shall constitute a waiver of notice of such meeting, except when the shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the shareholders need be specified in any written waiver of notice.
2.07 List of Shareholders. The Secretary shall prepare and make, or cause to be prepared and made, at least ten days before every meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at the corporation’s principal office, at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder who is present.
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2.08 Quorum of Shareholders; Adjournment. The holders of a majority of the shares of stock entitled to vote at any meeting of shareholders, present in person or represented by proxy, shall constitute a quorum for the transaction of any business at such meeting. When a quorum is once present to organize a meeting of shareholders, it is not broken by the subsequent withdrawal of any shareholder or shareholders. The holders of a majority of the shares of stock present in person or represented by proxy at any meeting of shareholders, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place.
2.09 Voting of Shares. Unless otherwise provided in the Articles of Incorporation, every shareholder of record shall be entitled at every meeting of shareholders to one vote for each share of capital stock standing in his name on the record of shareholders determined in accordance with Section 2.04 of the Bylaws. The provisions of Sections 607.0721, 607.0723 and 607.0724 of the Business Corporation Act shall apply in determining whether any shares of capital stock may be voted and the persons, if any, entitled to vote such shares, but the Corporation shall be protected in treating the persons in whose names shares of capital stock stand on the record of shareholders as owners thereof for all purposes. At any meeting of shareholders (at which a quorum is present to organize the meeting), all matters, except as otherwise provided by law or by the Articles of Incorporation or by the Bylaws, shall be decided by a majority of the votes cast at such meeting by the holders of shares of capital stock present in person or represented by proxy and entitled to vote thereon, whether or not a quorum is present when the vote is taken.
2.10 Ballots. All elections of directors shall be by written ballot. In voting on any other question on which a vote by ballot is required by law or is demanded at the commencement of the meeting by any shareholder entitled to vote, the voting shall be by ballot. Each ballot shall be signed by the shareholder voting or by his proxy, and shall state the number of shares voted. On all other questions, the voting shall be by voice vote.
2.11 Proxies. Every shareholder entitled to vote at a meeting of shareholders may authorize another person or persons to act for him by proxy. The validity and enforceability of any proxy shall be determined in accordance with Section 607.0722 of the Business Corporation Act.
2.12 Selection and Duties of Inspectors at Meetings of Shareholders. The Board, in advance of any meeting of shareholders, may appoint one or more inspectors to act at the meeting or any adjournment thereof. If inspectors are not so appointed, the person presiding at such meeting may, and on the request of any shareholder entitled to vote thereat shall, appoint one or more inspectors. In case any person appointed fails to appear or act, the vacancy may be filled by appointment made by the Board in advance of the meeting or at the meeting by the person presiding thereat. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspector or inspectors shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. On request of the person presiding at the meeting or any shareholder entitled to vote thereat, the inspector or inspectors shall take a report in writing of any challenge, question or matter determined by him or them and execute a certificate made by the inspector or inspectors shall be prima facie evidence of the facts stated and of the vote as certified by him or them.
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2.13 Organization and Conduct of Meeting.
At every meeting of shareholders, the Chairman, or in the absence of the Chairman, the President, or in the absence of both the Chairman and the President, a Vice President, and in case more than one Vice President shall be present, that Vice President designated by the Board (or in the absence of any such designation, the most senior Vice President, based on age, present) shall act as chairman of the meeting. The Secretary, or in his absence one of the Assistant Secretaries, shall act as secretary of the meeting. In the absence of the Secretary and the Assistant Secretaries, the presiding officer may appoint any other person to act as secretary of the meeting.
At any meeting of the shareholders, only such business shall be conducted as shall have been brought before the meeting (a) pursuant to the Corporation’s notice of meeting, (b) by or at the direction of the Board of Directors or (c) by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in these Bylaws, who shall be entitled to vote at such meeting, and who complies with the notice procedures set forth in this Section 2.13; provided, however, that business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice.
For business to be properly brought before any meeting by a shareholder pursuant to clause (c) of the immediately preceding paragraph, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred twenty (120) days prior to the date of the meeting. A shareholder’s notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the beneficial owner, if any, on whose behalf of the proposal is made, and (iv) any material interest of such shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 2.13. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the procedures prescribed by this Section 2.13, and if such person should so determine, such person shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.13, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.13.
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2.14 Order of Business. The order of business at all meetings of shareholders shall be as determined exclusively by the chairman of the meeting.
2.15 Action by Shareholders Without a Meeting.
(a) Except as otherwise provided in the Articles of Incorporation, any action required or permitted to be taken at any annual or special meeting of shareholders may be taken without a meeting, without prior notice, and without a vote, if the action is taken by the holders of issued and outstanding stock entitled to vote thereon having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. In order to be effective, the action must be evidenced by one or more written consents describing the action taken, dated and signed by approving shareholders having the requisite number of votes entitled to vote thereon, and delivered to the Corporation by delivery to its principal office. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the date of the earliest dated consent delivered in the manner required by this Section 2.15, written consents signed by the number of holders required to take action are delivered to the Corporation.
(b) Any written consent may be revoked prior to the date that the Corporation receives the required number of consents to authorize the proposed action. No revocation is effective unless in writing and until received by the Corporation at its principal office.
(c) Within ten days after obtaining authorization by written consent, notice shall be given to those shareholders who have not consented in writing or who are not entitled to vote on the action. The notice shall fairly summarize the material features of the authorized action and, if the action is one for which dissenters’ rights are provided by law or the Articles of Incorporation, the notice shall contain a clear statement of the right of shareholders dissenting therefrom to be paid the fair value of their shares upon compliance with applicable law.
(d) Whenever action is taken pursuant to written consent, the written consent or consents of the shareholders consenting thereto or the written reports of the inspectors appointed to tabulate such consents shall be filed with the minutes of proceedings of shareholders of the Corporation.
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ARTICLE III
DIRECTORS
3.01 General Powers. Except as otherwise provided in the Articles of Incorporation, the business and affairs of the Corporation shall be managed by or under the direction of the Board. The Board may adopt such rules and regulations, not inconsistent with the Articles of Incorporation or the Bylaws or applicable laws, as it may deem proper for the conduct of its meetings and the management of the Corporation. In addition to the powers expressly conferred by the Bylaws, the Board may exercise all powers and perform all acts which are not required, by the Bylaws or the Articles of Incorporation or by law, to be exercised and performed by the shareholders.
3.02 Nominations for Directors. Nominations for election to the Board may be made by (a) the Board or (b) any holder of record of shares of any outstanding class of capital stock of the Corporation entitled to vote for the election of directors, and who complies with the notice procedures set forth in this Section 3.02. Nominations other than those made by the Board shall be made by notification in writing delivered to the Secretary of the Corporation
For business to be properly brought before any meeting by a shareholder pursuant to clause (b) of the immediately preceding paragraph, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one hundred twenty (120) days prior to the date of the meeting. A shareholder’s notice to the Secretary shall set forth (a) the names and addresses of each of the persons proposed for nomination to the Board of Directors and the reason or reasons for the nomination of each of them, (b) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (c) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the beneficial owner, if any, on whose behalf of the proposal is made, and (d) any material interest of such shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made with respect to such nominations.
Notwithstanding anything in these Bylaws to the contrary, no nomination for directors shall be made at a meeting except in accordance with the procedures set forth in this Section 3.02. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination or nominations for directors were not properly brought before the meeting and in accordance with the procedures prescribed by this Section 3.02, and if such person should so determine, such person shall so declare to the meeting and voting on such nomination or nominations shall not be conducted. Notwithstanding the foregoing provisions of this Section 3.02, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 3.02.
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3.03 Number; Qualification; Term of Office.
(a) The Board shall at all times consist of not less than one nor more than fifteen persons as the Board shall determine. Directors must be natural persons who are eighteen years of age or older, but need not be residents of the State of Florida or shareholders of the Corporation. Each director shall hold office until his successor is elected and qualified or until his earlier death, resignation or removal.
(b) The directors of the Corporation shall be classified, with respect to the time for which they severally hold office, into three classes, Class I, Class II and Class III, each of which shall be as nearly equal in number as possible. At the 2014 annual meeting of shareholders, the Class I directors shall be elected to a term of office to expire at the 2015 annual meeting of shareholders, the Class II directors shall be elected to a term of office to expire at the 2016 annual meeting of shareholders, and the Class III directors shall be elected to a term of office to expire at the 2017 annual meeting of shareholders. At each annual meeting of shareholders following such initial classification and election, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting of shareholders after their election. Notwithstanding the foregoing provisions of this Section 3.03(b), each director shall serve until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal from office. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain a number of directors in each class as nearly equal as reasonably possible, but no decrease in the number of directors may shorten the term of any incumbent director.
3.04 Election. Directors shall, except as otherwise required by law or by the Articles of Incorporation, be elected by a plurality of the votes cast at a meeting of shareholders at which a quorum is present by the holders of shares entitled to vote in the election.
3.05 Newly Created Directorships and Vacancies. Unless otherwise provided in the Articles of Incorporation, newly created directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any other reason, including the removal of directors, shall be filled by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A director elected to fill a vacancy shall be elected to hold office for a term expiring at the next annual meeting of shareholders, or until his earlier death, resignation or removal.
3.06 Resignations. Any director may resign at any time by written notice to the Corporation. Such resignation shall take effect at the time therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective.
3.07 Removal of Directors. Any or all of the Directors may be removed from office at any time, with or without cause, as is provided in the Articles of Incorporation and Section 607.0808 of the Business Corporation Act.
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3.08 Compensation. Each director, in consideration of his service as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at directors’ meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable expenses incurred by him in connection with the performance of his duties. Each director who shall serve as a member of any committee of directors in consideration of his serving as such shall be entitled to such additional amount per annum or such fees for attendance at committee meetings, or both, as the Board may from time to time determine, together with reimbursement for the reasonable expenses incurred by him in the performance of his duties. Nothing contained in this Section 3.08 shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
3.09 Place and Time of Meetings of the Board. Meetings of the Board, regular or special, may be held at any place within or without the State of Florida. The times and places for holding meetings of the Board may be fixed from time to time by resolution of the Board or (unless contrary to resolution of the Board) in the notice of the meeting.
3.10 Annual Meeting. On the day when and at the place where the annual meeting of shareholders for the election of directors is held, and as soon as practicable thereafter, the Board may hold its annual meeting, without notice of such meeting, for the purposes of organization, the election of officers and the transaction of other business. The annual meeting of the Board may be held at any other time and place specified in a notice given as provided in Section 3.12 of the Bylaws for special meetings of the Board or in a waiver of notice thereof.
3.11 Regular Meetings. Regular meetings of the Board may be held at such times and places as may be fixed from time to time by the Board. Unless otherwise required by the Board, regular meetings of the Board may be held without notice. If any day fixed for a regular meeting of the Board shall be a Saturday or Sunday or a legal holiday at the place where such meeting is to be held, then such meeting shall be held at the same hour at the same place on the first business day thereafter which is not a Saturday, Sunday or legal holiday.
3.12 Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman or by any two or more Directors. Notice of each special meeting of the Board shall, if mailed, be addressed to each director at the address designated by him for that purpose or, if none is designated, at his last known address at least ten days before the date on which the meeting is to be held; or such notice shall be sent to each director at such address by telegraph, cable, telefax or wireless, or be delivered to him personally, not later than five days before the date on which such meeting is to be held. Every such notice shall state the time and place of the meeting but need not state the purposes of the meeting, except to the extent required by law. If mailed, each notice shall be deemed given when deposited, with postage thereon prepaid, in a post office or official depository under the exclusive care and custody of the United States post office department. Such mailing shall be by first class mail.
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3.13 Adjourned Meetings. A majority of the directors present at any meeting of the Board, including an adjourned meeting, whether or not a quorum is present, may adjourn such meeting to another time and place. Notice of any adjourned meeting of the Board need not be given to any director, whether or not he was present at the time of the adjournment. Any business may be transacted at any adjourned meeting that might have been transacted at the meeting as originally called.
3.14 Waiver of Notice. Whenever notice is required to be given to any director or member of a committee of directors under any provision of the Business Corporation Act or of the Articles of Incorporation or Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice.
3.15 Organization. At each meeting of the Board, the Chairman of the Corporation, or in the absence of the Chairman, a chairman chosen by a majority of the Directors present, shall preside. The Secretary shall act as secretary at each meeting of the Board. In case the Secretary shall be absent from any meeting of the Board, an Assistant Secretary shall perform the duties of secretary at such meeting; and in the case of the absence from any such meeting of the Secretary and all Assistant Secretaries, the person presiding at the meeting may appoint any person to act as secretary of the meeting.
3.16 Quorum of Directors. A quorum for the transaction of business or of any specified item of business at any meeting of the Board shall consist of a majority of the directors.
3.17 Action by the Board. All corporate action taken by the Board or any committee thereof shall be taken at a meeting of the Board or of such committee, as the case may be, except that any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Members of the Board or any committee designated by the Board may participate in a meeting of the Board or of such committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.17 shall constitute presence in person at such meeting. Except as otherwise provided by the Articles of Incorporation or by law, the vote of a majority of the Directors (including those who participate by means of conference telephone or similar communications equipment) present at the time of the vote, if a quorum is present at such time, shall be the act of the Board.
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ARTICLE IV
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the entire Board, designate one or more committees, each committee to consist of one or more of the Directors. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Articles of Incorporation or Bylaws, adopting an agreement of merger or consolidation, recommending to the shareholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the shareholders a dissolution of the Corporation or a revocation of a dissolution, declaring or paying any dividend or other distribution in respect of the stock of the Corporation, issuing or selling stock of the Corporation or acquiring issued and outstanding stock of the Corporation.
ARTICLE V
OFFICERS
5.01 Officers. The Board shall elect as officers, a Chairman, a President, a Secretary and a Treasurer, and may elect or appoint one or more Vice Presidents and such other officers as it may determine. The Board may use descriptive words or phrases to designate the standing, seniority or area of special competence of the Vice Presidents elected or appointed by it. Each officer shall hold his office until his successor is elected and qualified or until his earlier death, resignation or removal in the manner provided in Section 5.02 of the Bylaws. Any two or more offices may be held by the same person. The Board may require any officer to give a bond or other security for the faithful performance of his duties, in such amount and with such sureties as the Board may determine. All officers as between themselves and the Corporation shall have such authority and perform such duties in the management of the Corporation as may be provided in the Bylaws or as the Board may from time to time determine.
5.02 Removal of Officers. Any officer elected or appointed by the Board may be removed by the Board with or without cause. The removal of an officer without cause shall be without prejudice to his contract rights, if any. The election or appointment of an officer shall not of itself create contract rights.
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5.03 Resignations. Any officer may resign at any time by so notifying the Board, the Chairman or the President in writing. Such resignation shall take effect at the date of receipt of such notice or at such later time as is therein specified, and, unless otherwise specified, the acceptance of such resignation shall not be necessary to make it effective. The resignation of an officer shall be without prejudice to the contract rights of the Corporation, if any.
5.04 Vacancies. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled for the unexpired portion of the term in the manner prescribed in the Bylaws for the regular election or appointment to such office.
5.05 Compensation. Salaries or other compensation of the officers may be fixed from time to time by the Board. No officer shall be prevented from receiving a salary or other compensation by reason of the fact that he is also a director.
5.06 Chairman. The Chairman shall be the chief executive officer of the Corporation and shall have general supervision over the business and affairs of the Corporation; subject, however, to the control of the Board and of any duly authorized committee of Directors. He shall preside at all meetings of the shareholders and of the Board. He may, with the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign certificates for shares of capital stock of the Corporation. He may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases where the signing and executing thereof shall be expressly delegated by the Board or by the Bylaws to some other officer or agent of the Corporation, or shall be required by law otherwise to be signed or executed; and, in general, he shall perform all duties and have such authority as are incident to the offices of Chairman and chief executive officer of the Corporation.
5.07 President. The President shall be the chief operating officer of the Corporation and shall have general supervision over the day-to-day affairs of the Corporation, subject, however, to the control of the Chairman, the Board and any duly authorized committee of directors. He may, with the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign certificates for shares of capital stock of the Corporation. He may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts and other instruments, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by the Bylaws to some other officer or agent of the Corporation, or shall be required by law otherwise to be signed or executed; and, in general, he shall perform all duties incident to the office of President and such other duties as from time to time may be assigned to him by the Chairman, the Board or a duly authorized committee of the Board.
5.08 Vice Presidents. At the request of the Board, the Chairman or the President, the Vice Presidents shall perform all of the duties of the President and in so acting shall have all the powers of, and be subject to all restrictions upon, the President. Any Vice President may, with the Secretary or the Treasurer or an Assistant Secretary or an Assistant Treasurer, sign certificates for shares of capital stock of the Corporation. Any Vice President may sign and execute in the name of the Corporation deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing and execution thereof shall be expressly delegated by the Board or by the Bylaws to some other officer or agent of the Corporation, or shall be required by law otherwise to be signed or executed. Each Vice President shall perform such other duties as from time to time may be assigned to him by the Board, by the Chairman or by the President.
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5.09 Secretary. The Secretary, if present, shall act as secretary of all meetings of the shareholders and of the Board, and shall keep the minutes thereof in the proper book or books to be provided for that purpose; he shall see that all notices required to be given by the Corporation are duly given and served; he may, with the Chairman, the President or a Vice President, sign certificates for shares of capital stock of the Corporation; he shall be custodian of the seal of the Corporation and may seal with the seal of the Corporation, or a facsimile thereof, all certificates for shares of capital stock of the Corporation and all documents the execution of which on behalf of the Corporation under its corporate seal is authorized in accordance with the provisions of the Bylaws; he shall have charge of the stock ledger and also of the other books, records and papers of the Corporation relating to its organization and management as a corporation, and shall see that the reports, statements and other documents required by law are properly kept and filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board or by the Chairman.
5.10 Treasurer. The Treasurer shall have charge and custody of, and be responsible for, all funds, securities and notes of the Corporation; receive and give receipts for moneys due and payable to the Corporation from any source whatsoever; deposit all such moneys in the name of the Corporation in such banks, trust companies or other depositories as shall be selected in accordance with these Bylaws; against proper vouchers, cause such funds to be disbursed by checks or drafts on the authorized depositories of the Corporation signed in such manner as shall be determined in accordance with any provisions of the Bylaws, and be responsible for the accuracy of the amounts of all moneys so disbursed; regularly enter or cause to be entered in books to be kept by him or under his direction full and adequate account of all moneys received or paid by him for the account of the Corporation; have the right to require, from time to time, reports or statements giving such information as he may desire with respect to any and all financial transactions of the Corporation from the officers or agents transacting the same; render to the Chairman, the President or the Board, whenever the Chairman, the President or the Board, respectively, shall require him so to do, an account of the financial condition of the Corporation and of all his transactions as Treasurer; exhibit at all reasonable times his books of account and other records to any of the directors upon application at the office of the Corporation where such books and records are kept; and, in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board or by the Chairman; and he may sign with the Chairman, the President or a Vice President certificates for shares of capital stock of the Corporation.
5.11 Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers shall perform such duties as shall be assigned to them by the Secretary or by the Treasurer, respectively, or by the Board or by the Chairman. Assistant Secretaries and Assistant Treasurers may, with the Chairman, the President or a Vice President, sign certificates for shares of capital stock of the Corporation.
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ARTICLE VI
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.01 Execution of Contracts. The Board may authorize any officer, employee or agent, in the name and on behalf of the Corporation, to enter into any contract or execute and satisfy any instrument, and any such authority may be general or confined to specific instances or otherwise limited.
6.02 Loans. The Chairman or any other officer, employee or agent authorized by the Bylaws or by the Board may effect loans and advances at any time for the Corporation from any bank, trust company or other institution or from any firm, corporation or individual and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, and, when authorized by the Board so to do, may pledge and hypothecate or transfer any securities or other property of the Corporation as security for any such loans or advances. Such authority conferred by the Board may be general or confined to specific instances or otherwise limited.
6.03 Checks, Drafts, Etc. All checks, drafts and other orders for the payment of money out of the funds of the Corporation and all notes or other evidences of indebtedness of the Corporation shall be signed on behalf of the Corporation in such manner as shall from time to time be determined by resolution of the Board.
6.04 Deposits. The funds of the Corporation not otherwise employed shall be deposited from time to time to the order of the Corporation in such banks, trust companies or other depositories as the Board or the Chairman may select or as may be selected by an officer, employee or agent of the Corporation to whom such power may from time to time be delegated by the Board or the Chairman.
ARTICLE VII
STOCK AND DIVIDENDS
7.01 Certificates Representing Shares. The shares of capital stock of the Corporation shall be represented by certificates in such form (consistent with the provisions of Section 607.0625 of the Business Corporation Act) as shall be approved by the Board. Such certificates shall be signed by the Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of the officers upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent or registrar other than the Corporation itself or its employee. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon any certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may, unless otherwise ordered by the Board, be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.
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7.02 Transfer of Shares. Transfers of shares of capital stock of the Corporation shall be made only on the books of the Corporation by the holder thereof or by his duly authorized attorney appointed by a power of attorney duly executed and filed with the Secretary or a transfer agent of the Corporation, and on surrender of the certificate or certificates representing such shares of capital stock properly endorsed for transfer and upon payment of all necessary transfer taxes. Every certificate exchanged, returned or surrendered to the Corporation shall be marked “Canceled,” with the date of cancellation, by the Secretary or an Assistant Secretary or the transfer agent of the Corporation. A person in those name shares of capital stock shall stand on the books of the Corporation shall be deemed the owner thereof to receive dividends, to vote as such owner and for all other purposes as respects the Corporation. No transfer of shares of capital stock shall be valid as against the Corporation, its shareholders and creditors for any purpose, except to render the transferee liable for the debts of the Corporation to the extent provided by law, until such transfer shall have been entered on the books of the Corporation by an entry showing from and to whom transferred.
7.03 Transfer and Registry Agents. The Corporation may from time to time maintain one or more transfer offices or agents and registry offices or agents at such place or places as may be determined from time to time by the Board.
7.04 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of any shares of capital stock of the Corporation shall immediately notify the Corporation of any loss, destruction, theft or mutilation of the certificate representing such shares, and the Corporation may issue a new certificate to replace the certificate alleged to have been lost, destroyed, stolen or mutilated. The Board may, in its discretion, as a condition to the issue of any such new certificate, require the owner of the lost, destroyed, stolen or mutilated certificate, or his legal representatives, to make proof satisfactory to the Board of such loss, destruction, theft or mutilation and to advertise such fact in such manner as the Board may require, and to give the Corporation and its transfer agents and registrars, or such of them as the Board may require, a bond in such form, in such sums and with such surety or sureties as the Board may direct, to indemnify the Corporation and its transfer agents and registrars against any claim that may be made against any of them on account of the continued existence of any such certificate so alleged to have been lost, destroyed, stolen or mutilated and against any expense in connection with such claim.
7.05 Regulations. The Board may make such rules and regulations as it may deem expedient, not inconsistent with the Bylaws or with the Articles of Incorporation, concerning the issue, transfer and registration of certificates representing shares of its capital stock.
7.06 Restriction on Transfer. A written restriction on the transfer or registration of transfer of capital stock of the Corporation, if permitted by Section 607.0627 of the Business Corporation Act and noted conspicuously on the certificate representing such capital stock, may be enforced against the holder of the restricted capital stock or any successor or transferee of the holder including an executor, personal representative, administrator, trustee, guardian or other fiduciary entrusted with like responsibility for the person or estate of the holder. Unless noted conspicuously on the certificate representing such capital stock, a restriction, even though permitted by Section 607.0627 of the Business Corporation Act, shall be ineffective except against a person with actual knowledge of the restriction. A restriction on the transfer or registration of transfer of capital stock of the Corporation may be imposed either by the Articles of Incorporation or by an agreement among any number of shareholders or among such shareholders and the Corporation. No restriction so imposed shall be binding with respect to capital stock issued prior to the adoption of the restriction unless the holders of such capital stock are parties to an agreement or voted in favor of the restriction.
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7.07 Dividends, Surplus, Etc. Subject to the provisions of the Articles of Incorporation and of law, the Board may:
(a) declare and pay dividends or make other distributions on the outstanding shares of capital stock in such amounts and at such time or times as, in its discretion, the condition of the affairs of the Corporation shall render it advisable;
(b) use and apply, in its discretion, any of the surplus of the Corporation in purchasing or acquiring any shares of capital stock of the Corporation, or purchase warrants or options therefor, in accordance with law, or any of its bonds, debentures, notes, scrip or other securities or evidences of indebtedness; and
(c) set aside from time to time out of such surplus or net profits such sum or sums as, in its discretion, it may think proper, as a reserve fund to meet contingencies, or for equalizing dividends or for the purpose of maintaining or increasing the property or business of the Corporation, or for any purpose it may think conducive to the best interests of the Corporation.
ARTICLE VIII
INDEMNIFICATION
The Corporation shall indemnify and hold harmless its directors, officers, employees, attorneys and agents to the fullest extent permitted by laws of the State of Florida, as now or hereafter in effect, and such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee, attorney or agent and shall inure to the benefit of his or her heirs, executors and personal and legal representatives; provided, however, that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director, officer, employee, attorney or agent (or his or her heirs, executors or personal or legal representatives) in connection with any suit, action or proceeding (or part thereof) initiated by such person unless such suit, action or proceeding (or part thereof) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article VIII shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by the Corporation of an undertaking by or on behalf of the person receiving advancement to repay the amount advanced if it shall ultimately be determined that such person is not entitled to be indemnified by the Corporation under this Article VIII.
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The rights to indemnification and to the advancement of expenses conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under the Corporation’s Amended and Restated Articles of Incorporation (as now or hereafter in effect), these Bylaws (as now or hereafter in effect), any statute, agreement, vote of shareholders or disinterested directors, or otherwise.
The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee, attorney or agent against any liability which may be asserted against him or her or incurred by him or her or on his or her behalf in such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability.
No amendment, modification, alteration, change, supplement or repeal of all or any portion of this Article VIII, nor the amendment, modification, alteration, change, supplement or repeal of all or any portion of the Bylaws, inconsistent with the provisions of this Article VIII shall adversely affect the rights to indemnification and to the advancement of expenses of a director, officer, employee, attorney or agent existing at the time of such amendment, modification, alteration, change, supplement or repeal with respect to any act or omission occurring prior to the time of such amendment, modification, alteration, change, supplement or repeal.
ARTICLE IX
BOOKS AND RECORDS
9.01 Books and Records. The Corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of the shareholders, the Board and any committee of the Board. The Corporation shall keep at its principal office or at the office of the transfer agent or registrar of the Corporation a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof.
9.02 Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, floppy disks, compact disks, photographs, microphotographs, or any other information storage device, provided that the records so kept can be converted into clearly legible written form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect them.
9.03 Inspection of Books and Records. Except as otherwise provided by law, the Board shall determine from time to time whether, and, if allowed, when and under what conditions and regulations, the accounts, books, minutes and other records of the Corporation, or any of them, shall be open to the inspection of the shareholders.
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ARTICLE X
SEAL
The Board may adopt a corporate seal which shall be in the form of a circle and shall bear the full name of the Corporation, the year of its incorporation and the word “Florida.”
ARTICLE XI
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may be changed, by resolution of the Board.
ARTICLE XII
SECURITIES OF OTHER ENTITIES
Unless otherwise provided by resolution of the Board, the Chairman may, from time to time, appoint one or more attorneys or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as a shareholder or otherwise in any corporation or other entity, any of whose shares or securities may be held by the Corporation, at meetings of the holders of stock or other securities of such corporation or other entity, or to consent in writing to any action by any such corporation or other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, consents, waivers or other instruments as he may deem necessary or proper in his discretion; or the Chairman may himself attend any meeting of the stock or other securities of any such corporation or other entity and thereat vote or exercise any or all other powers of the Corporation as the holder of such stock or other securities of such other corporation or other entity.
ARTICLE XIII
GENDER
As used in these Bylaws, the masculine gender shall extend to and shall include the feminine and the neuter genders.
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ARTICLE XIV
AMENDMENTS
These Bylaws may be amended, modified, altered, changed, supplemented or repealed, or new Bylaws may be adopted, by the vote of the holders of a majority of the shares entitled to vote in the election of directors of the Corporation. These Bylaws may be amended, modified, altered, changed, supplemented or repealed, and new Bylaws may be adopted, by the affirmative vote of a majority of the directors at a meeting of the Board at which a quorum is present. Any Bylaw or Bylaws adopted, amended, modified, altered, changed, supplemented or repealed by the Board may be subsequently amended, modified, altered, changed, supplemented or repealed by the shareholders as provided in this Article XIV.
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Exhibit 4.1
Exhibit 4.2
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE 1933 ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.
WARRANT TO PURCHASE COMMON STOCK
OF
FREECAST, INC.
(Date Goes Here)
This is to Certify That, FOR VALUE RECEIVED, (“Holder”), is entitled to purchase, subject to the provisions of this Warrant, from FreeCast, Inc., a Florida corporation (the “Company”), (x00,000) shares of fully paid, validly issued and nonassessable common stock, par value $0.0001 per share, of the Company (“Common Stock”) at a price of $3.00 per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price.”
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time from the date hereof up to and including (2 years from date of execution) (the “Exercise Period”); provided, however, that (i) if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day, and (ii) in the event of any merger, consolidation or sale of substantially all the assets of the Company as an entirety, resulting in any distribution to the Company’s stockholders, prior to termination of the Exercise Period, the Holder shall have the right to exercise this Warrant commencing at such time through the termination of the Exercise Period into the kind and amount of shares of common stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which this Warrant might have been exercisable immediately prior thereto. This Warrant may be exercised by delivery and surrender hereof to the Company with the Exercise Notice annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the duly executed Exercise Notice accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form has been delivered to the Company (the “Exercise Date”) as provided in Section (a). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Section (c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.
(c) DELIVERY TO HOLDER. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event not later than seven (7) business days thereafter (the “Warrant Share Delivery Date”), the Company will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of Warrant Shares to which such Holder shall be entitled, and
(ii) in case such exercise is in part only, upon surrender of this Warrant for cancellation, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Shares equal (giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise.
(d) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of the this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.
(e) FRACTIONAL SHARES. No fractional shares or scrips representing fractional shares shall be issued upon the exercise of this Warrant. All fractions of a share called for upon any exercise hereof shall be eliminated by rounding any fraction down to the nearest whole number of shares of Common Stock or other securities, as applicable.
(f) REDEMPTION. After the Company completes its initial public offering, in the event that the trading price of the Common Stock closes at a price per share equal to or greater than 125% of the initial public offering price for 30 consecutive trading days, on the trading day immediately following such 30 consecutive trading day period or thereafter, the Company may, without the Holder’s consent, redeem the portion of this Warrant then outstanding at a redemption price of $0.01 per Warrant Share upon 30 calendar days written notice to the Holder.
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(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
(h) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
(i) ANTI-DILUTION PROVISIONS. In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted (without further action of the Company) so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted (without further action of the Company) to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section (i)) be issuable on such exercise by a fraction of which (1) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section (i)) be in effect, and (2) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section (i)). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock. Adjustment pursuant to this Section shall be made successively whenever any event listed above shall occur.
(j) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (j) shall similarly apply to successive reclassifications, capital reorganizations and changes of the Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Section (j) hereof.
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(k) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution on the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed to the Holder, at least fifteen days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive securities, cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
(l) NOTICES. Any notice or request hereunder shall be in writing and may be given only by, and shall be deemed to have been received upon: (a) registered or certified mail, return receipt requested, on the date on which such notice or request is received as indicated in such return receipt; (b) delivery by a nationally recognized overnight courier, one business day after deposit with such courier; or (c) facsimile or other electronic transmission upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient) of such facsimile or other electronic transmission. In the case of the Holder, such notices and communications shall be addressed to its address as set forth in the signature page hereto, unless the Holder shall notify the Company that notices and communications should be sent to a different address (or facsimile number or electronic mail address), in which case such notices and communications shall be sent to the address (or facsimile number or email address) specified by the Holder. In the case of the Company, such notices and communications shall be addressed to the following address or to such other address as the Company may designate by notice to the Holder:
FreeCast, Inc.
6901 TPC Drive #100 Orlando, Florida 32822
Attention: William A. Mobley, Jr., Chief Executive Officer
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(m) NO NET-CASH SETTLEMENT. In no event will the Holder be entitled to receive a net-cash settlement or other consideration in lieu of physical settlement in securities.
(n) NO CASHLESS EXERCISE. This Warrant may not be exercised, in whole or in part, by means of a “cashless exercise”.
(o) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
(p) MODIFICATION OF AGREEMENT. The provisions of this Warrant may from time to time be amended, modified or waived, by the Company and the holder of this Warrant.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date of this Warrant.
| FREECAST,INC. | |||
| By: | |||
| Name: | William A. Mobley | ||
| Title: | CEO | ||
Holder:
Holder Name Here
Holder Address Here (EX: 875 Bainbridge Dr, West Chester, PA 19382)
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EXERCISE NOTICE
TO: FREECAST, INC.
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company at an aggregate price of $__________ pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
____________________________________
with an address:
____________________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
____________________________________
____________________________________
____________________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, and that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.
_____________________
[SIGNATURE OF HOLDER]
Name of Investing
Entity:
Signature of Authorized Signatory of
Investing Entity: Name of Authorized Signatory:
Title of Authorized
Signatory:
Date: ___________________________________________________________________________________________
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Exhibit 4.3
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL EITHER: (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO; OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE 1933 ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER AND NEITHER IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE INCLUDED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.
WARRANT TO PURCHASE COMMON STOCK
OF
FREECAST, INC.
Issue Date:____________
Warrant Number: CSW-00_
This Certifies that_________________(“Holder”), is entitled to purchase, subject to the provisions of this Warrant to Purchase Common Stock (this “Warrant”), from FreeCast, Inc., a Florida corporation (the “Company”), (________) shares of fully paid, validly issued and nonassessable common stock, par value $0.0001 per share, of the Company (“Common Stock”) at a price of $______ per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price.”
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time from the date hereof up to and including December 31, 2025 (the “Exercise Period”); provided, however, that: (i) if either such day is a day on which banking institutions in the State of Florida are authorized by law to close, then on the next succeeding day which shall not be such a day, and (ii) in the event of any merger, consolidation or sale of substantially all the assets of the Company as an entirety, resulting in any distribution to the Company’s stockholders, prior to termination of the Exercise Period, the Holder shall have the right to exercise this Warrant commencing at such time through the termination of the Exercise Period into the kind and amount of shares of common stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which this Warrant might have been exercisable immediately prior thereto. This Warrant may be exercised by delivery and surrender hereof to the Company with the Exercise Notice annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form.
2. EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the duly executed Exercise Notice accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form has been delivered to the Company (the “Exercise Date”) as provided in Section 1 above. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Section 3 below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.
3. DELIVERY TO HOLDER. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event not later than seven (7) business days thereafter (the “Warrant Share Delivery Date”), the Company will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:
(i) unless the Common Stock is held in book-entry only form, in which case the Company’s transfer agent shall provide a statement of holdings, a certificate or certificates for the number of shares of Warrant Shares to which such Holder shall be entitled, and
(ii) in case such exercise is in part only, upon surrender of this Warrant for cancellation, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Shares equal (giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise.
4. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of the this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.
5. FRACTIONAL SHARES. No fractional shares or scrips representing fractional shares shall be issued upon the exercise of this Warrant. All fractions of a share called for upon any exercise hereof shall be eliminated by rounding any fraction down to the nearest whole number of shares of Common Stock or other securities, as applicable.
6. REDEMPTION. After the Company completes its initial public offering, in the event that the trading price of the Common Stock closes at a price per share equal to or greater than 125% of the initial public offering price for 30 consecutive trading days, on the trading day immediately following such 30 consecutive trading day period or thereafter, the Company may, without the Holder’s consent, redeem the portion of this Warrant then outstanding at a redemption price of $0.01 per Warrant Share upon 30 calendar days written notice to the Holder.
7. LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
8 RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
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9. ANTI-DILUTION PROVISIONS. In case the Company shall hereafter: (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock; (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares; or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted (without further action of the Company) so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted (without further action of the Company) to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 9) be issuable on such exercise by a fraction of which (x) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 9) be in effect, and (y) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 9). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock. Adjustment pursuant to this Section 9 shall be made successively whenever any event listed above shall occur.
10. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of the Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of this Section 10.
11. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, if: (i) the Company shall pay any dividend or make any distribution on the Common Stock; (ii) the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights; or (iii) any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed to the Holder, at least 15 days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive securities, cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
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12. NOTICES. Any notice or request hereunder shall be in writing and may be given only by, and shall be deemed to have been received upon: (i) registered or certified mail, return receipt requested, on the date on which such notice or request is received as indicated in such return receipt; (ii) delivery by a nationally recognized overnight courier, one business day after deposit with such courier; or (iii) electronic transmission upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient) of such electronic transmission. In the case of the Holder, such notices and communications shall be addressed to its address as set forth in the signature page hereto, unless the Holder shall notify the Company that notices and communications should be sent to a different address (or electronic mail address), in which case such notices and communications shall be sent to the address (or electronic address) specified by the Holder. In the case of the Company, such notices and communications shall be addressed to the following address or to such other address as the Company may designate by notice to the Holder: FreeCast, Inc. 6901 TPC Drive #100 Orlando, Florida 32822. Attention: William A. Mobley, Jr., Chief Executive Officer.
13. NO NET-CASH SETTLEMENT. In no event will the Holder be entitled to receive a net-cash settlement or other consideration in lieu of physical settlement in securities.
14. NO CASHLESS EXERCISE. This Warrant may not be exercised, in whole or in part, by means of a “cashless exercise.”
15. SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
16. AMENDMENTS AND MODIFICATIONS. The provisions of this Warrant may from time to time be amended, modified or waived only by a written agreement executed by the Company and the holder of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the issue date of this Warrant first set forth above.
| FREECAST, INC. | ||
| By: | ||
| William A. Mobley, CEO | ||
Holder Name:
Holder Address:
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EXERCISE NOTICE
TO: FREECAST, INC.
(1) The undersigned hereby elects to purchase Warrant Shares of the Company at an aggregate purchase price of $___________ pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer and other taxes, if any
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________________________
with an address:
_______________________________________________
(3) The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
_______________________________________________
_______________________________________________
_______________________________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, and that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.
_______________________
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________________________________
Signature of Authorized Signatory of Investing Entity: _______________________________________________
Name of Authorized Signatory: _______________________________________________
Title of Authorized Signatory: _______________________________________________
Date: _______________________________________________
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Exhibit 4.4
FIRST AMENDMENT
TO
WARRANT TO PURCHASE COMMON STOCK
THIS FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON STOCK (this “Amendment”) is made and effective as of June 15, 2023 by and among FREECAST, INC., (“Issuer”) and _______________________________________ (together with its successors and assigns, “Holder”).
R E C I T A L S:
WHEREAS, Issuer and Holder desire to revise that certain Warrant to Purchase Common Stock of Issuer issued to Holder for the purchase of _____ shares and dated [date of original warrant], heretofore referred to as Warrant Number: CSW-00_ (the “Warrant”).
NOW, THEREFORE, in consideration of the foregoing and the mutual benefits to be derived from this Amendment, the parties hereto hereby agree as follows:
1. Amendment of the Warrant. The phrase in the first sentence of Section (a) before the defined term “(the “Exercise Period”)” is deleted in its entirety and replaced with the following:
“This Warrant may be exercised in whole or in part at any time or from time to time from the date hereof up to and including December 31, 2025”
2. Continued Effect of the Warrant. All provisions of the Warrant, except as modified by this Amendment, shall remain in full force and effect and are reaffirmed. Other than as stated in this Amendment, this Amendment shall not operate as a waiver of any condition or obligation imposed on the parties under the Warrant.
3. Interpretation of Amendment. In the event of any conflict or inconsistency between any provision of this Amendment and any provision of the Warrant, the provisions of this Amendment shall govern and control.
4. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall be deemed an original, and together shall constitute one and the same agreement. Counterparts may be delivered via electronic mail (including .pdf or electronic signature e.g., www.docusign.com) or other transmission method, and any counterpart so delivered shall be valid and effective for all purposes.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above.
| FREECAST, INC. | ||
| By: | ||
| William A. Mobley | ||
| Chief Executive Officer | ||
HOLDER:
Name of Holder:
Signature of Holder (if Holder is an individual):
Signature of Authorized Signatory (if Holder is an entity):
Name of Authorized Signatory (if Holder is an entity):
Title of Authorized Signatory (if Holder is an entity):
Exhibit 4.5
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL EITHER: (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO; OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE 1933 ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER AND NEITHER IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE INCLUDED ON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.
WARRANT TO PURCHASE COMMON STOCK
OF
FREECAST, INC.
Issue Date: June 15, 2023
Warrant Number: CSW-00_
This Certifies that_________________(“Holder”), is entitled to purchase, subject to the provisions of this Warrant to Purchase Common Stock (this “Warrant”), from FreeCast, Inc., a Florida corporation (the “Company”), (________) shares of fully paid, validly issued and nonassessable common stock, par value $0.0001 per share, of the Company (“Common Stock”) at a price of $______ per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price.”
1. EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time from the date hereof up to and including December 31, 2025 (the “Exercise Period”); provided, however, that: (i) if either such day is a day on which banking institutions in the State of Florida are authorized by law to close, then on the next succeeding day which shall not be such a day, and (ii) in the event of any merger, consolidation or sale of substantially all the assets of the Company as an entirety, resulting in any distribution to the Company’s stockholders, prior to termination of the Exercise Period, the Holder shall have the right to exercise this Warrant commencing at such time through the termination of the Exercise Period into the kind and amount of shares of common stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which this Warrant might have been exercisable immediately prior thereto. This Warrant may be exercised by delivery and surrender hereof to the Company with the Exercise Notice annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form.
2. EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the duly executed Exercise Notice accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form has been delivered to the Company (the “Exercise Date”) as provided in Section 1 above. At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Section 3 below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.
3. DELIVERY TO HOLDER. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event not later than seven (7) business days thereafter (the “Warrant Share Delivery Date”), the Company will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:
(i) unless the Common Stock is held in book-entry only form, in which case the Company’s transfer agent shall provide a statement of holdings, a certificate or certificates for the number of shares of Warrant Shares to which such Holder shall be entitled, and
(ii) in case such exercise is in part only, upon surrender of this Warrant for cancellation, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Shares equal (giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise.
4. RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of the this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.
5. FRACTIONAL SHARES. No fractional shares or scrips representing fractional shares shall be issued upon the exercise of this Warrant. All fractions of a share called for upon any exercise hereof shall be eliminated by rounding any fraction down to the nearest whole number of shares of Common Stock or other securities, as applicable.
6. REDEMPTION. After the Company completes its initial public offering, in the event that the trading price of the Common Stock closes at a price per share equal to or greater than 125% of the initial public offering price for 30 consecutive trading days, on the trading day immediately following such 30 consecutive trading day period or thereafter, the Company may, without the Holder’s consent, redeem the portion of this Warrant then outstanding at a redemption price of $0.01 per Warrant Share upon 30 calendar days written notice to the Holder.
7. LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
8 RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
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9. ANTI-DILUTION PROVISIONS. In case the Company shall hereafter: (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock; (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares; or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted (without further action of the Company) so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted (without further action of the Company) to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section 9) be issuable on such exercise by a fraction of which (x) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section 9) be in effect, and (y) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section 9). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock. Adjustment pursuant to this Section 9 shall be made successively whenever any event listed above shall occur.
10. RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 10 shall similarly apply to successive reclassifications, capital reorganizations and changes of the Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of this Section 10.
11. NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, if: (i) the Company shall pay any dividend or make any distribution on the Common Stock; (ii) the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights; or (iii) any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed to the Holder, at least 15 days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive securities, cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
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12. NOTICES. Any notice or request hereunder shall be in writing and may be given only by, and shall be deemed to have been received upon: (i) registered or certified mail, return receipt requested, on the date on which such notice or request is received as indicated in such return receipt; (ii) delivery by a nationally recognized overnight courier, one business day after deposit with such courier; or (iii) electronic transmission upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient) of such electronic transmission. In the case of the Holder, such notices and communications shall be addressed to its address as set forth in the signature page hereto, unless the Holder shall notify the Company that notices and communications should be sent to a different address (or electronic mail address), in which case such notices and communications shall be sent to the address (or electronic address) specified by the Holder. In the case of the Company, such notices and communications shall be addressed to the following address or to such other address as the Company may designate by notice to the Holder: FreeCast, Inc. 6901 TPC Drive #100 Orlando, Florida 32822. Attention: William A. Mobley, Jr., Chief Executive Officer.
13. NO NET-CASH SETTLEMENT. In no event will the Holder be entitled to receive a net-cash settlement or other consideration in lieu of physical settlement in securities.
14. NO CASHLESS EXERCISE. This Warrant may not be exercised, in whole or in part, by means of a “cashless exercise.”
15. SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
16. AMENDMENTS AND MODIFICATIONS. The provisions of this Warrant may from time to time be amended, modified or waived only by a written agreement executed by the Company and the holder of this Warrant.
17. REGISTRATION OF SECURITIES. The Holder shall have the right at any time and from time to time to require the Company to register this Warrant and the Warrant Shares for resale to the public under the 1933 Act and any applicable state securities or blue-sky laws. Any request for such registration shall be made by delivery of written notice to the Company. The Holder shall promptly furnish to the Company such information as the Company shall reasonably request to enable it to prepare and file any and all required registration statements and amendments thereto. Except as may be required by law, the Company shall pay all fees and costs incurred in connection with the preparation and filing of any registration statement with the Securities and Exchange Commission and any applicable state securities authority.
18. SURVIVAL. Any obligation of the Company under this Warrant, the complete performance of which may require performance beyond the term of this Warrant, shall survive the expiration of such term.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the issue date of this Warrant first set forth above.
| FREECAST, INC. | ||
| By: | ||
| William A. Mobley, CEO | ||
| Holder Name: | ||
| Holder Address: | ||
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EXERCISE NOTICE
| TO: | FREECAST, INC. |
(1) The undersigned hereby elects to purchase Warrant Shares of the Company at an aggregate purchase price of $___________ pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer and other taxes, if any
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_________________________________________
with an address:
__________________________________________
(3) The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
________________________________
________________________________
________________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, and that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.
| [SIGNATURE OF HOLDER] |
Name of Investing Entity: _______________________________________________
Signature of Authorized Signatory of Investing Entity: ____________________________________
Name of Authorized Signatory: _________________________________________
Title of Authorized Signatory: ___________________________________________
Date: _______________________________________________
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Exhibit 4.6
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE 1933 ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS SUCH TRANSFER IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED IN EXCHANGE FOR THIS WARRANT OR ANY SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT.
WARRANT TO PURCHASE COMMON STOCK
OF
FREECAST, INC.
May 1, 2023
Warrant Number: CSW--130
This is to Certify That, FOR VALUE RECEIVED, Gary Engel or his/her assigns (“Holder”), is entitled to purchase, subject to the provisions of this Warrant, from FreeCast, Inc., a Florida corporation (the “Company”), 25,000 shares of fully paid, validly issued and nonassessable common stock, par value $0.0001 per share, of the Company (“Common Stock”) at a price of $3.00 per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price.”
(a) EXERCISE OF WARRANT. This Warrant shall vest ratably over 12 months and may be exercised in whole or in part at any time or from time to time from the vesting date up to and including May 1 (the “Exercise Period”); provided, however, that (i) if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day, and (ii) in the event of any merger, consolidation or sale of substantially all the assets of the Company as an entirety, resulting in any distribution to the Company’s stockholders, prior to termination of the Exercise Period, the Holder shall have the right to exercise this Warrant commencing at such time through the termination of the Exercise Period into the kind and amount of shares of common stock and other securities and property (including cash) receivable by a holder of the number of shares of Common Stock into which this Warrant might have been exercisable immediately prior thereto. This Warrant may be exercised by delivery and surrender hereof to the Company with the Exercise Notice annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form.
(b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant shall be deemed to have been effected immediately prior to the close of business on the day on which the duly executed Exercise Notice accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form has been delivered to the Company (the ” Exercise Date”) as provided in Section (a). At such time, the person or persons in whose name or names any certificates for Warrant Shares shall be issuable upon such exercise as provided in Section (c) below shall be deemed to have become the holder or holders of record of the Warrant Shares represented by such certificates.
(c) DELIVERY TO HOLDER. As soon as practicable after the exercise of this Warrant in whole or in part, and in any event not later than seven (7) business days thereafter (the “Warrant Share Delivery Date”), the Company will cause to be issued in the name of, and delivered to, the Holder, or as such Holder (upon payment by such Holder of any applicable transfer taxes) may direct:
(i) a certificate or certificates for the number of shares of Warrant Shares to which such Holder shall be entitled, and
(ii) in case such exercise is in part only, upon surrender of this Warrant for cancellation, a new warrant or warrants (dated the date hereof) of like tenor, calling in the aggregate on the face or faces thereof for the number of shares of Warrant Shares equal (giving effect to any adjustment therein) to the number of such shares called for on the face of this Warrant minus the number of such shares purchased by the Holder upon such exercise.
(d) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of the this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.
(e) FRACTIONAL SHARES. No fractional shares or scrips representing fractional shares shall be issued upon the exercise of this Warrant. All fractions of a share called for upon any exercise hereof shall be eliminated by rounding any fraction down to the nearest whole number of shares of Common Stock or other securities, as applicable.
(f) REDEMPTION. After the Company completes its initial public offering, in the event that the trading price of the Common Stock closes at a price per share equal to or greater than 125% of the initial public offering price for 30 consecutive trading days, on the trading day immediately following such 30 consecutive trading day period or thereafter, the Company may, without the Holder’s consent, redeem the portion of this Warrant then outstanding at a redemption price of $0.01 per Warrant Share upon 30 calendar days written notice to the Holder.
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(g) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute a substitute contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.
(h) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.
(i) ANTI-DILUTION PROVISIONS. In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding Common Stock in Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted (without further action of the Company) so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted (without further action of the Company) to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section (i)) be issuable on such exercise by a fraction of which (1) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section (i)) be in effect, and (2) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section (i)). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock. Adjustment pursuant to this Section shall be made successively whenever any event listed above shall occur.
(j) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section G) shall similarly apply to successive reclassifications, capital reorganizations and changes of the Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Section (j) hereof.
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(k) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution on the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution , liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed to the Holder, at least fifteen days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive securities, cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice.
(1) NOTICES. Any notice or request hereunder shall be in writing and may be given only by, and shall be deemed to have been received upon: (a) registered or certified mail, return receipt requested, on the date on which such notice or request is received as indicated in such return receipt; (b) delivery by a nationally recognized overnight courier, one business day after deposit with such courier; or (c) facsimile or other electronic transmission upon telephone or further electronic communication from the recipient acknowledging receipt (whether automatic or manual from recipient) of such facsimile or other electronic transmission. In the case of the Holder, such notices and communications shall be addressed to its address as set forth in the signature page hereto, unless the Holder shall notify the Company that notices and communications should be sent to a different address (or facsimile number or electronic mail address), in which case such notices and communications shall be sent to the address (or facsimile number or email address) specified by the Holder. In the case of the Company, such notices and communications shall be addressed to the following address or to such other address as the Company may designate by notice to the Holder:
FreeCast, Inc.
6901 TPC Drive #200
Orlando, Florida 32822
Attention: William A. Mobley, Jr., Chief Executive Officer
(m) NO NET-CASH SETTLEMENT. In no event will the Holder be entitled to receive a net-cash settlement or other consideration in lieu of physical settlement in securities.
( ) NO CASHLESS EXERCISE. This Warrant may not be exercised, in whole or in part, by means of a “cashless exercise”.
(a) SUCCESSORS AND ASSIGNS. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder.
(n) MODIFICATION OF AGREEMENT. The provisions of this Warrant may from time to time be amended, modified or waived, by the Company and the holder of this Warrant.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed as of the date of this Warrant.
| FREECAST, INC. | ||
| By: | /s/ William A. Mobley | |
| Name: | William A. Mobley | |
| Title: | CEO | |
Name: Gary Engel
Address for Notice: 18 Ronald Terrace, Springfield, NJ 07081
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EXERCISE NOTICE
TO: FREECAST, INC.
(1) The undersigned hereby elects to purchase ________________ Warrant Shares of the Company at an aggregate price of $ ___________________ pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:
__________________________
with an address:
__________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
___________________________________
___________________________________
___________________________________
(4) Accredited Investor. The undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended, and that the aforesaid Shares are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.
| [SIGNATURE OF HOLDER] |
| Name of investing |
| Entity: |
| Signature of Authorized Signatory of |
| Investing Entity: |
| Name of Authorized |
| Signatory: |
| Title of Authorized |
| Signatory: |
| Date: |
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Exhibit 4.7
Exhibit 4.8
THE SECURITIES REPRESENTED BY THIS DOCUMENT AND THE SHARES ISSUABLE UPON CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OR AN EXEMPTION THEREFROM AS CONFIRMED BY AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.
REVOLVING CONVERTIBLE PROMISSORY NOTE
| Up to $2,500,000 | June 30, 2021 |
FOR VALUE RECEIVED, the undersigned FREECAST, INC., a Florida corporation (“Maker”) hereby promises to pay to the order of NEXTELLIGENCE, INC. (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the aggregate principal amount as may be outstanding hereunder from time to time not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000), together with interest thereon from the date of this Convertible Promissory Note (this “Note”), as provided herein.
By acceptance of this Note, Payee agrees that it will promptly deliver and surrender this Note to Maker upon full payment thereof.
1. Principal Balance. This Note evidences a loan up to the maximum principal sum specified above, less the aggregate amount of all principal repayments made under this Note by Maker to Payee.
2. Interest Rate. Interest shall accrue on the aggregate unpaid principal balance outstanding hereunder from time to time at the rate of 12% per annum from but excluding the date first set forth above to and including the Maturity Date (as defined below). Interest shall accrue on any principal balance that is not paid on the earlier of the Maturity Date and the date of an Event of Default (as defined below) at the rate of 18% per annum from and including the Maturity Date or the date of such Event of Default to but excluding the date of payment. In no event, however, shall interest be payable at a rate higher than the highest rate permitted by applicable law. Interest on the principal balance outstanding will be calculated on the basis of the actual number of days elapsed over an assumed year consisting of 365 days, to the date of receipt by Payee of any interest and/or principal. Interest shall be payable on the unpaid principal balance of this Note, as the same may exist from time to time, from the date of issuance until paid or converted in full, in accordance with the terms herein and shall be payable: (a) on the Maturity Date; and (b) on any earlier date of payment or conversion of principal, in whole or in part and, if in part, as to the portion paid or converted.
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Payee in full no later than June 30, 2024 (the “Maturity Date”).
4. Conversion Rights.
(a) Payee shall have the right by notice to Maker (“Conversion Notice”) to elect to convert the principal amount of this Note and accrued and unpaid interest thereon (the “Convertible Amount”) in whole or in part into shares (“Shares”) of Maker’s common stock, par value of $0.0001 per share (“Common Stock”), at the Conversion Price (as defined below) in lieu of having Maker repay this Note pursuant to Section 3 above. The date notice of conversion of all or any portion of the Note is given by Payee to Maker is referred to as the “Conversion Date.” No fractional Shares will be issued in connection with any conversion of the Convertible Amount, but instead will be rounded up to the nearest whole Share.
(b) The Convertible Amount is convertible at any time at the option of Payee by notice to Maker into that number of Shares equal to the Convertible Amount divided by Twenty-Five Cents ($0.25), subject to adjustment as provided in the remaining provisions of this Note (the “Conversion Price”). The Shares or other securities into which this Note is convertible (and any Shares issued upon conversion or exercise of any such other securities) are referred to as the “Conversion Securities.” Payee may elect to convert this Note in part under any provision hereof permitting conversion and may elect multiple conversions.
(c) Upon conversion of any portion of this Note and delivery of the Conversion Securities in accordance with the terms hereof, the portion of the principal balance of this Note so converted and all accrued interest due thereon as of the date of conversion will be deemed paid in full, and upon conversion of all outstanding principal and interest the Note will be deemed cancelled and of no force or effect.
5. Additional Matters Relating to Conversion.
(a) If Maker shall effect a stock split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased. If Maker shall combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately increased.
(b) Maker shall at all times when this Note shall be outstanding, reserve and keep available out of Maker’s authorized but unissued Common Stock the total number of Shares for which this Note and all interest accrued thereon are at any time convertible.
6. Prepayment. Notwithstanding anything contained herein to the contrary, this Note is subject to prepayment in whole or in part at any time at the sole and absolute option of Maker, upon five business days’ prior written notice to Payee. The conversion rights of Payee shall continue to be exercisable during such five day period and thereafter until payment is made in full to Payee, and Maker shall duly honor all conversions as to which a Conversion Notice is given by Payee during such five day period.
7. Events of Default. Any of the following shall constitute an “Event of Default” under this Note, and shall give rise to the remedies provided in Section 8 herein.
(a) Maker defaults in the payment of principal of or interest on this Note when due, including upon any prepayment provided for herein.
(b) Maker fails to or is unable to (including by reason of Maker having insufficient authorized capital), or notifies Payee, at any time, that it does not intend to comply with proper requests for conversion of the Note.
(c) Maker fails to instruct its transfer agent to remove any legends from Conversion Securities eligible to be sold under Rule 144 of the Securities Act and issue such unlegended certificates to Payee (or Payee’s transferee, if such request is made in connection with a transfer of Conversion Securities), or to cause to be provided to such transfer agent any opinion of counsel and/or certification of Maker required in order for such transfer agent to comply with such instructions, within three business days of Payee’s request so long as Payee has provided a customary representation letter to Maker that provides a reasonable basis to conclude, to the extent such conclusion is dependent upon matters to be confirmed by Payee, that such shares of Common Stock can be sold pursuant to Rule 144.
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(d) Maker defaults in the compliance with any other term contained in this Note (which default is not described in subsections (a) through (c) above) and such default is not remedied or waived within ten business days after receipt by Maker of notice from Payee of such default.
(e) Maker shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means any of the following events: (i) Maker commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Maker or any Significant Subsidiary thereof; (ii) there is commenced against Maker any such case or proceeding that is not dismissed within 60 days after commencement; (iii) Maker is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (iv) Maker suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (v) Maker makes a general assignment for the benefit of creditors; (vi) Maker calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (vii) Maker, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
8. Remedies on Event of Default. If any Event of Default will occur, Payee shall, in addition to any and all other available rights and remedies, have the right, at Payee’s option, to: (a) declare the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, to be immediately due and payable without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by Maker, provided that upon the occurrence of an Event of Default described in Section 7(e), the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, shall be immediately due and payable without any declaration or other act by Payee; and (b) pursue any and all available remedies for the collection of such principal and interest and all other sums due by Maker hereunder and to enforce its rights as described herein; and in such case Payee may also recover all costs of suit and other expenses in connection therewith, including reasonable attorney’s fees for collection and the right to equitable relief to enforce Payee’s rights as set forth herein without the requirement to post any bond or other financial surety. The remedies provided in this Note may be exercised by Payee without notice to Maker (to the extent permitted by law and except as notice is herein expressly required), and will be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Payee for the recovery of damages or otherwise in the event of a breach of any of the undertakings of Maker hereunder. No failure by Payee to exercise and no delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other, further or additional exercise thereof.
9. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and construed in accordance with the laws of the State of Florida applied to contracts to be performed wholly within the State of Florida, without regard to conflicts of laws principles. Any judicial proceeding brought against Maker with respect to this Note or any related agreement may be brought in any court located in the State of Florida, United States of America, and, by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Maker at its address set forth below and service so made shall be deemed completed five days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Payee to bring proceedings against Maker in the courts of any other jurisdiction. Maker waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Maker against Payee involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Note or any related agreement, shall be brought only in a federal or state court located in the State of Florida.
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MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10. Amendment. Neither any provision of this Note nor any performance hereunder may be amended or waived orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
11. Binding Effect. The rights and obligations of Maker under this Note will be binding upon its successors, assigns, heirs, administrators and transferees.
12. Successors and Assigns. This Note may be assigned, transferred or negotiated by Payee to any person at any time (a “Transfer”) only upon its surrender to Maker for registration of Transfer, duly endorsed, or accompanied by a duly executed written instrument of Transfer in form satisfactory to Maker. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of Maker’s obligation to pay such interest and principal. Maker may not assign or transfer this Note or any of its rights hereunder without the prior written consent of Payee. This Note shall inure to the benefit of and be binding upon the parties hereto and their permitted assigns.
EXECUTED as of the date first set forth above.
| FREECAST, INC. | ||
| BY: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., CEO | ||
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Exhibit 4.9
FIRST AMENDMENT TO REVOLVING CONVERTIBLE PROMISSORY NOTE
THIS FIRST AMENDMENT TO REVOLVING CONVERTIBLE PROMISSORY NOTE (this “Amendment”) is made and entered into as of June 13, 2022 (the “Effective Date”), by and between FREECAST, INC. (“Borrower”) and NEXTELLIGENCE, INC. (together with successors and assigns, “Lender”). Borrower and Lender are referred to herein as the “Parties,” and each, a “Party.”
R E C I T A L S:
WHEREAS, Borrower executed a Revolving Convertible Promissory Note in favor of Lender in the principal amount of up to $2,500,000, dated June 30, 2021 (the “Existing Note”);
WHEREAS, Borrower has requested and Lender has agreed to, among other things, amend the terms and conditions of the Existing Note pursuant to the terms and conditions of this Amendment; and
WHEREAS, all capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Existing Note.
NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Amendment to the Existing Note. As of the Effective Date, the Existing Note is hereby amended or modified by:
Deleting the first paragraph in its entirety and replacing it with the following:
“FOR VALUE RECEIVED, the undersigned FREECAST, INC. (“Maker”) hereby promises to pay to the order of NEXTELLIGENCE, INC. (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the aggregate principal amount as may be outstanding hereunder from time to time not to exceed Six Million and 00/100 Dollars ($6,000,000), together with interest thereon from the date of this Revolving Convertible Promissory Note (this “Note”), as provided herein.”
2. Date of Effectiveness; Limited Effect. This Amendment will become effective as of the Effective Date. Except as expressly provided in this Amendment, all of the terms and provisions of the Existing Note are and will remain in full force and effect and are hereby ratified and confirmed by the Parties. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Existing Note or as a waiver of or consent to any further or future action on the part of either Party that would require the waiver or consent of the other Party. On and after the Effective Date, each reference in the Existing Note to “this Note,” “the Note,” “hereunder,” “hereof,” “herein” or words of like import will mean and be a reference to the Existing Note as amended by this Amendment.
3. Miscellaneous.
(a) This Amendment is governed by, and construed in accordance with, the laws of the State of Florida, without regard to the conflict of laws provisions of such State.
(b) This Amendment shall inure to the benefit of and be binding upon each of the Parties and each of their respective successors and assigns.
(c) The headings in this Amendment are for reference only and do not affect the interpretation of this Amendment.
(d) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Amendment may be executed and delivered by e-mail transmission (as a .pdf, .tif, or similar attachment) and upon such delivery the .pdf, .tif, or similar signature will be deemed to have the same effect as if the original signature had been delivered to the other Party.
(e) This Amendment constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
IN WITNESS WHEREOF, the undersigned have executed and delivered this First Amendment to Revolving Convertible Promissory Note on and as of the Effective Date.
| BORROWER: | ||
| FreeCast, Inc. | ||
| By: | /s/ Jonathan Morris | |
| Jonathan Morris, CFO | ||
|
Agreed to and accepted:
LENDER: |
| Nextelligence, Inc. | ||
| By: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., President | ||
FLORIDA DOCUMENTARY STAMP TAX REQUIRED BY LAW IN THE AMOUNT OF $2,450 WITH RESPECT TO THE INDEBTEDNESS EVIDENCED BY THE EXISTING NOTE HAS BEEN PREVIOUSLY PAID. NO ADDITIONAL DOCUMENTARY STAMP TAX IS DUE IN CONNECTION HEREWITH.
Exhibit 4.10
SECOND AMENDMENT TO REVOLVING CONVERTIBLE PROMISSORY NOTE
THIS SECOND AMENDMENT TO REVOLVING CONVERTIBLE PROMISSORY NOTE (this “Amendment”) is made and entered into as of July 17, 2023 (the “Effective Date”), by and between FREECAST, INC. (“Borrower”) and NEXTELLIGENCE, INC. (together with successors and assigns, “Lender”). Borrower and Lender are referred to herein as the “Parties,” and each, a “Party.”
R E C I T A L S:
WHEREAS, Borrower executed a Revolving Convertible Promissory Note in favor of Lender in the principal amount of up to $2,500,000, dated June 30, 2021 (the “Initial Note”);
WHEREAS, the Initial Note was amended by the Parties, whereby the aggregate principal amount that may be borrowed was increased from $2.5 million to $6 million, pursuant to that certain First Amendment to Revolving Convertible Promissory Note dated June 13, 2022 (the “First Amendment,” and together with the Initial Note, the “Existing Note”);
WHEREAS, Borrower has requested and Lender has agreed to, among other things, amend the terms and conditions of the Existing Note pursuant to the terms and conditions of this Amendment; and
WHEREAS, all capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Existing Note.
NOW, THEREFORE, in consideration of the premises set forth above and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. Amendment to the Existing Note. As of the Effective Date, the Existing Note is hereby amended or modified by:
(a) Deleting the first paragraph in its entirety and replacing it with the following:
“FOR VALUE RECEIVED, the undersigned FREECAST, INC. (“Maker”) hereby promises to pay to the order of NEXTELLIGENCE, INC. (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the aggregate principal amount as may be outstanding hereunder from time to time not to exceed Ten Million and 00/100 Dollars ($10,000,000), together with interest thereon from the date of this Revolving Convertible Promissory Note (this “Note”), as provided herein.”
(b) Deleting Section 3 in its entirety and replacing it with the following:
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Payee in full no later than June 30, 2025 (the “Maturity Date”).
2. Date of Effectiveness; Limited Effect. This Amendment will become effective as of the Effective Date. Except as expressly provided in this Amendment, all of the terms and provisions of the Existing Note are and will remain in full force and effect and are hereby ratified and confirmed by the Parties. Without limiting the generality of the foregoing, the amendments contained herein will not be construed as an amendment to or waiver of any other provision of the Existing Note or as a waiver of or consent to any further or future action on the part of either Party that would require the waiver or consent of the other Party. On and after the Effective Date, each reference in the Existing Note to “this Note,” “the Note,” “hereunder,” “hereof,” “herein” or words of like import will mean and be a reference to the Existing Note as amended by this Amendment.
3. Miscellaneous.
(a) This Amendment is governed by, and construed in accordance with, the laws of the State of Florida, without regard to the conflict of laws provisions of such State.
(b) This Amendment shall inure to the benefit of and be binding upon each of the Parties and each of their respective successors and assigns.
(c) The headings in this Amendment are for reference only and do not affect the interpretation of this Amendment.
(d) This Amendment may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Amendment may be executed and delivered by e-mail transmission (as a .pdf, .tif, or similar attachment) and upon such delivery the .pdf, .tif, or similar signature will be deemed to have the same effect as if the original signature had been delivered to the other Party.
(e) This Amendment constitutes the sole and entire agreement of the Parties with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter.
IN WITNESS WHEREOF, the undersigned have executed and delivered this Second Amendment to Revolving Convertible Promissory Note on and as of the Effective Date.
| BORROWER: | ||
| FreeCast, Inc. | ||
| By: | /s/ Jonathan Morris | |
| Jonathan Morris, CFO | ||
|
Agreed to and accepted:
LENDER: |
| Nextelligence, Inc. | ||
| By: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., President | ||
FLORIDA DOCUMENTARY STAMP TAX REQUIRED BY LAW IN THE AMOUNT OF $2,450 WITH RESPECT TO THE INDEBTEDNESS EVIDENCED BY THE INITIAL NOTE HAS BEEN PREVIOUSLY PAID. NO ADDITIONAL DOCUMENTARY STAMP TAX IS DUE IN CONNECTION WITH THE FIRST AMENDMENT OR HEREWITH.
Exhibit 4.11
THE SECURITIES REPRESENTED BY THIS DOCUMENT AND THE SHARES ISSUABLE UPON CONVERSION THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF BY THE HOLDER EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OR AN EXEMPTION THEREFROM AS CONFIRMED BY AN OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.
CONVERTIBLE PROMISSORY NOTE
| $85,508.69 | June 30, 2021 |
FOR VALUE RECEIVED, the undersigned FREECAST, INC., a Florida corporation (“Maker”) hereby promises to pay to the order of WILLIAM A. MOBLEY, JR. (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the principal sum of Eighty Five Thousand Five Hundred Eight and 69/100 Dollars ($85,508.69), or so much as may be outstanding hereunder from time to time, together with interest thereon from the date of this Convertible Promissory Note (this “Note”), as provided herein.
By acceptance of this Note, Payee agrees that it will promptly deliver and surrender this Note to Maker upon full payment thereof.
1. Principal Balance. This Note evidences a loan up to the maximum principal sum specified above, less the aggregate amount of all principal repayments made under this Note by Maker to Payee.
2. Interest Rate. Interest shall accrue on the unpaid principal balance hereof at the rate of 12% per annum from but excluding the date first set forth above to and including the Maturity Date (as defined below). Interest shall accrue on any principal balance that is not paid on the earlier of the Maturity Date and the date of an Event of Default (as defined below) at the rate of 18% per annum from and including the Maturity Date or the date of such Event of Default to but excluding the date of payment. In no event, however, shall interest be payable at a rate higher than the highest rate permitted by applicable law. Interest on the principal balance outstanding will be calculated on the basis of the actual number of days elapsed over an assumed year consisting of 365 days, to the date of receipt by Payee of any interest and/or principal. Interest shall be payable on the unpaid principal balance of this Note, as the same may exist from time to time, from the date of issuance until paid or converted in full, in accordance with the terms herein and shall be payable: (a) on the Maturity Date; and (b) on any earlier date of payment or conversion of principal, in whole or in part and, if in part, as to the portion paid or converted.
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Payee in full no later than June 30, 2024 (the “Maturity Date”).
4. Conversion Rights.
(a) Payee shall have the right by notice to Maker (“Conversion Notice”) to elect to convert the principal amount of this Note and accrued and unpaid interest thereon (the “Convertible Amount”) in whole or in part into shares (“Shares”) of Maker’s common stock, par value of $0.0001 per share (“Common Stock”), at the Conversion Price (as defined below) in lieu of having Maker repay this Note pursuant to Section 3 above. The date notice of conversion of all or any portion of the Note is given by Payee to Maker is referred to as the “Conversion Date.” No fractional Shares will be issued in connection with any conversion of the Convertible Amount, but instead will be rounded up to the nearest whole Share.
(b) The Convertible Amount is convertible at any time at the option of Payee by notice to Maker into that number of Shares equal to the Convertible Amount divided by Twenty-Five Cents ($0.25), subject to adjustment as provided in the remaining provisions of this Note (the “Conversion Price”). The Shares or other securities into which this Note is convertible (and any Shares issued upon conversion or exercise of any such other securities) are referred to as the “Conversion Securities.” Payee may elect to convert this Note in part under any provision hereof permitting conversion and may elect multiple conversions.
(c) Upon conversion of any portion of this Note and delivery of the Conversion Securities in accordance with the terms hereof, the portion of the principal balance of this Note so converted and all accrued interest due thereon as of the date of conversion will be deemed paid in full, and upon conversion of all outstanding principal and interest the Note will be deemed cancelled and of no force or effect.
5. Additional Matters Relating to Conversion.
(a) If Maker shall effect a stock split of the outstanding Common Stock, the applicable Conversion Price in effect immediately prior to the stock split shall be proportionately decreased. If Maker shall combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately prior to the combination shall be proportionately increased.
(b) Maker shall at all times when this Note shall be outstanding, reserve and keep available out of Maker’s authorized but unissued Common Stock the total number of Shares for which this Note and all interest accrued thereon are at any time convertible.
6. Prepayment. Notwithstanding anything contained herein to the contrary, this Note is subject to prepayment in whole or in part at any time at the sole and absolute option of Maker, upon five business days’ prior written notice to Payee. The conversion rights of Payee shall continue to be exercisable during such five day period and thereafter until payment is made in full to Payee, and Maker shall duly honor all conversions as to which a Conversion Notice is given by Payee during such five day period.
7. Events of Default. Any of the following shall constitute an “Event of Default” under this Note, and shall give rise to the remedies provided in Section 8 herein.
(a) Maker defaults in the payment of principal of or interest on this Note when due, including upon any prepayment provided for herein.
(b) Maker fails to or is unable to (including by reason of Maker having insufficient authorized capital), or notifies Payee, at any time, that it does not intend to comply with proper requests for conversion of the Note.
(c) Maker fails to instruct its transfer agent to remove any legends from Conversion Securities eligible to be sold under Rule 144 of the Securities Act and issue such unlegended certificates to Payee (or Payee’s transferee, if such request is made in connection with a transfer of Conversion Securities), or to cause to be provided to such transfer agent any opinion of counsel and/or certification of Maker required in order for such transfer agent to comply with such instructions, within three business days of Payee’s request so long as Payee has provided a customary representation letter to Maker that provides a reasonable basis to conclude, to the extent such conclusion is dependent upon matters to be confirmed by Payee, that such shares of Common Stock can be sold pursuant to Rule 144.
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(d) Maker defaults in the compliance with any other term contained in this Note (which default is not described in subsections (a) through (c) above) and such default is not remedied or waived within ten business days after receipt by Maker of notice from Payee of such default.
(e) Maker shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means any of the following events: (i) Maker commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Maker or any Significant Subsidiary thereof; (ii) there is commenced against Maker any such case or proceeding that is not dismissed within 60 days after commencement; (iii) Maker is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (iv) Maker suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (v) Maker makes a general assignment for the benefit of creditors; (vi) Maker calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (vii) Maker, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
8. Remedies on Event of Default. If any Event of Default will occur, Payee shall, in addition to any and all other available rights and remedies, have the right, at Payee’s option, to: (a) declare the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, to be immediately due and payable without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by Maker, provided that upon the occurrence of an Event of Default described in Section 7(e), the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, shall be immediately due and payable without any declaration or other act by Payee; and (b) pursue any and all available remedies for the collection of such principal and interest and all other sums due by Maker hereunder and to enforce its rights as described herein; and in such case Payee may also recover all costs of suit and other expenses in connection therewith, including reasonable attorney’s fees for collection and the right to equitable relief to enforce Payee’s rights as set forth herein without the requirement to post any bond or other financial surety. The remedies provided in this Note may be exercised by Payee without notice to Maker (to the extent permitted by law and except as notice is herein expressly required), and will be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Payee for the recovery of damages or otherwise in the event of a breach of any of the undertakings of Maker hereunder. No failure by Payee to exercise and no delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other, further or additional exercise thereof.
9. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and construed in accordance with the laws of the State of Florida applied to contracts to be performed wholly within the State of Florida, without regard to conflicts of laws principles. Any judicial proceeding brought against Maker with respect to this Note or any related agreement may be brought in any court located in the State of Florida, United States of America, and, by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Maker at its address set forth below and service so made shall be deemed completed five days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Payee to bring proceedings against Maker in the courts of any other jurisdiction. Maker waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Maker against Payee involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Note or any related agreement, shall be brought only in a federal or state court located in the State of Florida.
3
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10. Amendment. Neither any provision of this Note nor any performance hereunder may be amended or waived orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
11. Binding Effect. The rights and obligations of Maker under this Note will be binding upon its successors, assigns, heirs, administrators and transferees.
12. Successors and Assigns. This Note may be assigned, transferred or negotiated by Payee to any person at any time (a “Transfer”) only upon its surrender to Maker for registration of Transfer, duly endorsed, or accompanied by a duly executed written instrument of Transfer in form satisfactory to Maker. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of Maker’s obligation to pay such interest and principal. Maker may not assign or transfer this Note or any of its rights hereunder without the prior written consent of Payee. This Note shall inure to the benefit of and be binding upon the parties hereto and their permitted assigns.
EXECUTED as of the date first set forth above.
| FREECAST, INC. | ||
| BY: | /s/ Jonathan Morris | |
| Jonathan Morris, CFO | ||
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Exhibit 5.1
BAHNSEN LEGAL GROUP, PLLC
Attorneys at law
November 13, 2023
FreeCast, Inc.
6901 TPC Drive, Suite 200
Orlando, Florida 32822
| Re: | FreeCast, Inc. |
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel to FreeCast, Inc., a Florida corporation (the “Company”), in connection with the proposed issuance of up to 4,968,000 shares of common stock, $0.0001 par value per share (the “Shares”). The Shares are included in a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”), initially filed with the Securities and Exchange Commission (the “Commission”) on November 13, 2023 (as amended or supplemented, the “Registration Statement”). This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus (the “Prospectus”), other than as expressly stated herein with respect to the issue of the Shares.
In rendering the opinion stated herein, we have examined such matters of fact and questions of law as we have considered appropriate in order to render such opinion, including examination of the following: (1) the Company’s Amended and Restated Articles of Incorporation; (2) the Company’s Amended and Restated Bylaws; (3) the Registration Statement, together with the exhibits filed as a part thereof; and (4) the Underwriting Agreement to be entered between the Company and Maxim Group LLC. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates and receipts of public officials, certificates of officers or other representatives of the Company and others, and such other documents as to factual matters, including the factual representations and warranties contained in the Underwriting Agreement, without having independently verified such factual matters. We are opining herein as to the Florida Business Corporation Act (the “FBCA”), and we express no opinion with respect to any other laws.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers and have been issued by the Company against payment therefor in the circumstances contemplated by the form of Underwriting Agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the FBCA.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
| Very truly yours, | |
| /s/ Bahnsen Legal Group, PLLC |
Bahnsen Legal Group, PLLC 131 NE 1st Avenue, Suite 100, Boca Raton, Florida 33432
Phone: 407-808-5700 Email: jeff@bahnsenlaw.com
Exhibit 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT is entered into as of October 15, 2012 by and among WILLIAM A. MOBLEY, JR., AS TRUSTEE (the “Trustee”), FREECAST, INC., a Florida corporation (the “Company”), and TELEBRANDS CORP., a New Jersey corporation (“Telebrands”).
RECITALS:
A. The Company and Telebrands have entered into a Distribution Agreement of even date herewith (the “Distribution Agreement”).
B. Pursuant to the Distribution Agreement, among other things, Telebrands has acquired and is the legal and beneficial owner of Four Thousand (4,000) shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company (collectively, the “Shares”).
C. Pursuant to the Distribution Agreement, among other things, the Company has issued to Telebrands five warrants of even date herewith (collectively, the “Warrants”) to purchase up to an aggregate of Twenty Million (20,000,000) shares of Common Stock (collectively, the “Warrant Shares”) on the terms and conditions set forth therein.
D. Telebrands desires to grant to the Trustee all rights to vote and to dispose of all shares of Common Stock now or hereafter acquired or legally or beneficially owned by it, including without limitation the Securities (as such term is hereinafter defined).
E. Each of the parties desires to enter into this Voting Trust Agreement (the “Agreement”).
NOW, THEREFORE, in consideration of the covenants and agreements of the parties set forth herein, each of the parties, intending to be legally bound, agrees as follows:
1. Creation of Voting Trust; Transfer of Shares into Voting Trust.
(a) The Trustee is appointed as the trustee of all shares of Common Stock now or hereafter transferred to him in his capacity as trustee hereunder. The Trustee accepts his appointment as trustee hereunder.
(b) Simultaneously with the execution and delivery of this Agreement, Telebrands transfers and conveys to the Trustee all of the Shares and the Trustee is issuing to Telebrands a Voting Trust Certificate (as such term is hereinafter defined).
(c) Upon exercise of any of the Warrants by Telebrands, all of the certificates representing Warrant Shares issued upon such exercise shall be registered in the name of the Trustee. Telebrands shall execute and deliver all documents and instruments necessary to cause registration of the certificates in the name of the Trustee in his capacity as trustee. Upon receipt of the certificates, the Trustee shall issue to Telebrands appropriate Trust Certificates.
(d) All voting securities of the Company now or hereafter acquired, received or beneficially owned by Telebrands (collectively, the “Additional Shares”) shall be immediately transferred to the Trustee to be held by him pursuant to this Agreement. The Trustee shall issue to Telebrands appropriate Trust Certificates.
(e) All voting securities of the Company distributed by the Company or received by Telebrands with respect to the Shares, the Warrant Shares or the Additional Shares, including without limitation any stock dividends, stock splits, and any other distributions and recapitalizations (collectively, the “Distribution Shares”), shall be immediately transferred to the Trustee to be held by him pursuant to this Agreement. The Trustee shall issue to Telebrands appropriate Trust Certificates.
(I) The Shares, the Warrant Shares, the Additional Shares and the Distribution Shares are hereinafter collectively referred to as the “Securities.”
(g) All distributions received by the Trustee with respect to the Securities, which are not in the form of voting securities of the Company, including without limitation cash dividends, cash distributions and non-voting securities, shall be promptly transferred by the Trustee to Telebrands.
2. Voting Trust Certificates; List of Beneficial Owners.
(a) The Trustee shall issue to each person or entity which shall transfer any Securities to him in his capacity as trustee hereunder voting trust certificates in substantially the form of Exhibit A attached hereto (the “Trust Certificates”) for the number of shares transferred to him.
(b) The Trustee shall prepare a list of all beneficial owners of Trust Certificates.
(c) The Trustee shall deliver or cause to be delivered to the Company a fully executed copy of this Agreement and a list of all beneficial owners of Trust Certificates.
(d) The Trust Certificates shall not be transferable, provided, however, that Telebrands may Transfer (as such term is hereinafter defined) Trust Certificates to an Affiliate of Telebrands in a transaction not requiring registration under any federal or state securities laws.
3. Power and Authority of Trustee.
(a) The Trustee shall possess and be entitled to exercise all of the voting rights and voting powers of an absolute and record owner of the Securities, including without limitation the power to vote (i) for election or removal of directors, (ii) on amendments to the Articles of Incorporation or Bylaws of the Company, and (iii) on any merger or consolidation involving the Company, any sale of all or substantially all of the assets of the Company, and any liquidation or dissolution of the Company. The Trustee may vote the Securities in favor of his election as a director of the Company.
(b) The Trustee shall possess and be entitled to exercise all of the rights and powers of disposition of an absolute and record owner of the Securities, including without limitation the power to sell, exchange, gift, transfer, assign, convey and otherwise dispose of (a “Transfer”) the Securities; provided, however, that the Trustee shall not effect a Transfer or permit a registration statement to be filed with the Securities and Exchange or any state securities administrator of any or all of the Securities held by him unless Nextelligence, Inc., a Delaware corporation (“Nextelligence”), or any successor to Nextelligence, simultaneously effects a Transfer or registration of an identical proportion of the voting securities of the Company held by it on the same terms and conditions.
(c) The Trustee shall not permit Nextelligence (or any successor to Nextelligence) to effect a Transfer or permit a registration statement to be filed with the Securities and Exchange or any state securities administrator of any or all of the voting securities of the Company held by it unless the Trustee simultaneously effects a Transfer or registration of an identical proportion of the Securities held by him in his capacity as Trustee on the same terms and conditions.
(d) Telebrands shall be entitled to equitable relief, including injunctive relief or specific performance, for any breach of violation of the provisions of this Section 3.
4. Term.
(a) The trust hereby created shall remain in full force and effect until the earlier to occur of the following events:
(i) the Trustee shall have ceased to be an Affiliate of the Company; or
(ii) the Transfer of all of the Securities held by the Trustee.
(b) The following terms shall have the following respective meanings when utilized in this Agreement:
(i) “Affiliate” means with respect to a specified Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person or any director or officer of such Person. The concept of “control” when utilized with respect to a specified Person, shall signify the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting or equity securities, by contract or otherwise.
(ii) “Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
5. Trustee’s Duties and Immunities. In voting the Securities or in doing or performing or refraining from doing or performing any act or thing with respect to the control or management of Company or its business or affairs, either in person or by proxy, the Trustee shall act in good faith. Telebrands waives any potential or actual conflict of interest that the Trustee may personally have so long as Trustee acts in good faith. The Trustee shall not be liable for any error of judgment, any mistake of law or fact, or any other error or mistake, and shall not be responsible for any act or omission with respect to his duties and responsibilities as voting trustee, or for any damages or losses that may result therefrom, unless such damages or losses are proven by clear and convincing evidence to be the result of willful misconduct or bad faith.
6. Indemnification of Trustee. The Company shall indemnify and hold harmless the Trustee from, against and in respect of the full amount of any and all liabilities, damages, claims, taxes, deficiencies, assessments, losses, penalties, interest, costs and expenses (including without limitation fees and disbursements of trial and appellate counsel) (collectively, the “Indemnified Expenses”) paid or incurred by him as the result of, arising from, in connection with or incident to, any matter directly or indirectly related to this Agreement, other than any Indemnified Expenses that are proven by clear and convincing evidence to be the result of the gross negligence, willful misconduct or bad faith of the Trustee.
7. Appointment of Substitute Trustee. If the Trustee is unable for any reason to perform his duties hereunder, but continues to be an Affiliate of the Company, then the Trustee shall appoint a substitute Trustee (and give notice to Telebrands of such appointment), and any person so appointed shall thereupon be vested with all the duties, powers and authority of a trustee hereunder as if originally named herein.
8. Reports. The Trustee is authorized and instructed to prepare and file any reports with respect to the Securities as may be required under any applicable federal or state securities laws. Telebrands shall reasonably cooperate with the Trustee in connection with the preparation and filing of any such reports.
9. Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida without giving effect to the conflicts of law provisions thereof. This Agreement is intended by the parties to create “a voting trust” within the meaning of Section 607.0730 of the Florida Statutes.
10. Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
| If to the Trustee: | William
G. Mobley, Jr., as Trustee 5830 TG Lee Boulevard Suite 310 Orlando, Florida 32822 Attention: Chief Executive Officer Facsimile: |
| If to the Company: | FreeCast,
Inc. 5830 TG Lee Boulevard Suite 310 Orlando, Florida 32822 Attention: Chief Executive Officer Facsimile: |
| If to Telebrands: | Telebrands
Corp. 79 Two Bridges Road Fairfield, New Jersey 07004 Attention: Bala Iyer, Executive Vice President Facsimile: |
or to such other address or facsimile telephone number as a party may from time to time give written notice of to the other party pursuant to the foregoing provisions of this Section 10. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting, twittering or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 10 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
11. Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between and among the parties with respect to such subject matter. This Agreement may not be amended, modified, altered, changed or supplemented in any manner, except by a written instrument executed by each of the parties.
12. Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
13. Arbitration. In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the parties shall use their best efforts to settle the dispute, claim, question, or disagreement. To this effect, the parties shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable, solution satisfactory to both parties. If the parties do not reach such solution within a period of sixty days, then, upon notice by either party to the other, all disputes, claims, questions, or differences shall be finally resolved by arbitration administered by the American Arbitration Association in accordance with the provisions of its Commercial Arbitration Rules. The arbitration will be conducted in Orange County, Florida. There shall be three arbitrators who shall be named in accordance with such Rules. A court reporter shall record all hearings, with such record constituting the official transcript of such proceedings. The award of the arbitrators shall be accompanied by a statement of the reasons upon which the award is based. Judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction.
14. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
15. Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement effective as of the date first written above.
| /s/ William A. Mobley, Jr. | ||
| William A. Mobley, Jr., as Trustee | ||
| FREECAST, INC. | ||
| By | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr. | ||
| Chairman of the Board | ||
| and Chief Executive Officer | ||
| TELEBRANDS CORP. | ||
| By | /s/ Bala Iyer | |
| Bala Iyer, Executive Vice President | ||
Exhibit A
VOTING TRUST CERTIFICATE
FREECAST,
INC.
(a Florida corporation)
| Voting Trust No.___________ | Number of Shares Held ___________ |
VOTING TRUST CERTIFICATE
This is to certify that Telebrands Corp., a New Jersey corporation, has transferred to the Trustee under that certain Voting Trust Agreement dated as of October____, 2012 by and among William A. Mobley, Jr., as Trustee, FreeCast, Inc., a Florida corporation, and Telebrands Corp., a New York corporation (the “Voting Trust Agreement”) a certificate or certificates representing ____________ shares of common stock, par value $0.0001 per share, of FreeCast, Inc., a Florida corporation (the “Company”). A copy of the Voting Trust Agreement is on file at the office of the Company. This Voting Trust Certificate is issued in accordance with and is subject to the provisions of the Voting Trust Agreement.
IN WITNESS WHEREOF, the undersigned has executed and delivered this Voting Trust Certificate as of ________, 201_.
| /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., as Trustee |
Exhibit 10.1
AMENDED AND RESTATED
TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT
THIS AMENDED AND RESTATED TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT is entered into as of October 19, 2012 by and between NEXTELLIGENCE, INC., a Delaware corporation (“Nextelligence”), and FREECAST, INC., a Florida corporation (the “Company”).
RECITALS:
A. Nextelligence is the sole owner of the Technology.
B. Nextelligence desires to license the Technology to the Company and the Company desires to license the Technology for the Business Purpose in accordance with the terms and provisions of this Amended and Restated Technology License and Development Agreement (the “Agreement”).
C. The Company desires Nextelligence to perform certain technology development services and Nextelligence desires to perform such services in accordance with the terms and provisions of this Agreement.
D. The parties have previously entered into a Technology License and Development Agreement dated as of June 30, 2011(the “Original Agreement”). Pursuant to the Original Agreement, the Company is indebted to Nextelligence as of September 30, 2012 (the “Indebtedness”). The Company desires additional time to pay the Indebtedness.
E. The Company and Telebrands Corp. have entered into a Distribution Agreement dated as of October 15, 2012 (the “Distribution Agreement”).
F. The Distribution Agreement contemplates that Nextelligence and the Company will enter into this Agreement.
F. Each of the parties believes it to be in its best interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the Recitals and the respective covenants and agreements of the parties set forth herein, each of the parties agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“1933 Act” shall have the meaning set forth in Section 5.4(b).
“Additional Shares” shall have the meaning set forth in Section 5.1(b).
“Affiliate” means with respect to a specified Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person. The concept of “control” when utilized with respect to a specified Person, shall signify the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting or equity securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in Recital B.
“Business Purpose” means providing the Online Services to end-users.
“Change in Control of the Company” shall have the meaning set forth in Section 7.3.
“Company” shall have the meaning set forth in the first paragraph of this Agreement.
“Company Confidential Information” means the confidential and/or proprietary information and/or trade secrets of the Company (whether such information is or is not marked or identified as confidential or proprietary), including without limitation software (in object and source code form), technology, inventions (whether or not patentable), trade secrets, ideas, know-how, techniques, processes, formulas, algorithms, schematics, research, development, software design and architecture, testing procedures, design and functional specifications, problem reports and performance information, marketing and financial plans and data. “Company Confidential Information” does not include information that Telebrands can show through documentary evidence: (a) is or becomes publicly known through no fault, act or omission of Telebrands; (b) is known by or in the possession of Telebrands prior to its receipt from the Company; or (c) is lawfully obtained from a third party who rightfully possesses the information (without confidentiality or proprietary restriction).
“Company Indemnitees” shall have the meaning set forth in Section 11.1.
“Devices” shall have meaning set forth in the Distribution Agreement.
“Distribution Agreement” shall have the meaning set forth in Recital E.
“Federal Securities Laws” shall have the meaning set forth in Section 5.4(a).
“Gross Revenues” means, for a given period, the gross revenues of the Company, determined in accordance with generally accepted accounting principles as in effect in the United States of America applied in a manner consistent with prior periods.
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“Indebtedness” shall have the meaning set forth in Recital D.
“Intellectual Property Rights” means all present and future copyrights, trademark rights, service mark rights, trade secret rights, patent rights, moral rights, and other intellectual property and proprietary rights recognized in any jurisdiction.
“Online Services” means online television and music content aggregation services as an interactive guide.
“Original Agreement” shall have the meaning set forth in Recital D.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Securities” shall have the meaning set forth in Section 5.3.
“Shares” shall have the meaning set forth in Section 5.1(a).
“State Securities Laws” shall have the meaning set forth in Section 5.4(a).
“Nextelligence” shall have the meaning set forth in the first paragraph of this Agreement.
“Nextelligence Confidential Information” means the confidential and/or proprietary information and/or trade secrets of Nextelligence (whether such information is or is not marked or identified as confidential or proprietary), including without limitation software (in object and source code form), technology, inventions (whether or not patentable), trade secrets, ideas, know-how, techniques, processes, formulas, algorithms, schematics, research, development, software design and architecture, testing procedures, design and functional specifications, problem reports and performance information, marketing and financial plans and data. “Nextelligence Confidential Information” does not include information that the Company can show through documentary evidence: (a) is or becomes publicly known through no fault, act or omission of the Company; (b) is known by or in the possession of the Company prior to its receipt from Nextelligence; or (c) is lawfully obtained from a third party who rightfully possesses the information (without confidentiality or proprietary restriction).
“Technology” means and includes a web-based toolbar that installs in the end-user’s browser and any supported email functions and/or chat functions with the following features:
(a) a search box that allows the end-user to search the Internet with search results from a search results partner;
(b) a search assistant that provides relevant links and results when the end-user makes a search request in the browser address bar or if the browser address request is invalid, misspelled or incorrectly formatted; and
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(c) Features, functions and links to, or RSS (or other) video feeds from, third party partners.
“Term” shall have the meaning set forth in Section 7.1.
“Territory” means worldwide.
“Transfer” shall have the meaning set forth in Section 5.4(c).
“Warrants” shall have the meaning set forth in Section 5.2.
ARTICLE II
License
2.1 Grant of License. Subject to the terms and conditions set forth in this Agreement, Nextelligence grants to the Company a non-transferable, non-sublicensable, exclusive license, exercisable within the Territory, to install, use and operate the Technology solely for the Business Purpose.
2.2 Restrictions on Use. The Company shall not, and shall ensure that other parties shall not:
(a) modify, adapt, alter, translate, copy, perform and display (publicly or otherwise), or create derivative works based on the Technology;
(b) merge or bundle the Technology with other software or technology;
(c) sublicense, lease, rent or loan the Technology;
(d) transfer the Technology to any third party;
(e) provide the use of the Technology in any service bureau, rental or timesharing arrangement; or
(f) reverse engineer, decompile, disassemble, or otherwise attempt to derive the source code for the Technology.
2.3 IP Ownership. Nextelligence shall own all right, title and interest, including all Intellectual Property Rights, in and to the Technology. All rights in and to the Technology not expressly granted to the Company under this Agreement are reserved by Nextelligence. The Company shall take all reasonable measures to protect Nextelligence’s Intellectual Property Rights in the Technology, including providing assistance and measures as are reasonably requested by Nextelligence from time to time.
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ARTICLE III
Further Development of the Technology and Other Services
3.1 Further Development. All further development, improvement, modification and enhancement of the Technology shall be performed exclusively by Nextelligence. All further development, improvement, modification and enhancement of the Technology shall be owned solely by Nextelligence, but shall be deemed to be licensed to the Company pursuant to Section 2.1. Nextelligence shall invoice the Company on a monthly basis for all work performed.
3.2 Other Services. The Company engages Nextelligence, on an exclusive basis, to provide:
(a) commercial hosting services to the Company;
(b) office space to the Company;
(c) accounting and administrative services to the Company; and
(d) such other services as the Company may request.
Nextelligence shall invoice the Company on a monthly basis for all services provided to the Company. The amount invoiced shall not be less than the actual cost to Nextelligence of providing the service plus an administrative fee equal to twenty percent (20%) of such actual cost.
ARTICLE IV
Payments
4.1 Payments to Nextelligence.
(a) For and in partial consideration of the license granted pursuant to Section 2.1, on or before the last day of each calendar month, the Company, by wire or electronic funds transfer, shall pay to Nextelligence four percent (4%) of the Company’s Gross Revenues for the immediately preceding calendar month.
(b) On or before the last day each calendar month, the Company, by wire or electronic funds transfer, shall pay to Nextelligence the amount of any invoice for work performed and services provided during the immediately preceding calendar month.
(c) Nextelligence shall forbear to collect the Indebtedness for a period of one year from and after the date of this Agreement.
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4.2 Books and Records.
(a) The Company shall at all times maintain true, correct and complete books and records of account. Such books and records of account shall be preserved by the Company for a period of not less than seven years.
(b) At all reasonable times after reasonable notice, Nextelligence and its officers, employees, representatives and agents shall be entitled to inspect and to make copies of all of the books, records, files and documents, in whatever form, of the Company in order to verify that the provisions of Section 4.1 are being fully complied with by the Company.
(c) All shortfalls in payment to Nextelligence shall, immediately upon demand be paid by the Company. The cost of any inspection pursuant to Section 4.2(b) above shall be borne solely by Nextelligence; provided, however, if a variance is found for any period of more than two percent (2%) of (i) Gross Sales or (ii) any amounts paid to Nextelligence pursuant to Section 4.1, then the Company shall, immediately upon demand, pay to Nextelligence all of the following amounts:
(A) all reasonable costs of the inspection; and
(B) interest on all such shortfalls at the highest rate of interest permitted by the laws of the State of Florida.
ARTICLE V
Securities
5.1 Purchase and Sale of Shares.
(a) For and in partial consideration of the license granted pursuant to Section 2.1, on or about June 30, 2011, the Company transferred to Nextelligence Twenty Million (20,000,000) shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company (collectively, the “Shares”).
(b) Simultaneously with the execution and delivery of this Agreement, and for and in partial consideration of the license granted pursuant to Section 2.1, the Company is issuing to Nextelligence Four Thousand (4,000) share of Common Stock (the “Additional Shares”).
5.2 Issuance of Warrants. For and in partial consideration of the license granted pursuant to Section 2.1, for each Two Million (2,000,000) Devices in excess of Ten Million (10,000,000) Devices sold, the Company shall issue to Nextelligence an immediately exercisable warrant to purchase up to Four Million (4,000,000) shares of Common Stock at a purchase price per share equal to the fair market value of a share of Common Stock on the date of issuance (collectively, the “Warrants”).
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5.3 Securities. The Shares, the Additional Shares and the Warrants are hereinafter collectively referred to as the “Securities.”
5.4 Certain Representations, Warranties, Covenants and Agreements of Nextelligence. Nextelligence represents and warrants to the Company, and covenants and agrees with the Company, as follows:
(a) The Securities are being acquired by Nextelligence for its own account, and not for the account or beneficial interest of any other Person. The Securities are not being acquired by Nextelligence with a view to, or for resale in connection with, any “distribution” within the meaning of (i) the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Federal Securities Laws”), or (ii) any applicable state securities or blue sky laws and the rules and regulations promulgated thereunder (collectively, the “State Securities Laws”).
(b) The Securities have not been, and will not be, registered under the Federal Securities Laws or any State Securities Laws and, as such, must be held by Nextelligence unless and until they are subsequently so registered under the Federal Securities Laws and any applicable State Securities Laws or an exemption from registration thereunder is available. The Securities constitute “restricted securities,” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the 1933 Act”).
(c) Nextelligence shall not, directly or indirectly, sell, assign, transfer, convey, gift, give, mortgage, pledge, hypothecate, encumber or otherwise dispose of any or all of the Securities (any such transaction hereinafter being referred to as a “Transfer”), unless such Transfer is registered under the Federal Securities Laws and any applicable State Securities Laws or a specific exemption from registration thereunder is available. Any Transfer of any or all of the Securities which is made pursuant to an exemption claimed under the Federal Securities Laws and any applicable State Securities Laws will require a favorable opinion of the Company’s legal counsel to the effect that such Transfer does not and will not violate the provisions of the Federal Securities Laws or any applicable State Securities Laws.
(d) Nextelligence is an “accredited investor,” as such term is defined Regulation D under the 1933 Act.
(e) Nextelligence, through its directors and officers, has such knowledge and experience in financial, investment and business matters that it is capable of evaluating the merits and risks of an investment in the Securities. Management of Nextelligence has read and understood each and every one of the Disclosure Documents (as such term is hereinafter defined). In connection with its review, Nextelligence has consulted with such independent legal counsel, accountants and other advisers considered appropriate to assist Nextelligence. In particular, and not in limitation of the foregoing, Nextelligence has taken full cognizance of and understands each and every one of the following:
(i) this Agreement;
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(ii) the Distribution Agreement and the exhibits attached thereto; and
(iii) such other documents and materials as Nextelligence shall have requested from the Company.
All of the foregoing documents are collectively referred to herein as the “Disclosure Documents.”
(f) Nextelligence has been afforded the opportunity to ask questions of, and to receive answers from, the management of the Company concerning the terms and conditions of the Securities and to obtain any additional information, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed itself of such opportunity to the extent it considers appropriate in order to permit its management to evaluate the merits and risks of an investment in the Securities.
(g) The Company is under no obligation whatsoever to file any registration statement under the Federal Securities Laws or any State Securities Laws to register any Transfer of any Securities held by Nextelligence, or to take any other action necessary for the purpose of making an exemption from registration available to Nextelligence in connection with any such Transfer. Stop transfer instructions will be issued by the Company with respect to the Securities. Therefore, Nextelligence may be forced to hold the Securities acquired for an indefinite period of time.
(h) Nextelligence acknowledges that all certificates representing the Shares and the Additional Shares will bear a restrictive legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS (A) THEY ARE COVERED BY A REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO, EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) SUCH SALE, ASSIGNMENT, TRANSFER, CONVEYANCE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT ACT AND ANY OTHER APPLICABLE SECURITIES LAWS.
(i) Nextelligence acknowledges that all certificates representing the Warrants will bear a restrictive legend in substantially the following form:
NEITHER THIS WARRANT NOR THE SHARES UNDERLYING THIS WARRANT MAY BE SOLD, ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS (A) THEY ARE COVERED BY A REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO, EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) SUCH SALE, ASSIGNMENT, TRANSFER, CONVEYANCE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT ACT.
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5.5 Certain Representation and Warranties of the Company. The Company represents and warrants to Nextelligence, and covenants and agrees with Nextelligence, as follows:
(a) The Company has all requisite power and authority to enter into and perform its obligations under this Agreement and to issue the Shares, the Additional Shares, the Warrants and the shares to be issued upon exercise of the Warrants.
(b) The Shares and the Additional Shares are (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, except as arising through the acts or omissions of Nextelligence and except as arising from applicable Federal Securities Laws and State Securities Laws.
(c) The shares to be issued upon exercise of the Warrants will, upon issuance in accordance with the terms of the Warrants, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, except as arising through the acts or omissions of Nextelligence and except as arising from applicable Federal Securities Laws and State Securities Laws. The Company shall reserve and keep available, out of its authorized but unissued shares of Common Stock for issuance upon the exercise of the Warrants, free from pre-emptive rights, such number of shares of Common Stock for which the Warrants shall from time to time be exercisable.
ARTICLE VI
Confidential Information
6.1 Company Confidential Information.
(a) Nextelligence acknowledges and agrees that the Company Confidential Information is and shall remain the sole property of the Company. Nextelligence shall protect the Company Confidential Information from unauthorized dissemination and shall use the same degree of care that Nextelligence uses to protect its own like information, but in no event less than a reasonable degree of care. Nextelligence shall not disclose to third parties the Company Confidential Information without the prior written consent of the Company. Nextelligence shall use the Company Confidential Information only for purposes of performing its obligations or exercising its rights under this Agreement.
(b) Notwithstanding the provisions of Section 6.1(a), Nextelligence may use or disclose the Company Confidential Information to the extent Nextelligence is legally compelled to do so, provided, however, that prior to any such compelled disclosure, Nextelligence notifies the Company and fully cooperates with the Company in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information. Nextelligence acknowledges and agrees that any breach of this Section 6.1 would cause irreparable harm to the Company for which monetary damages would not be adequate and, therefore, Nextelligence agrees that, in the event of a breach of this Section 6.1, the Company shall be entitled to equitable relief in addition to any remedies it may have hereunder or at law.
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6.2 Nextelligence Confidential Information.
(a) The Company acknowledges and agrees that the Nextelligence Confidential Information is and shall remain the sole property of Nextelligence. The Company shall protect the Nextelligence Confidential Information from unauthorized dissemination and shall use the same degree of care that the Company uses to protect its own like information, but in no event less than a reasonable degree of care. The Company shall not disclose to third parties the Nextelligence Confidential Information without the prior written consent of Nextelligence. The Company shall use the Nextelligence Confidential Information only for purposes of performing its obligations or exercising its rights under this Agreement.
(b) Notwithstanding the provisions of Section 6.2(a), the Company may use or disclose the Nextelligence Confidential Information to the extent the Company is legally compelled to do so, provided, however, that prior to any such compelled disclosure, the Company notifies Nextelligence and fully cooperates with Nextelligence in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information. The Company acknowledges and agrees that any breach of this Section 6.2 would cause irreparable harm to Nextelligence for which monetary damages would not be adequate and, therefore, the Company agrees that, in the event of a breach of this Section 6.2, Nextelligence shall be entitled to equitable relief in addition to any remedies it may have hereunder or at law.
ARTICLE VII
Term and Termination
7.1 Term. The term of this Agreement shall commence on the date of this Agreement and shall continue in effect for a period of twenty years (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, certain provisions of this Agreement may be terminated early by Nextelligence in accordance with the provisions of Section 7.4.
7.2 Termination Events. The occurrence of any of the following events or conditions shall constitute a “Termination Event” hereunder:
(a) The Company shall fail for any reason to make any payment to Nextelligence when required pursuant to the provisions of Section 4.1 and such failure shall not have been cured within three days thereafter;
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(b) Except as otherwise provided in Section 7.2(a), the Company shall fail to perform or breach or default in any of its obligations under this Agreement and such failure to perform, breach or default is not cured within sixty days after receipt of notice from Nextelligence;
(c) The Company shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) file a voluntary petition under any bankruptcy, insolvency or other law for the relief or aid of debtors, including without limitation the Bankruptcy Code of 1978, as amended, (iii) make any assignment for the benefit of its creditors or (iv) enter into any composition agreement;
(d) An involuntary petition shall be filed against the Company under any bankruptcy, insolvency or other law for the relief or aid of debtors, including without limitation the Bankruptcy Code of 1978, as amended, which involuntary petition is not dismissed within ninety days after the date of the filing thereof;
(e) Any court of competent jurisdiction shall find that the Company is insolvent or bankrupt;
(f) A receiver or trustee shall be appointed for the Company or for all or a substantial portion of the assets and properties of a party;
(g) A final judgment shall be entered against the Company which is not satisfied or bonded in full within sixty days after the date of the entry thereof;
(h) All or a substantial portion of the assets and properties of the Company shall be levied upon, seized or attached;
(i) All or a substantial portion of the assets and properties of the Company shall be lost, stolen, damaged or destroyed;
(j) The Company shall fail to perform or breach or default in any of its obligations under the Warrants and such failure to perform, breach or default is not cured within three days after receipt of notice from Nextelligence; or
(j) A Change in Control of the Company shall occur.
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7.3 Change in Control. The term “Change in Control of the Company” means any change in control of the Company of a nature which would be required to be reported under the Federal Securities Laws, regardless of whether the Company is subject to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”); provided, however, that, without limitation, a Change in Control of the Company shall be deemed to have occurred if:
(a) subsequent to the date of this Agreement, any “person” (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than the Company, any subsidiary of the Company or any compensation, retirement, pension or other employee benefit plan or trust of the Company or any subsidiary of the Company, becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company or any successor to the Company (whether by merger, consolidation or otherwise) representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities;
(b) during any period of two consecutive years, the individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority of such Board of Directors, unless the election of each director who was not a director at the beginning of such period has been approved in advance by the directors representing at least two-thirds of the directors then in office who were directors at the beginning of such period;
(c) the Company shall merge or consolidate with or into another corporation or other entity, or enter into a binding agreement to merge or consolidate with or into another corporation or other entity, 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 corporation or entity) not less than eighty percent (80%) of the combined voting power of the voting securities of the Company or such surviving corporation or entity outstanding immediately after such merger or consolidation;
(d) the Company shall sell, lease, exchange or otherwise dispose of all or substantially all of its assets, or enter into a binding agreement for the sale, lease, exchange or other disposition of all or substantially all of its assets, in one transaction or in a series of related transactions; or
(e) the Company shall liquidate or dissolve, or any plan or proposal shall be adopted for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, the acquisition of shares of Common Stock by Telebrands Corp. or any Affiliate of Telebrands Corp. shall not be deemed to constitute a “Change in Control of the Company” so long as such shares of Common Stock are subject to that certain Voting Trust Agreement dated as of October 15, 2012.
7.4 Termination. Upon the occurrence of a Termination Event, Nextelligence shall have the right to terminate the provisions of Articles II through IV, Sections 7.1 through 7.3, and Article VIII of this Agreement upon the delivery of written notice thereof to the Company, but all of the other provisions of this Agreement shall remain in full force and effect for an indefinite period.
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ARTICLE VIII
Excuse of Performance
No party shall be liable for any failure to perform under this Agreement, other than any obligation to make any payment, due to an act of God, war, public enemy, any person engaged in subversive activity, sabotage, terrorism, hacking or other similar acts, fire, flood, storm, explosion, hurricane, tornado, earthquake or other natural disaster or catastrophe, epidemic or quarantine restriction, interruption of power supplies or hosting services or any other cause beyond the reasonable control of the party attempting to excuse its performance pursuant to this Article VIII.
ARTICLE IX
Disclaimers; Limitation on Liability
9.1 Disclaimer. NEXTELLIGENCE MAKES NO WARRANTIES WITH RESPECT TO ANY PRODUCTS, LICENSE OR SERVICE, INCLUDING WITHOUT LIMITATION LICENSED TECHNOLOGY, AND DISCLAIMS ALL STATUTORY OR IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE. NEXTELLIGENCE DOES NOT WARRANT THAT THE TECHNOLOGY WILL MEET ANY OF THE COMPANY’S REQUIREMENTS OR THAT THE OPERATION OF THE TECHNOLOGY WILL BE UNINTERRUPTED OR ERROR-FREE.
9.2 Limitation on Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), INDEMNITY OR OTHER LEGAL, CONTRACTUAL OR EQUITABLE THEORY FOR (a) ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND WHETHER OR NOT ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES; (b) DAMAGES FOR LOST PROFITS OR LOST DATA; OR (c) COST AND EXPENSES OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
ARTICLE X
Certain Representations and Warranties
10.1 Certain Representations and Warranties of Nextelligence. Nextelligence represents and warrants to the Company as follows:
(a) Nextelligence is a corporation duly organized and existing under the laws of the State of Delaware.
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(b) Nextelligence has all necessary power and authority to execute and deliver this Agreement and has taken all necessary corporate action required to be taken to authorize Nextelligence to execute and deliver this Agreement and to perform all of its obligations, undertakings and agreements to be observed and performed by it under this Agreement. This Agreement has been duly executed and delivered by Nextelligence and is a valid and binding agreement of Nextelligence. The execution and delivery of this Agreement by Nextelligence does not violate any provision of Nextelligence’ organizational documents, violate, or result in, with the giving of notice or the lapse of time or both, a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice, or lapse of time or both) any obligation under, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which Nextelligence is a party or by which Nextelligence or any of its assets is bound.
(c) Nextelligence is the sole owner of the Technology, free and clear of all liens, security interests, encumbrances and charges of any kind or nature whatsoever. Nextelligence has all necessary rights, power and authority to license the Technology to the Company, and the Company shall be fully protected in utilizing any or all of the Technology.
(d) Nextelligence (i) is not involved in any manner in any suit, action or proceeding which involves a claim of infringement or misappropriation of any of the Technology and (ii) has not received any written complaint, claim, demand or notice alleging any such claim or possible claim. None of the Technology or the use thereof infringes on or violates in any manner the patent, trademark, service mark, copyright, trade dress or other Intellectual Property Rights of any Person, or any trade secret or confidential or proprietary information or data of any Person.
10.2 Certain Representations, Warranties of the Company. The Company represents and warrants to Nextelligence as follows:
(a) The Company is a corporation duly organized and existing under the laws of the State of Florida.
(b) The Company has all necessary power and authority to execute and deliver this Agreement and has taken all necessary corporate action required to be taken to authorize the Company to execute and deliver this Agreement and to perform all of its obligations, undertakings and agreements to be observed and performed by it under this Agreement. This Agreement has been duly executed and delivered by the Company and is a valid and binding agreement of the Company. The execution and delivery of this Agreement by the Company does not violate any provision of its organizational documents, violate, or result in, with the giving of notice or the lapse of time or both, a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice, or lapse of time or both) any obligation under, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which the Company is a party or by which the Company or any of its assets is bound.
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ARTICLE XI
Indemnification
11.1 Indemnification by Nextelligence. Nextelligence shall indemnify and hold harmless the Company, its Affiliates and their respective shareholders, members, directors, officers, employees, agents, attorneys and representatives (all of the foregoing are hereinafter collectively referred to as the “Company Indemnitees”) of, from and against the full amount of any and all claims, demands, actions, causes of actions, losses, liabilities, damages, settlements, taxes, deficiencies, assessments, costs and expenses (including without limitation fees and disbursements of trial and appellate counsel) (collectively, the “Indemnified Expenses”) suffered or incurred by any or all of the Nextelligence Indemnitees arising out of or in connection with any third party claim that the any of the Technology or the use thereof violates the patent, trademark, service mark, copyright, trade dress or other Intellectual Property Rights of any Person, or any trade secret or confidential or proprietary information or data of any Person. The Company shall immediately advise Nextelligence of any claim or suit of which it becomes aware. The Company may, at its option, join in the defense or settlement of any such claim with counsel of its choice, at its own expense.
ARTICLE XII
Miscellaneous Provisions
12.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the provisions regarding conflicts of law thereof.
12.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS, Airborne or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers set forth below:
| If to Nextelligence: | Nextelligence, Inc. |
| 5830 TG Lee Boulevard
Suite 310 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive
Officer Facsimile: |
| 15 |
| If to the Company: | FreeCast, Inc. |
| 5830 TG Lee Boulevard
Suite 310 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive
Officer Facsimile: |
or to such other address or facsimile telephone number as any party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 12.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, twittering or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 12.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
12.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior discussions, agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Original Agreement is superseded by this Agreement and shall hereafter be of no force or effect. This Agreement may not be amended, modified, altered or repealed in any manner, except by a written instrument executed by each of the parties.
12.4 Assignment. This Agreement may not be assigned, in whole or in part, directly or indirectly, by the Company. Any purported assignment, sale, transfer, delegation or other disposition of this Agreement by the Company shall be null and void. Nextelligence may assign any or all of its interest in the Agreement at any time without the consent of the Company.
12.5 Independent Contractor Status. Each of the parties is an independent contractor, and not an agent, partner, joint venturer, franchisee or employee of any other party. Nothing contained in this Agreement shall be construed to create a partnership, joint venture or agency relationship between or among the parties.
12.6 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties and their respective successors and assigns.
12.7 Further Assurances. Each of the parties shall cooperate with one another, shall do and perform such actions and things, and shall execute and deliver such agreements, documents and instruments, as may be reasonable and necessary to effectuate the purposes and intents of this Agreement.
| 16 |
12.8 Severability. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part hereof, all of which are inserted conditionally on their being valid in law. If any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid by any court of competent jurisdiction, then, in any such event, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted.
12.9 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or his address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or him in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
12.10 Attorneys’ Fees. If a party to this Agreement shall bring suit against the other party based in whole or in part upon a breach or violation of any provision hereof, then, in any such event, the prevailing party in such suit shall be awarded, and shall be paid by the non-prevailing party, reasonable fees and disbursements of legal counsel (including trial and appellate counsel) paid, incurred or suffered by the prevailing party in connection with such suit.
12.11 No Waivers. The waiver by a party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by a party to exercise any right or remedy it may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
12.12 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
12.13 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
| 17 |
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
| NEXTELLIGENCE, INC. | ||
| By |  | |
| William A. Mobley, Jr. | ||
| Chairman of the Board
and Chief Executive Officer | ||
| FREECAST, INC. | ||
| By |  | |
| Marjorie Lieberman, Secretary | ||
| 18 |
Exhibit 10.2
AMENDMENT
TO
AMENDED
AND RESTATED
TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT
THIS AMENDMENT TO AMENDED AND RESTATED TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT is entered into on July 1, 2013 by and between Nextelligence, Inc., a Delaware corporation (“Nextelligence”), and FreeCast, Inc., a Florida corporation (the “Company”).
RECITALS:
A. Nextelligence and the Company previously entered into a Technology License and Development Agreement dated as of June 30, 2011 (the “Original Agreement”).
B. Nextelligence and the Company previously entered into an Amended and Restated Technology License and Development Agreement dated as of October 19, 2012 (the “Amended and Restated Agreement”).
C. Each of Nextelligence and the Company desires to make certain modifications to the Original Agreement and the Amended and Restated Agreement as are set forth in this Amendment to Amended and Restated Technology License and Development Agreement (the “Amendment”).
D. Each of Nextelligence and the Company desires to continue their relationship pursuant to the provisions of the Amended and Restated Agreement, as modified by the provisions of this Amendment.
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of Nextelligence and the Company contained in this Amendment, each of Nextelligence and the Company agrees as follows:
1. Definitions. All capitalized terms utilized in this Amendment which are not defined herein shall have the respective meanings set forth in the Amended and Restated Agreement.
2. Interest. A new Section 4.1(d) is added to both the Original Agreement and the Amended and Restated Agreement:
“(d) If the Company fails to make any payment to Nextelligence when due pursuant to the provisions of this Agreement, then simple interest shall accrue on such amount from the date due to the date of payment in full at the rate of Twelve Percent (12%) per annum. Simple interest shall accrue on the Indebtedness from the date due to the date of payment in full at the rate of Twelve Percent (12%) per annum.”
3. Term. Section 7.1of the Amended and Restated Agreement is deleted in its entirety and the following Section 7.1 is inserted in its place:
“7.1 Term. The term of this Agreement shall commence on January 1, 2013 and shall continue in effect for a period of twenty and one-half (20.5) years through and including June 30, 2033 (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, certain provisions of this Agreement may be terminated early by Nextelligence in accordance with the provisions of Section 7.4.”
4. Effectiveness. The provisions of Section 2 above shall be effective for all purposes as of and from and after June 30, 2011 as if it had been included in the Original Agreement on that date. The provisions of Sections 2 and 3 above shall be effective for all purposes as of and from and after October 19, 2012 as if they had been included in the Amended and Restated Agreement on that date.
6. Conflict. If and to the extent that a conflict may arise or exist between any provision of this Amendment and any provision of the Amended and Restated Agreement, to the fullest extent permitted by applicable law, the provision of this Amendment shall be controlling, and shall take precedence over, the provision of the Amended and Restated Agreement.
7. Governing Law. This Amendment shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of laws provisions thereof.
8. Entire Agreement. This Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. This Amendment may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
9. Benefits; Binding Effect. This Amendment shall be for the benefit of, and shall be binding upon, the parties hereto and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
10. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11. Counterparts. This Amendment may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
| 2 |
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement on the date first written above.
| FreeCast, Inc. | |||||
| By: |  |
 | |||
| Marjorie Lieberman, | William A. Mobley, Jr. | ||||
| Secretary | |||||
| 3 |
Exhibit 10.3
SECOND AMENDED AND RESTATED
TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT
THIS SECOND AMENDED AND RESTATED TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT is entered into as of July 31, 2014 by and between NEXTELLIGENCE, INC., a Delaware corporation (“Nextelligence”), and FREECAST, INC., a Florida corporation (the “Company”).
RECITALS:
A. Nextelligence is the sole owner of the Technology.
B. Nextelligence desires to license the Technology to the Company and the Company desires to license the Technology for the Business Purpose in accordance with the terms and provisions of this Second Amended and Restated Technology License and Development Agreement (the “Agreement”).
C. The Company desires Nextelligence to perform certain technology development services and Nextelligence desires to perform such services in accordance with the terms and provisions of this Agreement. By performing such services, it is anticipated that Nextelligence will create Additional Technology. It is anticipated that any Additional Technology will be licensed to the Company in accordance with the provisions of this Agreement.
D. The parties have previously entered into a Technology License and Development Agreement dated as of June 30, 2011 (the “First Agreement”), as modified and superseded by an Amended and Restated Technology License and Development Agreement dated as of October 19, 2012 (the “Second Agreement”). The First Agreement and the Second Agreement are hereinafter collectively referred to as the “Original Agreements”.
E. A majority of the disinterested directors of the Company have approved the Company’s entering into this Agreement in accordance with the provisions of Section 607.0832 of the Florida Statutes
F. Each of the parties believes it to be m its best interests to enter into this Agreement.
NOW, THEREFORE, in consideration of the Recitals and the respective covenants and agreements of the parties set forth herein, each of the parties agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“1933 Act” shall have the meaning set forth in Section 5.4(b).
“Additional Shares” shall have the meaning set forth in Section 5.l(b).
“Affiliate” means with respect to a specified Person, any other Person which, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person. The concept of “control” when utilized with respect to a specified Person, shall signify the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting or equity securities, by contract or otherwise.
“Agreement” shall have the meaning set forth in Recital B.
“Business Purpose” means providing the Online Services to end-users.
“Change in Control of the Company” shall have the meaning set forth in Section 7.3.
“Common Stock” shall have the meaning set forth in Section 5.l(a).
“Company” shall have the meaning set forth in the first paragraph of this Agreement.
“Company Confidential Information” means the confidential and/or proprietary information and/or trade secrets of the Company (whether such information is or is not marked or identified as confidential or proprietary), including without limitation software (in object and source code form), technology, inventions (whether or not patentable), trade secrets, ideas, know-how, techniques, processes, formulas, algorithms, schematics, research, development, software design and architecture, testing procedures, design and functional specifications, problem reports and performance information, marketing and financial plans and data. “Company Confidential Information” does not include information that Telebrands can show through documentary evidence: (a) is or becomes publicly known through no fault, act or omission of Telebrands; (b) is known by or in the possession of Telebrands prior to its receipt from the Company; or (c) is lawfully obtained from a third party who rightfully possesses the information (without confidentiality or proprietary restriction).
“Company Indemnitees” shall have the meaning set forth in Section 11.1.
“Devices” shall have meaning set forth in the Distribution Agreement.
“Disclosure Documents” shall have the meaning set forth in Section 5.4(e).
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“Distribution Agreement” means that certain Distribution Agreement dated as of October 15, 2012 by and between Telebrands Corp. and the Company, as amended by that certain First Amendment to Distribution Agreement dated as of June 13, 2014 by and between Telebrands Corp. and the Company.
“Federal Securities Laws” shall have the meaning set forth in Section 5.4(a).
“First Agreement”.shalL have the meaning set forth in Recital D.
“Gross Revenues” means, for a given period, the gross revenues of the Company, determined in accordance with generally accepted accounting principles as in effect in the United States of America applied in a manner consistent with prior periods.
“Intellectual Property Rights” means all present and future copyrights, trademark rights, service mark rights, trade secret rights, patent rights, moral rights, and other intellectual property and proprietary rights recognized in any jurisdiction.
“Nextelligence” shall have the meaning set forth in the first paragraph of this Agreement.
“Nextelligence Confidential Information” means the confidential and/or proprietary information and/or trade secrets of Nextelligence (whether such information is or is not marked or identified as confidential or proprietary), including without limitation software (in object and source code form), technology, inventions (whether or not patentable), trade secrets, ideas, know-how, techniques, processes, formulas, algorithms, schematics, research, development, software design and architecture, testing procedures, design and functional specifications, problem reports and performance information, marketing and financial plans and data. “Nextelligence Confidential Information” does not include information that the Company can show through documentary evidence: (a) is or becomes publicly known through no fault, act or omission of the Company; (b) is known by or in the possession of the Company prior to its receipt from Nextelligence; or (c) is lawfully obtained from a third party who rightfully possesses the information (without confidentiality or proprietary restriction).
“Online Services” means online television and music content aggregation services as an interactive guide.
“Original Agreements” shall have the meaning set forth in Recital D.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Second Agreement” shall have the meaning set forth in Recital D.
“Securities” shall have the meaning set forth in Section 5.3.
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“Shares” shall have the meaning set forth in Section 5.l(a).
“State Securities Laws” shall have the meaning set forth in Section 5.4(a).
“Technology” means and includes a web-based toolbar that installs in the end-user’s browser and any supported email functions and/or chat functions with the following features:
(a) a search box that allows the end-user to search the Internet with search results from a search results partner;
(b) a search assistant that provides relevant links and results when the end-user makes a search request in the browser address bar or if the browser address request is invalid, misspelled or incorrectly formatted; and
(c) Features, functions and links to, or RSS (or other) video feeds from, third party partners.
“Term” shall have the meaning set forth in Section 7.1.
“Termination Event” shall have the meaning set forth in Section 7.2.
“Territory” means worldwide.
“Transfer” shall have the meaning set forth in Section 5.4(c).
“Warrants”shall have the meaning set forth in Section 5.2.
ARTICLE II
License
2.1 Grant of License. Subject to the terms and conditions set forth in this Agreement, Nextelligence grants to the Company a non-transferable, non-sublicensable, exclusive license, exercisable within the Territory, to install, use and operate the Technology solely for the Business Purpose.
2.2 Restrictions on Use. The Company shall not, and shall ensure that other parties shall not:
(a) modify, adapt, alter, translate, copy, perform and display (publicly or otherwise), or create derivative works based on the Technology;
(b) merge or bundle the Technology with other software or technology;
(c) sublicense, lease, rent or loan the Technology;
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(d) transfer the Technology to any third party;
(e) provide the use of the Technology in any service bureau, rental or timesharing arrangement; or
(f) reverse engineer, decompile, disassemble, or otherwise attempt to derive the source code for the Technology.
2.3 IP Ownership. Nextelligence shall own all right, title and interest, including all Intellectual Property Rights, in and to the Technology. All rights in and to the Technology not expressly granted to the Company under this Agreement are reserved by Nextelligence. The Company shall take all reasonable measures to protect Nextelligence’s Intellectual Property Rights in the Technology, including providing assistance and measures as are reasonably requested by Nextelligence from time to time.
ARTICLE III
Further Development of the Technology
3.1 Further Development.
(a) All further development, improvement, modification, maintenance, management and enhancement of the Technology shall be performed exclusively by Nextelligence. All further development, improvement, modification and enhancement of the Technology shall be owned solely by Nextelligence, but shall be deemed to be licensed to the Company pursuant to Section 2.1.
(b) For all of the services to be performed by Nextelligence for the Company pursuant to Section 3.l(a), on a monthly basis, the Company shall pay to Nextelligence a fixed management fee of Twenty-Three Thousand Dollars ($23,000.00). Such amount shall be reviewed on a semi-annual basis, in January and July, and may be adjusted as the parties shall mutually agree.
(c) It is anticipated that Nextelligence may require outside resources in order to perform the services set forth in Section 3.l(a). In such event, outside vendors shall invoice the Company directly in amounts that have been mutually agreed by any such vendor and the Company.
ARTICLE IV
Payments
4.1 Payments to Nextelligence.
(a) For and in partial consideration of the license granted to the Company pursuant to Section 2.1 and Section 3.l(a), on or before the last day of each calendar month, the Company, by wire or electronic funds transfer, shall pay to Nextelligence four percent (4%) of the Company’s Gross Revenues for the immediately preceding calendar month.
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(b) On or before the last day each calendar month, the Company, by wire or electronic funds transfer, shall pay to Nextelligence the amount due for the immediately preceding calendar month pursuant to Section 3.1 (b).
4.2 Books and Records.
(a) The Company shall at all times maintain true, correct and complete books and records of account. Such books and records of account shall be preserved by the Company for a period of not less than seven years.
(b) At all reasonable times after reasonable notice, Nextelligence and its officers, employees, representatives and agents shall be entitled to inspect and to make copies of all of the books, records, files and documents, in whatever form, of the Company in order to verify that the provisions of Section 4.1 are being fully complied with by the Company.
(c) All shortfalls in payment to Nextelligence shall, immediately upon demand be paid by the Company. The cost of any inspection pursuant to Section 4.2(b) above shall be borne solely by Nextelligence; provided, however, if a variance is found for any period of more than two percent (2%) of (i) Gross Sales or (ii) any amounts paid to Nextelligence pursuant to Section 4.1, then the Company shall, immediately upon demand, pay to Nextelligence all of the following amounts:
(A) all reasonable costs of the inspection; and
(B) interest on all such shortfalls at the highest rate of interest permitted by the laws of the State of Florida.
ARTICLE V
Securities
5.1 Purchase and Sale of Shares.
(a) For and in partial consideration of the license granted pursuant to Section 2.1 , on or about June 30, 2011 , the Company transferred to Nextelligence Twenty Million (20,000,000) shares of common stock, par value $0.0001 per share (the “Common Stock”), of the Company (collectively, the “Shares”).
(b) For and in partial consideration of the license granted pursuant to Section 2.1 , on or about October 19, 2012, the Company issued to Nextelligence Four Thousand (4,000) shares of Common Stock (the “Additional Shares”).
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5.2 Issuance of Warrants. For and in partial consideration of the license granted pursuant to Section 2.1, for each Two Million (2,000,000) Devices in excess of Ten Million (10,000,000) Devices sold, the Company shall issue to Nextelligence an immediately exercisable warrant to purchase up to Four Million (4,000,000) shares of Common Stock at a purchase price per share equal to the fair market value of a share of Common Stock on the date of issuance (collectively, the “Warrants”).
5.3 Securities. The Shares, the Additional Shares and the Warrants are hereinafter collectively referred to as the “Securities.”
5.4 Certain Representations, Warranties, Covenants and Agreements of Nextelligence. Nextelligence represents and warrants to the Company, and covenants and agrees with the Company, as follows:
(a) The Securities are being acquired by Nextelligence for its own account, and not for the account or beneficial interest of any other Person. The Securities are not being acquired by Nextelligence with a view to, or for resale in connection with, any “distribution” within the meaning of (i) the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the “Federal Securities Laws”), or (ii) any applicable state securities or blue sky laws and the rules and regulations promulgated thereunder (collectively, the “State Securities Laws”).
(b) The Securities have not been, and will not be, registered under the Federal Securities Laws or any State Securities Laws and, as such, must be held by Nextelligence unless and until they are subsequently so registered under the Federal Securities Laws and any applicable State Securities Laws or an exemption from registration thereunder is available. The Securities constitute “restricted securities,” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the 1933 Act”).
(c) Nextelligence shall not, directly or indirectly, sell, assign, transfer, convey, gift, give, mortgage, pledge, hypothecate, encumber or otherwise dispose of any or all of the Securities (any such transaction hereinafter being referred to as a “Transfer”), unless such Transfer is registered under the Federal Securities Laws and any applicable State Securities Laws or a specific exemption from registration thereunder is available. Any Transfer of any or all of the Securities which is made pursuant to an exemption claimed under the Federal Securities Laws and any applicable State Securities Laws will require a favorable opinion of the Company’s legal counsel to the effect that such Transfer does not and will not violate the provisions of the Federal Securities Laws or any applicable State Securities Laws.
(d) Nextelligence is an “accredited investor,” as such term is defined Regulation D under the 1933 Act.
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(e) Nextelligence, through its directors and officers, has such knowledge and experience in financial, investment and business matters that it is capable of evaluating the merits and risks of an investment in the Securities. Management of Nextelligence has read and understood each and every one of the Disclosure Documents (as such term is hereinafter defined). In connection with review, Nextelligence has consulted with such independent legal counsel, accountants and other advisers considered appropriate to assist Nextelligence. In particular, and not in limitation of the foregoing, Nextelligence has taken full cognizance of and understands each and every one of the following:
(i) this Agreement;
(ii) the Distribution Agreement and the exhibits attached thereto; and
(iii) such other documents and materials as Nextelligence shall have requested from the Company.
All of the foregoing documents are collectively referred to herein as the “Disclosure Documents.”
(f) Nextelligence has been afforded the opportunity to ask questions of, and to receive answers from, the management of the Company concerning the terms and conditions of the Securities and to obtain any additional information, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed itself of such opportunity to the extent it considers appropriate in order to permit its management to evaluate the merits and risks of an investment in the Securities.
(g) The Company is under no obligation whatsoever to file any registration statement under the Federal Securities Laws or any State Securities Laws to register any Transfer of any Securities held by Nextelligence, or to take any other action necessary for the purpose of making an exemption from registration available to Nextelligence in connection with any such Transfer. Stop transfer instructions will be issued by the Company with respect to the Securities. Therefore, Nextelligence may be forced to hold the Securities acquired for an indefinite period of time.
(h) Nextelligence acknowledges that all certificates representing the Shares and the Additional Shares will bear a restrictive legend in substantially the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS (A) THEY ARE COVERED BY A REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO, EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) SUCH SALE, ASSIGNMENT, TRANSFER, CONVEYANCE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT ACT AND ANY OTHER APPLICABLE SECURITIES LAWS.
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(i) Nextelligence acknowledges that all certificates representing the Warrants will bear a restrictive legend in substantially the following form:
NEITHER THIS WARRANT NOR THE SHARES UNDERLYING THIS WARRANT MAY BE SOLD, ASSIGNED, TRANSFERRED, CONVEYED, PLEDGED, HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS (A) THEY ARE COVERED BY A REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT-THERETO, EFFECTIVE UNDER_THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) SUCH SALE, ASSIGNMENT, TRANSFER, CONVEYANCE, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THAT ACT.
5.5 Certain Representation and Warranties of the Company. The Company represents and warrants to Nextelligence, and covenants and agrees with Nextelligence, as follows:
(a) The Company has all requisite power and authority to enter into and perform its obligations under this Agreement and to issue the Shares, the Additional Shares, the Warrants and the shares to be issued upon exercise of the Warrants.
(b) The Shares and the Additional Shares are (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, except as arising through the acts or omissions of Nextelligence and except as arising from applicable Federal Securities Laws and State Securities Laws.
(c) The shares to be issued upon exercise of the Warrants will, upon issuance in accordance with the terms of the Warrants, be (i) duly authorized, fully paid and non-assessable, and (ii) free from all liens, charges and security interests, except as arising through the acts or omissions ofNextelligence and except as arising from applicable Federal Securities Laws and State Securities Laws. The Company shall reserve and keep available, out of its authorized but unissued shares of Common Stock for issuance upon the exercise of the Warrants, free from pre-emptive rights, such number of shares of Common Stock for which the Warrants shall from time to time be exercisable.
ARTICLE VI
Confidential Information
6.1 Company Confidential Information.
(a) Nextelligence acknowledges and agrees that the Company Confidential Information is and shall remain the sole property of the Company. Nextelligence shall protect the Company Confidential Information from unauthorized dissemination and shall use the same degree of care that Nextelligence uses to protect its own like information, but in no event less than a reasonable degree of care. Nextelligence shall not disclose to third parties the Company Confidential Information without the prior written consent of the Company. Nextelligence shall use the Company Confidential Information only for purposes of performing its obligations or exercising its rights under this Agreement.
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(b) Notwithstanding the provisions of Section 6.l(a), Nextelligence may use or disclose the Company Confidential Information to the extent Nextelligence is legally compelled to do so, provided, however, that prior to any such compelled disclosure, Nextelligence notifies the Company and fully cooperates.with the Company in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information. Nextelligence acknowledges and agrees that any breach of this Section 6.1 would cause irreparable harm to the Company for which monetary damages would not be adequate and, therefore, Nextelligence agrees that, in the event of a breach of this Section 6.1, the Company shall be entitled to equitable relief in addition to any remedies it may have hereunder or at law.
6.2 Nextelligence Confidential Information.
(a) The Company acknowledges and agrees that the Nextelligence Confidential Information is and shall remain the sole property of Nextelligence. The Company shall protect the Nextelligence Confidential Information from unauthorized dissemination and shall use the same degree of care that the Company uses to protect its own like information, but in no event less than a reasonable degree of care. The Company shall not disclose to third parties the Nextelligence Confidential Information without the prior written consent of Nextelligence. The Company shall use the Nextelligence Confidential Information only for purposes of performing its obligations or exercising its rights under this Agreement.
(b) Notwithstanding the provisions of Section 6.2(a), the Company may use or disclose the Nextelligence Confidential Information to the extent the Company is legally compelled to do so, provided, however, that prior to any such compelled disclosure, the Company notifies Nextelligence and fully cooperates with Nextelligence in protecting against any such disclosure and/or obtaining a protective order narrowing the scope of such disclosure and/or use of the Confidential Information. The Company acknowledges and agrees that any breach of this Section 6.2 would cause irreparable harm to Nextelligence for which monetary damages would not be adequate and, therefore, the Company agrees that, in the event of a breach of this Section 6.2, Nextelligence shall be entitled to equitable relief in addition to any remedies it may have hereunder or at law.
ARTICLE VII
Term and Termination
7.1 Term. The term of this Agreement shall commence on the date of this Agreement and shall continue in effect for a period of forty years (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, certain provisions of this Agreement may be terminated early by Nextelligence in accordance with the provisions of Section 7.4.
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7.2 Termination Events. The occurrence of any of the following events or conditions shall constitute a “Termination Event” hereunder:
(a) The Company shall fail for any reason to make any payment to Nextelligence when required pursuant to the provisions of Section 4.1 and such failure shall not have been cured within three days thereafter;
(b) Except as otherwise providedin Section 7.2(a), the Company shall fail to perform or breach or default in any of its obligations under this Agreement and such failure to perform, breach or default is not cured within sixty days after receipt of notice from Nextelligence;
(c) The Company shall (i) admit in writing its inability to pay its debts generally as they become due, (ii) file a voluntary petition under any bankruptcy, insolvency or other law for the relief or aid of debtors, including without limitation the Bankruptcy Code of 1978, as amended, (iii) make any assignment for the benefit of its creditors or (iv) enter into any composition agreement;
(d) An involuntary petition shall be filed against the Company under any bankruptcy, insolvency or other law for the relief or aid of debtors, including without limitation the Bankruptcy Code of 1978, as amended, which involuntary petition is not dismissed within ninety days after the date of the filing thereof;
(e) Any court of competent jurisdiction shall find that the Company is insolvent or bankrupt;
(f) A receiver or trustee shall be appointed for the Company or for all or a substantial portion of the assets and properties of a party;
(g) A final judgment shall be entered against the Company which is not satisfied or bonded in full within sixty days after the date of the entry thereof;
(h) All or a substantial portion of the assets and properties of the Company shall be levied upon, seized or attached;
(i) All or a substantial portion of the assets and properties of the Company shall be lost, stolen, damaged or destroyed;
(j) The Company shall fail to perform or breach or default in any of its obligations under the Warrants and such failure to perform, breach or default is not cured within three days after receipt of notice from Nextelligence; or
(j) A Change in Control of the Company shall occur.
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7.3 Change in Control. The term “Change in Control of the Company” means any change in control of the Company of a nature which would be required to be reported under the Federal Securities Laws, regardless of whether the Company is subject to the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange Act”); provided, however, that, without limitation, a Change in Control of the Company shall be deemed to have occurred if:
(a) subsequent to the date of this Agreement, any “person” (as such term is defined in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than the Company, any subsidiary of the Company or any compensation, retirement, pension or other employee benefit plan or trust of the Company or any subsidiary of the Company, becomes the “beneficial owner” (as such term is defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company or any successor to the Company (whether by merger, consolidation or otherwise) representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding securities;
(b) during any period of two consecutive years, the individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority of such Board of Directors, unless the election of each director who was not a director at the beginning of such period has been approved in advance by the directors representing at least two-thirds of the directors then in office who were directors at the beginning of such period;
(c) the Company shall merge or consolidate with or into another corporation or other entity, or enter into a binding agreement to merge or consolidate with or into another corporation or other entity, 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 corporation or entity) not less than eighty percent (80%) of the combined voting power of the voting securities of the Company or such surviving corporation or entity outstanding immediately after such merger or consolidation;
(d) the Company shall sell, lease, exchange or otherwise dispose of all or substantially all of its assets, or enter into a binding agreement for the sale, lease, exchange or other disposition of all or substantially all of its assets, in one transaction or in a series of related transactions; or
(e) the Company shall liquidate or dissolve, or any plan or proposal shall be adopted for the liquidation or dissolution of the Company.
Notwithstanding the foregoing, the acquisition of shares of Common Stock by Telebrands Corp. or any Affiliate of Telebrands Corp. shall not be deemed to constitute a “Change in Control of the Company” so long as such shares of Common Stock are subject to that certain Voting Trust Agreement dated as of October 15, 2012.
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7.4 Termination. Upon the occurrence of a Termination Event, Nextelligence shall have the right to terminate the provisions of Articles II through IV, Sections 7.1 through 7.3, and Article VIII of this Agreement upon the delivery of written notice thereof to the Company, but all of the other provisions of this Agreement shall remain in full force and effect for an indefinite period.
ARTICLE VIII
Excuse of Performance
No party shall be liable for any failure to perform under this Agreement, other than any obligation to make any payment, due to an act of God, war, public enemy, any person engaged in subversive activity, sabotage, terrorism, hacking or other similar acts, fire, flood, storm, explosion, hurricane, tornado, earthquake or other natural disaster or catastrophe, epidemic or quarantine restriction, interruption of power supplies or hosting services or any other cause beyond the reasonable control of the party attempting to excuse its performance pursuant to this Article VIII.
ARTICLE IX
Disclaimers; Limitation on Liability
9.1 Disclaimer. NEXTELLIGENCE MAKES NO WARRANTIES WITH RESPECT TO ANY PRODUCTS, LICENSE OR SERVICE, INCLUDING WITHOUT LIMITATION LICENSED TECHNOLOGY, AND DISCLAIMS ALL STATUTORY OR IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, COURSE OF PERFORMANCE OR USAGE OF TRADE. NEXTELLIGENCE DOES NOT WARRANT THAT THE TECHNOLOGY WILL MEET ANY OF THE COMPANY’S REQUIREMENTS OR THAT THE OPERATION OF THE TECHNOLOGY WILL BE UNINTERRUPTED OR ERROR-FREE.
9.2 Limitation on Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY UNDER ANY CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT LIABILITY), INDEMNITY OR OTHER LEGAL, CONTRACTUAL OR EQUITABLE THEORY FOR (a) ANY INDIRECT, SPECIAL, PUNITIVE, INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND WHETHER OR NOT ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES; (b) DAMAGES FOR LOST PROFITS OR LOST DATA; OR (c) COST AND EXPENSES OF PROCUREMENT OF SUBSTITUTE GOODS, TECHNOLOGY OR SERVICES.
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ARTICLE X
Certain Representations and Warranties
10.1 Certain Representations and Warranties of Nextelligence. Nextelligence represents and warrants to the Company as follows:
(a) Nextelligence is a corporation duly organized and existing under the laws of the State of Delaware.
(b) Nextelligence has all necessary power and authority to execute and deliver this Agreement and has taken all necessary corporate action required to be taken to authorize Nextelligence to execute and deliver this Agreement and to perform all of its obligations, undertakings and agreements to be observed and performed by it under this Agreement. This Agreement has been duly executed and delivered by Nextelligence and is a valid and binding agreement of Nextelligence. The execution and delivery of this Agreement by Nextelligence does not violate any provision of Nextelligence’ organizational documents, violate, or result in, with the giving of notice or the lapse of time or both, a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice, or lapse of time or both) any obligation under, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which Nextelligence the acceleration of or entitle any party to accelerate (whether after the giving of notice, or lapse of time or both) any obligation under, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which Nextelligence is a party or by which Nextelligence or any of its assets is bound.
(c) Nextelligence is the sole owner of the Technology, free and clear of all liens, security interests, encumbrances and charges of any kind or nature whatsoever. Nextelligence has all necessary rights, power and authority to license the Technology to the Company, and the Company shall be fully protected in utilizing any or all of the Technology.
(d) Nextelligence (i) is not involved in any manner in any suit, action or proceeding which involves a claim of infringement or misappropriation of any of the Technology and (ii) has not received any written complaint, claim, demand or notice alleging any such claim or possible claim. None of the Technology or the use thereof infringes on or violates in any manner the patent, trademark, service mark, copyright, trade dress or other Intellectual Property Rights of any Person, or any trade secret or confidential or proprietary information or data of any Person.
10.2 Certain Representations, Warranties of the Company. The Company represents and warrants to Nextelligence as follows:
(a) The Company is a corporation duly organized and existing under the laws of the State of Florida.
(b) The Company has all necessary power and authority to execute and deliver this Agreement and has taken all necessary corporate action required to be taken to authorize the Company to execute and deliver this Agreement and to perform all of its obligations, undertakings and agreements to be observed and performed by it under this Agreement. This Agreement has been duly executed and delivered by the Company and is a valid and binding agreement of the Company. The execution and delivery of this Agreement by the Company does not violate any provision of its organizational documents, violate, or result in, with the giving of notice or the lapse of time or both, a violation of any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the giving of notice, or lapse of time or both) any obligation under, any mortgage, lien, lease, agreement, license, instrument, law, ordinance, regulation, order, arbitration award, judgment or decree to which the Company is a party or by which the Company or any of its assets is bound.
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ARTICLE XI
Indemnification
11.1 Indemnification by Nextelligence. Nextelligence shall indemnify and hold harmless the Company, its Affiliates and their respective shareholders, members, directors, officers, employees, agents, attorneys and representatives (all of the foregoing are hereinafter collectively referred to as the “Company Indemnitees”) of, from and against the full amount of any and all claims, demands, actions, causes of actions, losses, liabilities, damages, settlements, taxes, deficiencies, assessments, costs and expenses (including without limitation fees and disbursements of trial and appellate counsel) (collectively, the “Indemnified Expenses”) suffered or incurred by any or all of the Nextelligence Indemnitees arising out of or in connection with any third party claim that the any of the Technology or the use thereof violates the patent, trademark, service mark, copyright, trade dress or other Intellectual Property Rights of any Person, or any trade secret or confidential or proprietary information or data of any Person. The Company shall immediately advise Nextelligence of any claim or suit of which it becomes aware. The Company may, at its option, join in the defense or settlement of any such claim with counsel of its choice, at its own expense.
ARTICLE XII
Miscellaneous Provisions
12.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the provisions regarding conflicts of law thereof.
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12.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS, Airborne or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers set forth below:
| If to Nextelligence: | Nextelligence, Inc. |
| 5830 TG Lee Boulevard | |
| Suite 301 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive Officer | |
| Facsimile: | |
| If to the Company: | FreeCast, Inc. |
| 5830 TG Lee Boulevard | |
| Suite 310 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive Officer | |
| Facsimile: |
or to such other address or facsimile telephone number as any party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 12.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, twittering or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 12.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
12.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior discussions, agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Original Agreements are superseded by this Agreement and shall hereafter be of no force or effect. This Agreement may not be amended, modified, altered or repealed in any manner, except by a written instrument executed by each of the parties.
12.4 Assignment. This Agreement may not be assigned, in whole or in part, directly or indirectly, by the Company. Any purported assignment, sale, transfer, delegation or other disposition of this Agreement by the Company shall be null and void. Nextelligence may assign any or all of its interest in the Agreement at any time without the consent of the Company.
12.5 Independent Contractor Status. Each of the parties is an independent contractor, and not an agent, partner, joint venturer, franchisee or employee of any other party. Nothing contained in this Agreement shall be construed to create a partnership, joint venture or agency relationship between or among the parties.
12.6 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties and their respective successors and assigns.
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12.7 Further Assurances. Each of the parties shall cooperate with one another, shall do and perform such actions and things, and shall execute and deliver such agreements, documents and instruments, as may be reasonable and necessary to effectuate the purposes and intents of this Agreement.
12.8 Severabilitv. The invalidity of any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall not affect the enforceability of the remaining portions of this Agreement or any part hereof, all of which are inserted conditionally on their being valid in law. If any one or more of the words, phrases, sentences, clauses or sections contained in this Agreement shall be declared invalid by any court of competent jurisdiction, then, in any such event, this Agreement shall be construed as if such invalid word or words, phrase or phrases, sentence or sentences, clause or clauses, or section or sections had not been inserted.
12.9 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or his address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or him in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
12.10 Attorneys’ Fees. If a party to this Agreement shall bring suit against the other party based in whole or in part upon a breach or violation of any provision hereof, then, in any such event, the prevailing party in such suit shall be awarded, and shall be paid by the non-prevailing party, reasonable fees and disbursements of legal counsel (including trial and appellate counsel) paid, incurred or suffered by the prevailing party in connection with such suit.
12.11 No Waivers. The waiver by a party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by a party to exercise any right or remedy it may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
12.12 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
12.13 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
12.14 Effective Date. This Agreement shall be effective for all purposes from and after July 1, 2014.
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IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
| NEXTELLIGENCE, INC. | FREECAST, INC. | |||
| By | /s/ William A. Mobley, Jr. | By | /s/ Christopher M. Savine | |
| William A. Mobley, Jr. | Christopher M. Savine, | |||
| Chairman of the Board and | Chief Financial Officer | |||
| Chief Executive Officer | ||||
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Exhibit 10.4
Revision to the SECOND AMENDED AND RESTATED
TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT
This Revision to the SECOND AMENDED AND RESTATED TECHNOLOGY LICENSE AND DEVELOPMENT AGREEMENT is entered into as of June 30, 2016, by and between NEXTELLIGENCE, INC., a Delaware corporation (“Nextelligence”), and FREECAST, INC., a Florida corporation (the “Company”).
Each of the parties agrees as follows:
Payments
Payments to Nextelligence.
Effective with the Close of Business on June 30, 2016, all payments to Nextelligence pursuant to the Second Amended and Restated Technology License and Development Agreement entered into as of July 31, 2014, shall be terminated.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
| NEXTELLIGENCE, INC. | FREECAST, INC. | |||
| By: | /s/ William A. Mobley, Jr. | By: | /s/ Christopher M. Savine | |
| William A. Mobley, Jr. | Christopher M. Savine | |||
| Chairman of the Board and | Chief Financial Officer | |||
| Chief Executive Officer | ||||
Exhibit 10.5
RENEWAL AND CONSOLIDATING PROMISSORY NOTE
| $320,383.50 | August 1, 2023 |
FOR VALUE RECEIVED, the undersigned FREECAST, INC., a Florida corporation (“Borrower”) hereby promises to pay to the order of CARL PETERSON (“Lender”) at such place as Lender may designate from time to time in writing to Borrower, in immediately available funds of official currency of the United States, the principal sum of Three Hundred Twenty Thousand Three Hundred Eighty Three and 50/100 Dollars ($320,383.50), or so much as may be outstanding hereunder from time to time, together with interest thereon as provided herein.
This Renewal and Consolidating Promissory Note (this “Note”) renews and consolidates three current promissory notes between Borrower and Lender: (i) a promissory note dated March 28, 2022 in the principal amount of $100,000 (the “March Note”); (ii) a promissory note dated June 21, 2022 in the principal amount of $100,000 (the “June Note”); and (iii) a promissory note dated August 23, 2022 in the principal amount of $100,000 (the “August Note,” and together with the March Note and the June Note, the “Current Notes”). By renewing and consolidating the Current Notes, this Note supersedes in their entirety, and is substituted for and in lieu of, the Current Notes, and the Current Notes shall henceforth be deemed cancelled in the books and records of Borrower and Lender. By acceptance of this Note, Lender agrees that it will promptly deliver and surrender this Note to Borrower upon full payment thereof.
1. Principal Balance. The principal amount of this Note reflects and consolidates: (a) the principal amount of the March Note; (b) accrued and unpaid interest through July 31, 2023 in the amount of $8,071.21 on the March Note; (c) the principal amount of the June Note; (d) accrued and unpaid interest through July 31, 2023 in the amount of $6,673.95 on the June Note; (e) the principal amount of the August Note; and (f) accrued and unpaid interest through July 31, 2023 in the amount of $5,638.34 on the August Note.
2. Interest Rate. Interest shall accrue at the rate of six percent per annum, and be payable on the unpaid principal balance of this Note, as the same may exist from time to time, from and including the date set forth above until and excluding the Maturity Date (as defined below) or any earlier date of payment of principal, in whole or in part and, if in part, as to the portion paid. Interest on the principal balance outstanding will be calculated on the basis of the actual number of days elapsed over an assumed year consisting of 365 days, to the date of receipt by Lender of any interest and/or principal.
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Lender in full no later than July 31, 2024 (the “Maturity Date”).
4. Prepayment. Notwithstanding anything contained herein to the contrary, this Note is subject to prepayment in whole or in part at any time at the sole and absolute option of Borrower.
5. Events of Default. Any of the following shall constitute an “Event of Default” under this Note, and shall give rise to the remedies provided in Section 8 herein.
(a) Borrower defaults in the payment of principal of or interest on this Note when due.
FLORIDA DOCUMENTARY STAMP TAX REQUIRED BY LAW IN THE AMOUNT OF $1,050 WITH RESPECT TO THE INDEBTEDNESS EVIDENCED BY THE CURRENT NOTES HAS BEEN PAID. THE CURRENT NOTES AND EVIDENCE OF PAYMENT OF SUCH TAXES ARE ATTACHED HERETO. ADDITIONAL DOCUMENTARY STAMP TAX IN THE AMOUNT OF $71.34 IS DUE IN CONNECTION WITH THIS NOTE.
(b) Borrower shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means any of the following events: (i) Borrower commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Borrower or any Significant Subsidiary thereof; (ii) there is commenced against Borrower any such case or proceeding that is not dismissed within 60 days after commencement; (iii) Borrower is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (iv) Borrower suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (v) Borrower makes a general assignment for the benefit of creditors; (vi) Borrower calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (vii) Borrower, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
6. Remedies on Event of Default. If any Event of Default will occur, Lender shall, in addition to any and all other available rights and remedies, have the right, at Lender’s option, to: (a) declare the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Borrower hereunder, to be immediately due and payable without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by Borrower, provided that upon the occurrence of an Event of Default described in Section 5(b), the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Borrower hereunder, shall be immediately due and payable without any declaration or other act by Lender; and (b) pursue any and all available remedies for the collection of such principal and interest and all other sums due by Borrower hereunder and to enforce its rights as described herein; and in such case Lender may also recover all costs of suit and other expenses in connection therewith, including reasonable attorney’s fees for collection and the right to equitable relief to enforce Lender’s rights as set forth herein without the requirement to post any bond or other financial surety. The remedies provided in this Note may be exercised by Lender without notice to Borrower (to the extent permitted by law and except as notice is herein expressly required), and will be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Lender for the recovery of damages or otherwise in the event of a breach of any of the undertakings of Borrower hereunder. No failure by Lender to exercise and no delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other, further or additional exercise thereof.
7. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and construed in accordance with the laws of the State of Florida applied to contracts to be performed wholly within the State of Florida, without regard to conflicts of laws principles. Any judicial proceeding brought against Borrower with respect to this Note or any related agreement may be brought in any court located in the State of Florida, United States of America, and, by execution and delivery of this Note, Borrower accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Borrower at its address set forth below and service so made shall be deemed completed five days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Lender to bring proceedings against Borrower in the courts of any other jurisdiction. Borrower waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Borrower against Lender involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Note or any related agreement, shall be brought only in a federal or state court located in the State of Florida.
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MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
8. Amendment. Neither any provision of this Note nor any performance hereunder may be amended or waived orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
9. Binding Effect. The rights and obligations of Borrower under this Note will be binding upon its successors, assigns, heirs, administrators and transferees.
10. Successors and Assigns. Neither Borrower or Lender may assign or transfer this Note or any of their respective rights or obligations hereunder without the prior written consent of the other party. This Note shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.
EXECUTED as of the date first set forth above.
| FREECAST, INC. | ||
| BY: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., CEO | ||
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Exhibit 10.6
PROMISSORY NOTE
| $275,356.16 | June 30, 2021 |
FOR VALUE RECEIVED, the undersigned FREECAST, INC., a Florida corporation (“Maker”) hereby promises to pay to the order of WILLIAM HALDON VALDES (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the principal sum of Two Hundred Seventy Five Thousand Three Hundred Fifty Six and 16/100 Dollars ($275,356.16), or so much as may be outstanding hereunder from time to time, together with interest thereon from the date of this Promissory Note (this “Note”), as provided herein.
By acceptance of this Note, Payee agrees that it will promptly deliver and surrender this Note to Maker upon full payment thereof.
1. Principal Balance. This Note evidences a loan up to the maximum principal sum specified above, less the aggregate amount of all principal repayments made under this Note by Maker to Payee.
2. Interest Rate. Interest shall accrue on the unpaid principal balance hereof at the rate of six percent per annum from but excluding the date first set forth above to and including the Maturity Date (as defined below). Interest shall accrue on any principal balance that is not paid on the earlier of the Maturity Date and the date of an Event of Default (as defined below) at the rate of 18% per annum from and including the Maturity Date or the date of such Event of Default to but excluding the date of payment. In no event, however, shall interest be payable at a rate higher than the highest rate permitted by applicable law. Interest on the principal balance outstanding will be calculated on the basis of the actual number of days elapsed over an assumed year consisting of 365 days, to the date of receipt by Payee of any interest and/or principal. Interest shall be payable on the unpaid principal balance of this Note, as the same may exist from time to time, from the date of issuance until paid or converted in full, in accordance with the terms herein and shall be payable: (a) on the Maturity Date; and (b) on any earlier date of payment or conversion of principal, in whole or in part and, if in part, as to the portion paid or converted.
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Payee in full no later than June 30, 2024 (the “Maturity Date”).
4. Prepayment. Notwithstanding anything contained herein to the contrary, this Note is subject to prepayment in whole or in part at any time at the sole and absolute option of Maker, upon five business days’ prior written notice to Payee.
5. Events of Default. Any of the following shall constitute an “Event of Default” under this Note, and shall give rise to the remedies provided in Section 8 herein.
(a) Maker defaults in the payment of principal of or interest on this Note when due, including upon any prepayment provided for herein.
(b) Maker fails to or is unable to (including by reason of Maker having insufficient authorized capital), or notifies Payee, at any time, that it does not intend to comply with proper requests for conversion of the Note.
(c) Maker defaults in the compliance with any other term contained in this Note (which default is not described in subsections (a) and (b) above) and such default is not remedied or waived within ten business days after receipt by Maker of notice from Payee of such default.
(d) Maker shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means any of the following events: (i) Maker commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Maker or any Significant Subsidiary thereof; (ii) there is commenced against Maker any such case or proceeding that is not dismissed within 60 days after commencement; (iii) Maker is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (iv) Maker suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (v) Maker makes a general assignment for the benefit of creditors; (vi) Maker calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (vii) Maker, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
6. Remedies on Event of Default. If any Event of Default will occur, Payee shall, in addition to any and all other available rights and remedies, have the right, at Payee’s option, to: (a) declare the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, to be immediately due and payable without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by Maker, provided that upon the occurrence of an Event of Default described in Section 5(d), the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, shall be immediately due and payable without any declaration or other act by Payee; and (b) pursue any and all available remedies for the collection of such principal and interest and all other sums due by Maker hereunder and to enforce its rights as described herein; and in such case Payee may also recover all costs of suit and other expenses in connection therewith, including reasonable attorney’s fees for collection and the right to equitable relief to enforce Payee’s rights as set forth herein without the requirement to post any bond or other financial surety. The remedies provided in this Note may be exercised by Payee without notice to Maker (to the extent permitted by law and except as notice is herein expressly required), and will be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Payee for the recovery of damages or otherwise in the event of a breach of any of the undertakings of Maker hereunder. No failure by Payee to exercise and no delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other, further or additional exercise thereof.
7. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and construed in accordance with the laws of the State of Florida applied to contracts to be performed wholly within the State of Florida, without regard to conflicts of laws principles. Any judicial proceeding brought against Maker with respect to this Note or any related agreement may be brought in any court located in the State of Florida, United States of America, and, by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Maker at its address set forth below and service so made shall be deemed completed five days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Payee to bring proceedings against Maker in the courts of any other jurisdiction. Maker waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Maker against Payee involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Note or any related agreement, shall be brought only in a federal or state court located in the State of Florida.
2
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
8. Amendment. Neither any provision of this Note nor any performance hereunder may be amended or waived orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
9. Binding Effect. The rights and obligations of Maker under this Note will be binding upon its successors, assigns, heirs, administrators and transferees.
10. Successors and Assigns. This Note may be assigned, transferred or negotiated by Payee to any person at any time (a “Transfer”) only upon its surrender to Maker for registration of Transfer, duly endorsed, or accompanied by a duly executed written instrument of Transfer in form satisfactory to Maker. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of Maker’s obligation to pay such interest and principal. Maker may not assign or transfer this Note or any of its rights hereunder without the prior written consent of Payee. This Note shall inure to the benefit of and be binding upon the parties hereto and their permitted assigns.
EXECUTED as of the date first set forth above.
| FREECAST, INC. | ||
| BY: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., CEO | ||
3
Exhibit 10.7
PROMISSORY NOTE
| $89,139 | June 30, 2021 |
FOR VALUE RECEIVED, the undersigned FREECAST, INC., a Florida corporation (“Maker”) hereby promises to pay to the order of PUBLIC WIRE, LLC (“Payee”) at such place as Payee may designate from time to time in writing to Maker, in immediately available funds of official currency of the United States, the principal sum of Eighty Nine Thousand One Hundred Thirty Nine and 69/100 Dollars ($89,139), or so much as may be outstanding hereunder from time to time, together with interest thereon from the date of this Promissory Note (this “Note”), as provided herein.
By acceptance of this Note, Payee agrees that it will promptly deliver and surrender this Note to Maker upon full payment thereof.
1. Principal Balance. This Note evidences a loan up to the maximum principal sum specified above, less the aggregate amount of all principal repayments made under this Note by Maker to Payee.
2. Interest Rate. Interest shall accrue on the unpaid principal balance hereof at the rate of 12% per annum from but excluding the date first set forth above to and including the Maturity Date (as defined below). Interest shall accrue on any principal balance that is not paid on the earlier of the Maturity Date and the date of an Event of Default (as defined below) at the rate of 18% per annum from and including the Maturity Date or the date of such Event of Default to but excluding the date of payment. In no event, however, shall interest be payable at a rate higher than the highest rate permitted by applicable law. Interest on the principal balance outstanding will be calculated on the basis of the actual number of days elapsed over an assumed year consisting of 365 days, to the date of receipt by Payee of any interest and/or principal. Interest shall be payable on the unpaid principal balance of this Note, as the same may exist from time to time, from the date of issuance until paid or converted in full, in accordance with the terms herein and shall be payable: (a) on the Maturity Date; and (b) on any earlier date of payment or conversion of principal, in whole or in part and, if in part, as to the portion paid or converted.
3. Payment Terms. Any outstanding principal balance and accrued unpaid interest shall be paid to Payee in full no later than June 30, 2024 (the “Maturity Date”).
4. Prepayment. Notwithstanding anything contained herein to the contrary, this Note is subject to prepayment in whole or in part at any time at the sole and absolute option of Maker, upon five business days’ prior written notice to Payee.
5. Events of Default. Any of the following shall constitute an “Event of Default” under this Note, and shall give rise to the remedies provided in Section 8 herein.
(a) Maker defaults in the payment of principal of or interest on this Note when due, including upon any prepayment provided for herein.
(b) Maker fails to or is unable to (including by reason of Maker having insufficient authorized capital), or notifies Payee, at any time, that it does not intend to comply with proper requests for conversion of the Note.
(c) Maker defaults in the compliance with any other term contained in this Note (which default is not described in subsections (a) and (b) above) and such default is not remedied or waived within ten business days after receipt by Maker of notice from Payee of such default.
(d) Maker shall be subject to a Bankruptcy Event. For purposes hereof, “Bankruptcy Event” means any of the following events: (i) Maker commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to Maker or any Significant Subsidiary thereof; (ii) there is commenced against Maker any such case or proceeding that is not dismissed within 60 days after commencement; (iii) Maker is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (iv) Maker suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 calendar days after such appointment; (v) Maker makes a general assignment for the benefit of creditors; (vi) Maker calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (vii) Maker, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.
6. Remedies on Event of Default. If any Event of Default will occur, Payee shall, in addition to any and all other available rights and remedies, have the right, at Payee’s option, to: (a) declare the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, to be immediately due and payable without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by Maker, provided that upon the occurrence of an Event of Default described in Section 5(d), the entire unpaid outstanding principal balance of this Note, together with all interest accrued thereon, and all other sums due by Maker hereunder, shall be immediately due and payable without any declaration or other act by Payee; and (b) pursue any and all available remedies for the collection of such principal and interest and all other sums due by Maker hereunder and to enforce its rights as described herein; and in such case Payee may also recover all costs of suit and other expenses in connection therewith, including reasonable attorney’s fees for collection and the right to equitable relief to enforce Payee’s rights as set forth herein without the requirement to post any bond or other financial surety. The remedies provided in this Note may be exercised by Payee without notice to Maker (to the extent permitted by law and except as notice is herein expressly required), and will be in addition to and not in substitution for the rights and remedies which would otherwise be vested in Payee for the recovery of damages or otherwise in the event of a breach of any of the undertakings of Maker hereunder. No failure by Payee to exercise and no delay in exercising any right, power or privilege under this Note will operate as a waiver thereof, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other, further or additional exercise thereof.
7. Governing Law; Venue; Waiver of Jury Trial. This Note shall be governed by and construed in accordance with the laws of the State of Florida applied to contracts to be performed wholly within the State of Florida, without regard to conflicts of laws principles. Any judicial proceeding brought against Maker with respect to this Note or any related agreement may be brought in any court located in the State of Florida, United States of America, and, by execution and delivery of this Note, Maker accepts for itself and in connection with its properties, generally and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Note. Maker hereby waives personal service of any and all process upon it and consents that all such service of process may be made by registered mail (return receipt requested) directed to Maker at its address set forth below and service so made shall be deemed completed five days after the same shall have been so deposited in the mails of the United States of America. Nothing herein shall affect the right to serve process in any manner permitted by law or shall limit the right of Payee to bring proceedings against Maker in the courts of any other jurisdiction. Maker waives any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. Any judicial proceeding by Maker against Payee involving, directly or indirectly, any matter or claim in any way arising out of, related to or connected with this Note or any related agreement, shall be brought only in a federal or state court located in the State of Florida.
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MAKER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A) ARISING UNDER THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR NOTE EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS NOTE MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
8. Amendment. Neither any provision of this Note nor any performance hereunder may be amended or waived orally, but only by an agreement in writing and signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.
9. Binding Effect. The rights and obligations of Maker under this Note will be binding upon its successors, assigns, heirs, administrators and transferees.
10. Successors and Assigns. This Note may be assigned, transferred or negotiated by Payee to any person at any time (a “Transfer”) only upon its surrender to Maker for registration of Transfer, duly endorsed, or accompanied by a duly executed written instrument of Transfer in form satisfactory to Maker. Thereupon, this Note shall be reissued to, and registered in the name of, the transferee, or a new note for like principal amount and interest shall be issued to, and registered in the name of, the transferee. Interest and principal shall be paid solely to the registered holder of this Note. Such payment shall constitute full discharge of Maker’s obligation to pay such interest and principal. Maker may not assign or transfer this Note or any of its rights hereunder without the prior written consent of Payee. This Note shall inure to the benefit of and be binding upon the parties hereto and their permitted assigns.
EXECUTED as of the date first set forth above.
| FREECAST, INC. | ||
| BY: | /s/ William A. Mobley, Jr. | |
| William A. Mobley, Jr., CEO | ||
3
Exhibit 10.8
IN
THE CIRCUIT COURT OF THE
9TH JUDICIAL CIRCUIT IN AND FOR
ORANGE COUNTY, FLORIDA
Case No. 2018-CA-4938-0
US PREMIUM FINANCE,
Plaintiff,
v.
FREECAST,
INC., a Florida corporation,
and WILLIAM MOBLEY, individually,
Defendants.
_______________________/
STIPULATION FOR SETTLEMENT WITH JUDGMENT UPON DEFAULT
The Plaintiff, US PREMIUM FINANCE (“USPF”), and the Defendants, FREECAST, INC. (“Freecast”) and WILLIAM MOBLEY (“Mobley”), jointly and severally (USPF, Freecast, and Mobley may be collectively referred to herein as the “Parties,” or individually as a “Party”), pursuant to the Florida Rules of Civil Procedure, hereby stipulate and agree to the terms, conditions and provisions of this Stipulation for Settlement and that the matters between USPF, Freecast, and Mobley will be settled upon the following terms, conditions and provisions:
I. RECITALS
WHEREAS, Freecast and Mobley executed and delivered a Premium Finance Agreement and Disclosure Statement (the “First PFA”) on September 1.5, 2016 in which Freecast and Mobley agreed to pay USPF the sum of $2,122,466.76 in thirty-six (36) equal monthly payments of $58,957.41 beginning October 15, 2016.
WHEREAS, in addition to being an obligor under the First PFA, Mobley personally guaranteed the payments due under the First PFA pursuant to a “Guaranty” dated September 15, 2016.
US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
WHEREAS, Freecast and Mobley executed and delivered another Premium Finance Agreement and Disclosure Statement (the “Second PFA”) on April 18, 2017 in which Freecast and Mobley agreed to pay USPF the sum of $594,102.00 in twenty (20) equal monthly payments of $29,705.10 beginning May 15, 2017.
WHEREAS, Freecast and Mobley failed to make the payments due on January 15, 2018 under the First PFA and the Second PFA (collectively, the “PFAs”).
WHEREAS, USPF filed this action against Freecast and Mobley (the “Lawsuit”), asserting claims against Freecast and Mobley for, among others, breach of the PFAs and the Guaranty;
WHEREAS, Freecast and Mobley asserted defenses to the Lawsuit, but hereby acknowledge and admit that they are in default of the PFAs and the Guaranty;
WHEREAS, the Parties desire to settle and resolve their differences without resorting to further litigation conditioned upon full performance with the terms, conditions and provisions of this Stipulation for Settlement; and
WHEREAS, each Party hereto, believing this Stipulation for Settlement to be fair, just and reasonable, has assented freely and voluntarily to its terms.
II. INCORPORATION OF RECITALS. The above recitals are true and correct and are incorporated herein by reference.
III. PAYMENTS
A. Freecast and Mobley shall pay to USPF the sum of One Million and 00/100 Dollars ($1,000,000.00) (the “Settlement Amount”) as follows:
1. $250,000 on or before January 5, 2020;
2. $25,000 on or before June 5, 2020;
3. $25,000 on or before December 5, 2020;
4. $25,000 on or before June 5, 2021;
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No, 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
5. $25,000 on or before December 5, 2021; and
6. $650,000 on or before December 5, 2022
B. In the event the sum of $750,000 is paid to USPF on or before June 5, 2021 without a prior uncured default as set forth herein, Mobley shall be released from his Guaranty and from any further liability for the remaining $250,000 to be paid pursuant to this Stipulation for Settlement. In that case, Mobley’s obligations and liabilities owed to USPF shall be deemed paid and satisfied in full. Freecast’s liability shall not be affected in any manner and it will remain fully liable for all obligations, including all payment obligations set forth in III.A, in the event Mobley is released from his Guaranty and the obligations in this Stipulation for Settlement. In the event $750,000 is paid on or before June 5, 2021 without a prior uncured default, the payment due in III.A.6 shall be reduced to $225,000.
C. Prepayments can be made at any time without penalty. Payment is not deemed to have been made unless and until it is received in clear funds. All payments shall be made payable to “US Premium Finance” and sent to USPF, c/o John Lippincott, General Counsel, 280 Technology Parkway, Suite 200, Norcross, Georgia 30092.
IV. STATUS OF LAWSUIT
The Parties shall file a Joint Stipulation for Dismissal and requesting that the Court enter an Order adopting, approving and incorporating the terms, conditions, and provisions of this Stipulation for Settlement and reserving jurisdiction to enforce the terms of this Stipulation for Settlement.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
V. DEFAULT
A. Freecast and Mobley, jointly and severally, shall be in default of this Stipulation for Settlement in the event any payment due hereunder is not timely made in accordance with this Stipulation for Settlement after receiving written notice of the default with five (5) days 3 opportunity to cure. In the event the sum of $750,000 is paid on or before June 5, 2021 without an uncured default pursuant to Section III.B above, Mobley shall not be in default of this Stipulation for Settlement in the event either of the payments identified in Section III.A.5-6 are not timely made.
B. In the event of an uncured default under this Stipulation for Settlement, USPF is and shall be entitled to obtain against Freecast and Mobley, jointly and severally, subject to Section V.A. above, immediate entry of final judgment for damages, with execution forthwith, for the Settlement Amount less any amounts paid pursuant to this Stipulation for Settlement (the “Default Amount”), together with interest at the maximum rate allowed by law from the date of default, reasonable attorneys’ fees, court costs, and all expenses incurred relating to the default, upon the filing of an affidavit without notice, stating the default and the total amount then due and owing (the “Affidavit of Default”).
C. In the event of an uncured default, USPF shall also be entitled to recover any and all additional attorneys’ fees, court costs, and all expenses incurred in the enforcement of this Stipulation for Settlement, in the collection of this debt, and for all post judgment and appellate proceedings.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
VI. GENERAL RELEASES
(a) A. By USPF: Except for the obligations, terms, and conditions of this Stipulation for Settlement, which are expressly excepted from this release, and in further consideration for the promises and covenants contained within this Stipulation for Settlement, USPF, on its own behalf, and on behalf of its agents, heirs, employees, officers, successors, directors, representatives, legal representatives, partners, stockholders, executors, administrators, predecessors and successors in interest, assigns, parents, subsidiaries, divisions, departments, insurers, affiliates, and attorneys (collectively “USPF Party Releasors”), hereby release, remise, acquit, satisfy, and forever discharge Freecast and Mobley, and their respective employees, agents, officers, successors, directors, representatives, legal representatives, partners, stockholders, executors, administrators, predecessors and successors in interest, assigns, parents, subsidiaries, divisions, departments, insurers, affiliates, heirs, assigns, and attorneys (collectively “Freecast Released Parties”), from all manner of actions, causes of action, accounts, reckonings, controversies, agreements, promises, suits, choses in action, contracts, covenants, claims, bonds, bills, debts, dues, sums of money, commissions, compensation for purported personal services rendered, judgments, executions, damages, demands, and rights whatsoever, in law or in equity, which the USPF Party Releasors ever had, now have, or hereafter can, shall, or may have against the Freecast Released Parties, for, upon, or by reason of any matter, cause, act, transaction, occurrence, or thing whatsoever, from the beginning of the world to the date this Stipulation for Settlement is fully executed; this includes, but is not limited to, all matters, known or unknown, which were or could have been brought in connection with all claims, counterclaims, cross-claims, and other claims for affirmative relief, including those that have been or could have been raised or arising out of the Litigation.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
B. By Freecast and Mobley: In further consideration for the promises and covenants contained within this Stipulation for Settlement, Freecast and Mobley, on their own behalves, and on behalf of their agents, heirs, employees, officers, successors, directors, representatives, legal representatives, partners, stockholders, executors, administrators, predecessors and successors in interest, assigns, parents, subsidiaries, divisions, departments, insurers, affiliates, and attorneys (collectively “Freecast Party Releasors”), hereby release, remise, acquit, satisfy, and forever discharge USPF, and their respective employees, agents, officers, successors, directors, representatives, legal representatives, partners, stockholders, executors, administrators, predecessors and successors in interest, assigns, parents, subsidiaries, divisions, departments, insurers, affiliates, heirs, assigns, and attorneys (collectively the “USPF Released Parties”), from all manner of actions, causes of action, accounts, reckonings, controversies, agreements, promises, suits, choses in action, contracts, covenants, claims, bonds, bills, debts, dues, sums of money, commissions, compensation for purported personal services rendered, judgments, executions, damages, demands, and rights whatsoever, in law or in equity, which the Freecast Party Releasors ever had, now have, or hereafter can, shall, or may have against the USPF Released Parties, for, upon, or by reason of any matter, cause, act, transaction, occurrence, or thing whatsoever, from the beginning of the world to the date this Stipulation for Settlement is fully executed; this includes, but is not limited to, all matters, known or unknown, which were or could have been brought in connection with all claims, counterclaims, cross-claims, and other claims for affirmative relief, including those that have been or could have been raised or arising out of the Litigation.
VII. MISCELLANEOUS
A. This document may be signed in counterparts and facsimile signatures shall be treated as original for all purposes.
B. Notice as provided for herein shall be good if by e-mail, hand delivery or verifiable courier. Notice shall be deemed received and delivered on the date of delivery if notice is provided by certified mail, and if by email, the date the email is sent. Notices shall be sent to the Parties as follows:
If to USPF:
John Lippincott, Esquire
General Counsel
US Premium Finance
280 Technology Parkway, Suite 200
Norcross, Georgia 30092
Thippincott@USPremiumFinance.com
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
With a copy to:
Steven A. Wahlbrink, Esquire
Seiler, Sautter, Zaden, Rimes & Wahlbriiik
North Andrews Avenue Fort
Lauderdale, Florida 33311
swahlbrink@sszrlaw.com
If to Freecast and/or Mobley:
William Mobley
7447 Ridge Road
Sarasota, Florida 34238
bmobley@freecast.corn
with a copy to:
Tucker Byrd, Esquire
Byrd Campbell, P.A.
180 Park Avenue North, Suite 2A
Winter Park, Florida 32789
TByrd43yrdCampbell.com
The Parties shall provide notice, in writing, of any changes to the aforesaid notice addresses and email addresses.
C. This Stipulation for Settlement contains and embodies the entire understanding and agreement by, between and among the Parties concerning their settlement of the claims raised or that could have been raised by, between, and among the Parties in the Lawsuit, that there are no other promises, inducements or understandings by, between, and among the Parties not expressly set forth herein, and that the terms, conditions, and provisions of this Stipulation for Settlement cannot be modified or amended by any party unless all parties agree in. writing.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
D. The parties further acknowledge and represent that they have been given an opportunity to consult with attorneys of their choice in connection with the execution of this Stipulation for Settlement.
E. The parties agree that the provisions of this Stipulation for Settlement shall inure to the benefit of and shall be binding upon the heirs, executors, administrators, successors and assigns of each of the parties. Except as otherwise expressly provided herein, the parties agree that this Stipulation for Settlement shall not and does not create any rights in any third persons.
F. Each individual executing this Stipulation for Settlement in a representative capacity expressly represents and warrants that he or she is fully authorized and empowered to execute such document on behalf of the party on whose behalf he or she is signing.
G. Each of the individuals signing this Stipulation for Settlement hereby expressly warrants that he or she is in full command of his or her physical and mental faculties.
H. The parties further acknowledge and represent that they have reviewed and understand this Stipulation for Settlement and that they have entered into this Stipulation for Settlement freely and voluntarily.
I. In order to induce USPF to execute and deliver this Stipulation for Settlement, Freecast and Mobley warrant and represent to USPF that:
| (a) | This Stipulation for Settlement is not being made or entered into with the actual intent to hinder, delay, or defraud any entity or person, and Freecast and USPF are each solvent and not bankrupt; |
| (b) | No action or proceeding, including, without limitation, a voluntary or involuntary petition for bankruptcy under any chapter of the Federal Bankruptcy Code, has been instituted or threatened by or against Freecast or Mobley; |
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
| (c) | The execution of this Stipulation for Settlement by Freecast and Mobley, and the performance by Freecast and Mobley of their obligations hereunder will not violate or result in a breach or constitute a default under any agreements to which any of them is a party; and |
| (d) | The person signing this Stipulation for Settlement on behalf of Freecast is duly authorized to execute this Stipulation for Settlement on behalf of Freecast, and this Stipulation for Settlement is valid, binding and enforceable against Freecast and Mobley, in accordance with its terms. |
J. In entering into this Stipulation for Settlement, the : Parties hereby stipulate, acknowledge and agree that USPF gave up valuable rights and agreed to forbear from exercising legal remedies available to it in exchange for the promises, representations, acknowledgments and warranties of Freecast and Mobley as contained herein and that USPF would not have entered into this Stipulation for Settlement but for such promises, representations, acknowledgments, agreements, and warranties, all of which have been accepted by USPF in good faith, the breach of which by Freecast and Mobley, in any way, at any time,. now or in the future, would admittedly and confessedly constitute cause for dismissal of any such bankruptcy petition pursuant to 11 U.S.C. §1112(b). This provision is not intended to preclude Freecast or Mobley from filing for protection under any Chapter of the Bankruptcy Code.
K. Any future waiver, alteration, amendment or modification of any of the provisions of this Stipulation. for Settlement shall not be valid or enforceable unless in writing and signed by the Parties, it being expressly agreed that this Stipulation for Settlement cannot be modified orally, by course of dealing or by implied agreement. Moreover, any delay by USPF in enforcing its rights after an event of default shall not be a release or waiver of the event of default and shall not be relied upon by Freecast or Mobley as a release or waiver of the default.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
L. The warranties and representations of the parties in this Stipulation for Settlement shall survive the termination of this Stipulation for Settlement.
M. The terms, conditions and provisions set forth in this Stipulation for Settlement are the result of joint draftsmanship by the Parties, each being represented by counsel (or who had the opportunity to be represented by counsel but voluntarily chose not to do so), and any ambiguities in this Stipulation for Settlement or any documentation prepared pursuant to or in connection with this Stipulation for Settlement shall not be construed against any of the parties because of draftsmanship.
N. Time shall be of the essence with respect to this Stipulation for Settlement and all of the obligations of Freecast and Mobley, hereunder.
ENTERED, AGREED, and STIPULATED as such on the dates written below.
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US Premium Finance v. Freecast, Inc., et al.
Case No. Case No. 2018-CA-4938-0
Stipulation For Settlement With Judgment Upon Default
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Exhibit 10.9
LOAN AGREEMENT
Loan Amount: ($100,000)
Date: November 18, 2022
I. THE PARTIES. For the above value received by FreeCast, Inc. with a mailing address of 6901 TPC Drive #100, City of Orlando, State of FL, (the “Borrower”), agrees to pay Michael Boyko with a mailing address of 108 Zachary Ct, Forest Hill, MD 21050, (the “Lenders”).
II. PAYMENT. This agreement, (the “Note”), shall be due and payable, including the principal and any accrued interest, in one of the following ways:
All payments made by the Borrower are to be applied first (1st) to any accrued interest and then to the principal balance. The total amount of the loan shall be due and payable on the 1st day of December 1, 2024.
III. INTEREST. The Note shall
☒ - Bear interest at a rate of SIX percent (6%) compounded annually. The rate must be equal to or less than the usury rate in the State of the Borrower.
☐ - Not bear interest.
IV. PREPAYMENT. The Borrower has the right to pay back the loan in-full or make additional payments at any time without penalty.
V. REMEDIES. No delay or omission on part of the holder of this Note in exercising any right hereunder shall operate as a waiver of any such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The rights and remedies of the Lender shall be cumulative and may be pursued singly, successively, or together, in the sole discretion of the Lender.
VI. EVENTS OF ACCELERATION. The occurrence of any of the following shall constitute an “Event of Acceleration” by the Lender under this Note:
| (a) | Borrower’s failure to pay any part of the principal or interest as and when due under this Note; or |
| (b) | Borrower’s becoming insolvent or not paying its debts as they become due. |
VII. ACCELERATION. Upon the occurrence of an Event of Acceleration under this Note, and in addition to any other rights and remedies that Lender’s may have, Lender shall have the right, at its sole and exclusive option, to declare this Note immediately due and payable.
VIII. SUBORDINATION. The Borrower’s obligations under this Promissory Note are subordinated to all indebtedness, if any, of the Borrower, to any unrelated third party lender to the extent such indebtedness is outstanding on the date of this Note and such subordination is required under the loan documents providing for such indebtedness.
IX. WAIVERS BY BORROWER. All parties to this Note including the Borrower and any sureties, endorsers, and guarantors hereby waive protest, presentment, notice of dishonor, and notice of acceleration of maturity and agree to continue to remain bound for the payment of principal, interest and all other sums due under this Note notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Note or by way of any extension or extensions of time for the payment of principal and interest; and all such parties waive all and every kind of notice of such change or changes and agree that the same may be made without notice or consent of any of them.
X. EXPENSES. In the event any payment under this Note is not paid when due, the Borrower agrees to pay, in addition to the principal and interest hereunder, reasonable attorneys’ fees not exceeding a sum equal to the maximum usury rate in the State of Florida of the then outstanding balance owing on the Note, plus all other reasonable expenses incurred by Lender in exercising any of its rights and remedies upon default.
XI. GOVERNING LAW. This Note shall be governed by, and construed in accordance with, the laws of the State of Florida.
XII. SUCCESSORS. All of the foregoing is the promise of Borrower and shall bind Borrower and Borrower’s successors, heirs and assigns; provided, however, that Lender may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the holder of this Note.
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IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the day and year first above written.
| Borrower’s Signature: | /s/ William A. Mobley, Jr. | Print: William A. Mobley, Jr. | ||
| Lender’s Signature: | /s/ Michael Boyko | Print: Michael Boyko | ||
| Witness’s Signature: | /s/ Clara Bevington | Print: Clara Bevington |
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Exhibit 10.10
LOAN AGREEMENT
Loan Amount: ($100,000)
Date: November 18, 2022
I. THE PARTIES. For the above value received by FreeCast, Inc. with a mailing address of 6901 TPC Drive #100, City of Orlando, State of FL, (the “Borrower”), agrees Paul Becker with a mailing address of 875 Bainbridge Dr. West Chester, PA 19382, (the “Lenders”).
II. PAYMENT. This agreement, (the “Note”), shall be due and payable, including the principal and any accrued interest, in one of the following ways:
All payments made by the Borrower are to be applied first (1st) to any accrued interest and then to the principal balance. The total amount of the loan shall be due and payable on the 1st day of December 1, 2024.
III. INTEREST. The Note shall
☒ - Bear interest at a rate of SIX percent (6%) compounded annually. The rate must be equal to or less than the usury rate in the State of the Borrower.
☐ - Not bear interest.
IV. PREPAYMENT. The Borrower has the right to pay back the loan in-full or make additional payments at any time without penalty.
V. REMEDIES. No delay or omission on part of the holder of this Note in exercising any right hereunder shall operate as a waiver of any such right or of any other right of such holder, nor shall any delay, omission or waiver on any one occasion be deemed a bar to or waiver of the same or any other right on any future occasion. The rights and remedies of the Lender shall be cumulative and may be pursued singly, successively, or together, in the sole discretion of the Lender.
VI. EVENTS OF ACCELERATION. The occurrence of any of the following shall constitute an “Event of Acceleration” by the Lender under this Note:
(a) Borrower’s failure to pay any part of the principal or interest as and when due under this Note; or
(b) Borrower’s becoming insolvent or not paying its debts as they become due.
VII. ACCELERATION. Upon the occurrence of an Event of Acceleration under this Note, and in addition to any other rights and remedies that Lender’s may have, Lender shall have the right, at its sole and exclusive option, to declare this Note immediately due and payable.
VIII. SUBORDINATION. The Borrower’s obligations under this Promissory Note are subordinated to all indebtedness, if any, of the Borrower, to any unrelated third party lender to the extent such indebtedness is outstanding on the date of this Note and such subordination is required under the loan documents providing for such indebtedness.
IX. WAIVERS BY BORROWER. All parties to this Note including the Borrower and any sureties, endorsers, and guarantors hereby waive protest, presentment, notice of dishonor, and notice of acceleration of maturity and agree to continue to remain bound for the payment of principal, interest and all other sums due under this Note notwithstanding any change or changes by way of release, surrender, exchange, modification or substitution of any security for this Note or by way of any extension or extensions of time for the payment of principal and interest; and all such parties waive all and every kind of notice of such change or changes and agree that the same may be made without notice or consent of any of them.
X. EXPENSES. In the event any payment under this Note is not paid when due, the Borrower agrees to pay, in addition to the principal and interest hereunder, reasonable attorneys’ fees not exceeding a sum equal to the maximum usury rate in the State of Florida of the then outstanding balance owing on the Note, plus all other reasonable expenses incurred by Lender in exercising any of its rights and remedies upon default.
XI. GOVERNING LAW. This Note shall be governed by, and construed in accordance with, the laws of the State of Florida.
XII. SUCCESSORS. All of the foregoing is the promise of Borrower and shall bind Borrower and Borrower’s successors, heirs and assigns; provided, however, that Lender may not assign any of its rights or delegate any of its obligations hereunder without the prior written consent of the holder of this Note.
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IN WITNESS WHEREOF, Borrower has executed this Promissory Note as of the day and year first above written.
Borrower’s Signature: /s/ William A. Mobley, Jr. Print: William A. Mobley, Jr.
Lender’s Signature: /s/ Paul Becker Print: Paul Becker
Witness’s Signature: /s/ Clara Bevington Print: Clara Bevington
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Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.14
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of July 1, 2013 by and between FreeCast, Inc., a Florida corporation (the “Company”), and William A. Mobley, Jr., an individual (the “Executive”).
RECITALS:
A. The Executive served as the Chief Executive Officer of the Company since its inception.
B. The Company desires to employ the Executive, and the Executive desires to be employed by the Company, pursuant to the provisions of this Employment Agreement (the “Agreement”).
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE
I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, or is controlled by or is under common control with, such specified Person. For purposes of this definition, the concept of “control,” when used with respect to any specified Person, signifies the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities or partnership or other equity or ownership interests, by contract or otherwise.
“Agreement” shall have the meaning set forth in Recital B.
“Cause” means any of the following:
(a) any action by the Executive or any failure to act by the Executive which constitutes fraud, embezzlement, misappropriation, dishonesty or breach of trust;
(b) any action by the Executive which constitutes assault or any other act of violence;
(c) any action by the Executive which constitutes sexual harassment or discrimination on the basis of race, ethnicity, religion, gender or sexual preference;
(d) the Executive’s conviction or plea of guilty or nolo contendre to any felony whatsoever or to any misdemeanor if the sentence therefor includes incarceration;
(e) the Executive’s attendance at work in a state of intoxication or being found with any drug or substance possession which would constitute a criminal offense of any kind;
(f) the Executive’s carrying out any activity or making any public statement which prejudices or diminishes the good name, reputation or standing of the Company or any its Affiliates or would cause any of them to be subjected to public contempt or ridicule;
(g) any action or failure to act by the Executive which constitutes a violation of law, including without limitation any violation of any federal or state securities laws;
(h) any breach or violation by the Executive of any or all of his material covenants or agreements set forth in this Agreement;
(i) any failure or refusal by the Executive to perform any or all of his material duties and responsibilities as an employee of the Company; or
(j) gross negligence by the Executive in the performance of any or all of his material duties and responsibilities as an employee of the Company.
“Company” means FreeCast, Inc., a Florida corporation.
“Disability” means any mental or physical illness, condition, disability or incapacity which prevents the Executive from reasonably discharging his duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Executive as to whether the Executive suffers from any Disability, then, in such event, the Executive shall submit to the physical or mental examination of a licensed physician, who is mutually agreeable to the Company and the Executive, and such physician shall determine whether the Executive suffers from any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon the Company and the Executive. The entire cost of such examination shall be paid for solely by the Company.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Protracted Disability” means any Disability which prevents the Executive from reasonably discharging his duties and responsibilities as an officer of the Company for a period of three consecutive months.
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“Termination Date” means a specific date not less than fifteen nor more than forty-five days from and after the date of any Termination Notice upon which the Executive’s employment by the Company shall terminate.
“Termination Notice” shall mean a written notice which sets forth (a) the specific provision of this Agreement relied upon to terminate the Executive’s employment and (b) a Termination Date.
“Territory” means the United States of America and its territories and possessions.
ARTICLE II
Employment
2.1 Employment.
(a) The Company employs the Executive and the Executive accepts such employment. Subject to the direction of the Board of Directors, the Executive shall serve as the Chief Executive Officer of the Company. The Executive shall have such responsibilities, perform such duties and exercise such power and authority as may from time to time be delegated to him by the Board of Directors or are inherent in, or incident to, such office.
(b) The Executive shall devote such time and attention as he shall determine in his sole and absolute discretion and his best efforts to the diligent, professional and ethical performance of his duties as an employee and officer of the Company; provided, however, that it is understood and agreed that the Executive serves as a director and/or officer of other entities, including without limitation Nextelligence, Inc. and its Affiliates, and will be devoting time and attention to the respective businesses and affairs of those entities.
2.2 Change in Position. If the Executive’s position with the Company shall change for any reason, then this Agreement shall continue to apply.
ARTICLE III
Term
3.1 Term. The term of the Executive’s employment by the Company shall be for a period of five years, commencing on July 1, 2013 and continuing through June 30, 2018 (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, the Executive’s employment by the Company may be terminated prior to the expiration of the Term in accordance with the provisions of Article VII below.
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3.2 Extension of Term. The Term may be extended for successive periods of one year each by the mutual written agreement of the Company and the Executive. Notwithstanding the provisions of the immediately preceding sentence, the Executive’s employment by the Company may be terminated prior to the expiration of the Term in accordance with the provisions of Article VII below.
ARTICLE IV
Salary
4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, the Company shall pay to the Executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to Two Hundred Thousand Dollars ($200,000.00) per annum (the “Salary”).
4.2 Payment of Salary. The Salary shall be paid to the Executive in installments from time to time on the same dates payments of salary are generally made to all senior management employees of the Company.
ARTICLE V
Bonus
The Executive shall have the opportunity to earn a discretionary bonus on an annual basis as may be determined in the sole discretion of the Board of Directors of the Company. Any such bonus shall be subject to applicable payroll and/or other taxes required by law to be withheld.
ARTICLE VI
Certain Fringe Benefits
6.1 Generally. The Executive may receive such benefits and participate in such benefit plans as are generally provided from time to time by the Company to its senior management employees; provided, however, that nothing contained in this Section 6.1 shall be construed to obligate the Company to provide any specific benefits to its respective senior management employees generally or to the Executive specifically.
6.2 Vacations. The Executive shall be entitled to vacation time on an annual basis in accordance with such policies as are from time to time adopted by the Company’s Board of Directors with respect to its senior management employees.
6.3 Health Insurance. The Company shall provide health insurance to the Executive and his family.
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6.4 Automobile. The Company shall pay, or reimburse the Executive for, all automobile expenses incurred by the Executive. Such payment or reimbursement shall include without limitation all costs of purchasing or leasing an automobile, all costs of operating such automobile, all costs for maintenance of such automobile and all costs of insurance of such automobile.
6.5 Stock Options. The Executive may participate in any stock option plan of the Company as may from time to time be in effect and to receive such incentive or other stock options as may from time to time be granted to him thereunder; provided, however, that nothing contained in this Section 6.5 shall be construed to obligate the Company to implement any stock option plan or to obligate the Company, its Board of Directors or any committee of its Board of Directors to grant any incentive or other stock option whatsoever generally or to the Executive specifically.
6.6 Business, Travel and Entertainment Expenses. Within a reasonable time after the submission of appropriate receipts and other evidence by the Executive, the Company shall pay, or reimburse the Executive for, all reasonable business, travel and entertainment expenses incurred by the Executive in connection with the performance of his duties and responsibilities on behalf of the Company.
ARTICLE VII
Termination of Employment
7.1 Termination of Employment.
(a) Notwithstanding the provisions of Article III above, the employment of the Executive (i) shall automatically terminate upon the death of the Executive pursuant to the provisions of Section 7.2 hereof and (ii) may be terminated at any time by the Company pursuant to the provisions of Sections 7.3 or 7.4 hereof.
(b) If the Company shall desire to terminate the Executive’s employment by the Company pursuant to any of the provisions of Sections 7.3 or 7.4 of this Agreement, then, in such event, the Company shall provide a Termination Notice to the Executive.
(c) If the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Article VII, then the Company shall be discharged from all of its obligations to the Executive under this Agreement upon the payment to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination of employment shall occur. The Executive’s sole and exclusive remedy for the termination of his employment by the Company prior to the expiration of the Term shall be the payment by the Company to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination shall occur.
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7.2 Death of Executive. If during the Term the Executive shall die, then the employment of the Executive by the Company shall automatically terminate on the date of the Executive’s death. In such event, the Company shall be obligated to pay to the Executive’s estate or as otherwise directed by the Executive’s personal representative or executor, the Executive’s Salary (subject to applicable payroll and/or other taxes required by law to be withheld) through the date of the Executive’s death.
7.3 Disability of Executive.
(a) If during the Term the Executive shall suffer any Disability, then the Company shall continue to pay to the Executive or his legal representative, as the case may be, in the ordinary and normal course of its business his Salary (subject to applicable payroll and/or other taxes required by law to be withheld) from the date that the Executive shall first suffer any such Disability to the date that the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Agreement.
(b) If during the Term the Executive shall suffer any Protracted Disability, then the Company may terminate the Executive’s employment. In such event, the Company shall pay to the Executive or as otherwise directed by the Executive’s legal representative his Salary (subject to applicable payroll and/or taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
7.4 Termination of Employment by Company. The Company may terminate the Executive’s employment at any time with Cause. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
ARTICLE VIII
Certain Covenants of the Executive
8.1 Certain Restrictive Covenants. The Executive covenants and agrees with the Company and each Affiliate of the Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or for any other Person, approach, counsel, solicit, induce or attempt to approach, counsel, solicit or induce any Person employed or engaged by the Company or any Affiliate of the Company, whether such Person is a full-time employee, part-time employee or independent contractor, to terminate his, her or its employment or independent contractor relationship with the Company or any Affiliate of the Company.
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(b) He shall not at any time, directly or indirectly, for himself or for any other Person employ, attempt to employ or enter into any contractual arrangement for employment with, engage, attempt to engage or enter into any contractual arrangement for the engagement of, any employee or former employee or independent contractor or former independent contractor of the Company or any Affiliate of the Company, unless such former employee or independent contractor shall not have been employed or engaged by the Company or any Affiliate of the Company for a period of at least one year.
(c) He shall not, while he is employed by the Company and for a period of two years from and after the date that his employment by the Company ceases or terminates for any reason, directly or indirectly, for himself or for any other Person:
(i) acquire or own in any manner any interest in, or loan any amount to, any Person which competes in any manner with the Company or any Affiliate of the Company anywhere in the Territory;
(ii) be employed by or serve as an employee, agent, officer, director or manager of, or as a consultant to, or as an independent contractor or salesperson for, any Person which competes in any manner with the Company or any Affiliate of the Company in the Territory;
(iii) solicit, attempt to solicit, market, sell or provide, or attempt to market, sell or provide, any goods or services to any customer of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such customer has not been a customer of the Company or any Affiliate of the Company for a period of at least one year;
(iv) procure goods or services from any supplier or vendor of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such supplier or vendor has not been a supplier or vendor to the Company or any Affiliate of the Company for a period of at least one year;
(v) compete in any manner with the Company or any of its Affiliates in the Territory; or
(vi) interfere with, disrupt, or attempt to interfere with or disrupt, any existing relationship, contractual or otherwise, between the Company or any Affiliate of the Company on the one hand, and any of the respective employees, independent contractors, customers, suppliers, vendors or other Persons with which any of the Company or its Affiliates has business relations or deals with on the other.
The foregoing provisions of this Section 8.l(c) shall not prevent the Executive from acquiring and owning not more than one percent of the equity securities of any Person whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market.
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8.2 Independent Agreements. The restrictive covenants set forth in Section 8.1 above (collectively, the “Restrictive Covenants”) shall be construed as agreements independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of the Restrictive Covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefits of the Restrictive Covenants, and that the Restrictive Covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
8.3 Reasonable Restraint. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is a reasonable and necessary restraint of trade and does not violate any applicable laws, rules or regulations, including without limitation the Sherman Antitrust Act, the Florida Antitrust Act or the common law. Each of the Company and the Executive acknowledges that the Company conducts its business activities on a worldwide basis and throughout the Territory. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is supported by valid and legitimate business interests, including without limitation the need to protect the Confidential Information and Trade Secrets (as such terms are hereinafter defined) of the Company and its Affiliates, and the need to protect the substantial relationships of the Company and its Affiliates with their respective employees and independent contractors, current and prospective customers, and current and prospective vendors, and that the period of restriction set forth in Section 8.l(c) above is essential to the full protection of each of such valid and legitimate business interests.
8.4 Severability. Each of the Company and the Executive agrees that each of the Restrictive Covenants is reasonable and proper with respect to duration, geographical scope, and lines of business. If all or any portion of any of the Restrictive Covenants is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy for any reason, then all or such portion of such Restrictive Covenants shall be considered divisible as to duration, geographical scope or lines of business, or may be otherwise narrowed so as to be enforceable. If a court of competent jurisdiction shall determine that a time period, a geographical area or a specified line of business is unreasonable, arbitrary or against public policy for any reason, then a shorter period, a smaller geographical area or a narrower line of business, as shall be determined by such court to be reasonable, non-arbitrary and not against public policy, may be enforced against the Executive by the Company.
8.5 Certain Policies. The Executive acknowledges that (a) he has been provided with a copy of the Company’s Policies Regarding Electronic Information Systems, Electronic Mail, Internet and Telephone and Other Communications (the “Policies”), (b) he has read the Policies, (c) he has had an opportunity ask questions of and to seek information regarding the Policies, (d) he understands the Policies and (e) he accepts, consents to and agrees to abide by the Policies.
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8.6 Assignment of Works. The Executive assigns to the Company or its assigns all of the Executive’s right, title and interest in and to all developments, inventions and ideas made, conceived or reduced to practice solely or jointly by the Executive while engaging in activities within the scope of his employment by the Company, regardless of whether any of such developments, inventions and ideas qualify as intellectual property or were conceived or developed during business hours. The Executive acknowledges and agrees that all original works of authorship that are made with the scope of his employment by the Company and which can be legally protected are “works for hire” under applicable law. The Executive shall notify the Company of all developments, inventions and ideas and to take all actions necessary to enable the Company to seek legal protection for them.
ARTICLE IX
Confidential Information and Trade Secrets
9.1 Certain Definitions.
(a) “Confidential Information” includes information which (a) has been or is developed or is otherwise owned by the Company or any of its Affiliates, whether developed by the Company or an Affiliate of the Company or by any other Person, (b) is not readily available to the public and not generally ascertainable by proper means by the public, (c) if disclosed to the public, would be harmful to the interests of the Company or any Affiliate of the Company, (d) has limited disclosure within the Company or any Affiliate of the Company, or (e) is treated or designated by the Company or any Affiliate of the Company as being confidential. Confidential Information may consist of technical information, including without limitation inventions, formulas, compilations, computer programs, software, databases, methods, purchasing techniques and processes, sales techniques and processes, market data and pricing and discounting practices, as well as business information relating to the financial condition, financial arrangements, business plans or strategies (such as new products and services and plans for sales, marketing, purchasing, distribution, services or promotions), employee training materials, sales manuals, customer needs, contacts, accounts and the like, vendor or supplier lists, vendor or supplier needs, contacts, accounts and the like, personnel, payroll and financial data and records, and any and all data, information, plans, processes, procedures, methods and records of any kind or nature whatsoever, regardless of the form of storage medium and wherever located, related in any manner to the Company or any Affiliate of the Company or their respective businesses, operations or affairs or their respective members, managers, directors, officers, employees, agents or independent contractors.
(b) “Trade Secrets” include Confidential Information which is sufficiently secret to derive actual or potential economic value to the Company or an Affiliate of the Company from not being generally known to, and not being readily ascertainable by, the competitors of the Company or an Affiliate of the Company and other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company), which information gives, or has the potential of giving, the Company or any Affiliate of the Company an advantage over the competitors of the Company or any Affiliate of the Company or other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company) which can obtain economic value from the disclosure or use of the information and which information the Company or any Affiliate of the Company has taken, and will continue to take, reasonable steps to maintain as secret or confidential vis-a-vis its current and potential competitors and other Persons (including without limitation the Company’s vendors, suppliers and customers).
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9.2 Ownership of Confidential Information and Trade Secrets. The Executive acknowledges that, in the course of his relationship with the Company, he has received, used, had access to and became familiar with, or in the future will receive, use, have access to and become familiar with, the Confidential Information and the Trade Secrets which are owned by the Company or by an Affiliate of the Company or which are or will be otherwise used in connection with the current or future business of the Company or an Affiliate of the Company. The Executive acknowledges and agrees that all such Confidential Information and Trade Secrets are and shall remain the sole and exclusive property of the Company or an Affiliate of the Company, as the case may be, and that the covenants set forth in Section 9.3 below are fair and reasonable.
9.3 Non-Disclosure. The Executive shall not, directly or indirectly, at any time disclose to any Person, or take or use for the purposes of any Person, other than the Company or its Affiliates, any Confidential Information or Trade Secrets. The Executive shall not, directly or indirectly, at any time copy or place any Confidential Information or Trade Secrets on to any personal computer or other data collection or storage device that is not owned by the Company or an Affiliate of the Company. The obligations of the Executive set forth in this Section 9.3 apply to, and are intended to prevent, the direct or indirect disclosure of any Confidential Information or Trade Secrets to Persons where such disclosure of the Confidential Information or the Trade Secrets would reasonably be considered to be useful to the competitors of the Company or any of its Affiliates or to any other Person to become a competitor based, in whole or in part, on such Confidential Information or Trade Secrets. Immediately upon the termination of the Executive’s employment by the Company for any reason, the Executive shall deliver to the Company all Confidential Information and Trade Secrets and all Company property then in his possession.
9.4 Independent Agreements. The covenants set forth in Section 9.3 above shall be construed as an agreement independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of such covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefit of the covenants set forth in Section 9.3 above, and that such covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
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ARTICLE
X
Remedies; Survival
10.1 Injunction: Specific Performance. It is recognized and acknowledged by each of the parties that a breach or violation by the Executive of any or all or the provisions contained in this Agreement will cause irreparable harm and damage to the Company and/or its Affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, each of the parties recognizes and acknowledges that the Company and/or its Affiliates shall be entitled to the remedies of injunction and/or specific performance from any court of competent jurisdiction enjoining and restraining any breach or violation by the Executive of any or all of the provisions contained herein and/or requiring the specific performance of any or all of the provisions contained herein, and that such rights to injunction and specific performance shall be cumulative and in addition to whatever other rights and remedies the Company and/or its Affiliates may possess hereunder, at law and in equity.
10.2 Damages.
(a) Except as otherwise provided in Article VII above, nothing contained in this Agreement shall be construed to prevent either of the parties from seeking and recovering from the other party damages sustained by it or him as a result of the other party’s breach or violation of any or all of the provisions of this Agreement.
(b) Without limiting the generality of the provisions of Section 10.2(a) above, if the Company fails to make any payment to the Executive when due pursuant to the provisions of this Agreement, then simple interest shall accrue on such amount from the date due to the date of payment in full at the rate of Twelve Percent (12%) per annum.
(c) Without limiting the generality of the provisions of Section 10.2 above, if any litigation shall arise between the Company and the Executive based, in whole or in part, upon this Agreement or any or all of the provisions contained herein, then, in any such event, the prevailing party in any such litigation shall be entitled to recover from the non-prevailing party, and shall be awarded by a court of competent jurisdiction, all reasonable fees and disbursements of trial and appellate counsel paid, incurred or suffered by such prevailing party as the result of, arising from, or in connection with, any such litigation.
10.3 Survival. The provisions of Articles I, VIII, IX, X and XI of this Agreement shall survive indefinitely the expiration of the Term or the termination of the Executive’s employment prior to the expiration of the Term.
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ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of laws provisions thereof.
11.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
| If to the Company: | ForeCast, Inc. |
| 5850 TG Lee Boulevard | |
| Suite 310 | |
| Orlando, Florida 32822 | |
| Attention: Secretary | |
| If to the Executive: | William A. Mobley, Jr. |
| 5850 TG Lee Boulevard | |
| Suite 310 | |
| Orlando, Florida 32822 |
or to such other address or facsimile telephone number as either party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 11.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 11.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
11.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. This Agreement may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
11.4 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
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11.5 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or her address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or him in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
11.6 No Waivers. The waiver by either party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by either party to exercise any right or remedy it or he may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
11.7 Third Party Beneficiaries. The Executive acknowledges and agrees that each and every present and future Affiliate of the Company shall be entitled, as a third party beneficiary, to the rights and benefits of the representations, warranties, covenants and agreements of the Executive set forth in this Agreement. Nothing contained in this Section 11.7 shall prohibit the modification of this Agreement by the Company and the Executive in accordance with the provisions hereof.
11.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11.9 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
[Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
FreeCast, Inc.
| By: |  |
 | ||
| Marjorie Lieberman, Secretary |
William A. Mobley, Jr. | |||
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Exhibit 10.16
AMENDMENT
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of July 1, 2014 by and between FreeCast, Inc., a Florida corporation (the “Company”), and William A. Mobley, Jr., an individual (the “Executive”).
RECITALS:
A. The Company and the Executive have previously entered into an Employment Agreement dated as of July 1, 2013 (the “Employment Agreement”). The Executive serves as the Chief Executive Officer of the Company.
B. Each of the Company and the Executive desires to make certain modifications to the Employment Agreement as are set forth in this Amendment to Employment Agreement (the “Amendment”).
C. The Company desires to continue to employ the Executive, and the Executive desires to continue to be employed by the Company, pursuant to the provisions of the Employment Agreement, as modified by the provisions of this Amendment.
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Amendment, each of the Company and the Executive agrees as follows:
1. Definitions. All capitalized terms utilized in this Amendment which are not defined herein shall have the respective meanings set forth in the Employment Agreement.
2. Term. Section 3.1 of the Employment Agreement is deleted in its entirety and the following Section 3.1 is inserted in its place:
“3.1 Term. The term of the Executive’s employment by the Company shall be for a period of five years, commencing on July 1, 2014 and continuing through June 30, 2019 (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, the Executive’s employment by the Company may be terminated prior to the expiration of the Term in accordance with the provisions of Article VII below.”
3. Automobile. Section 6.4 of the Employment Agreement is deleted in its entirety and the following Section 6.4 is inserted in its place:
“6.4 Automobile. The Company shall provide the Executive with an automobile allowance of Two Thousand Five Hundred Dollars ($2,500.00) per month.”
4. Conflict. If and to the extent that a conflict may arise or exist between any provision of this Amendment and any provision of the Employment Agreement, to the fullest extent permitted by applicable law, the provision of this Amendment shall be controlling, and shall take precedence over, the provision of the Employment Agreement.
5. Governing Law. This Amendment shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of laws provisions thereof.
6. Entire Agreement. This Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. This Amendment may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
7. Benefits; Binding Effect. This Amendment shall be for the benefit of, and shall be binding upon, the parties and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
8. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
9. Counterparts. This Amendment may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
FreeCast, Inc.
| By: | /s/ Christopher M. Savine | /s/ William A. Mobley, Jr. | |
| Christopher M. Savine, | William A. Mobley, Jr. | ||
| Chief Financial Officer |
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Exhibit 10.17
SECOND AMENDMENT
TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT is entered into as of July 1, 2019 by and between FreeCast, Inc., a Florida Corporation (the “Company”), and William A. Mobley, Jr., an individual (the “Executive”).
RECITALS:
A. The Company and the Executive have previously entered into an Employment Agreement dated as of July 1, 2013 (the “Employment Agreement”). The Executive serves as the Chief Executive Officer of the Company.
B. Each of the Company and the Executive desires to make certain modifications to the Employment Agreement as are set forth in this Second Amendment to Employment Agreement (the “Amendment”).
C. The Company desires to continue to employ the Executive, and the Executive desires to be employed by the Company, pursuant to the provisions of the Employment Agreement, as modified by the provisions of this Amendment.
NOW THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Amendment, each of the Company and the Executive agrees as follows;
1. Term. Section 3.1 of the Employment Agreement is deleted in its entirety and the following Section 3.1 is inserted in its place:
“3.1 Term. The term of the Executive’s employment by the Company shall be for a period of five years, commencing on July 1, 2019 and continuing through June 30, 2024 (the “Term”). Notwithstanding the provisions of the immediately preceding sentence, the Executive’s employment by the Company may be terminated prior to the expiration of the Term in accordance with provisions of Article VII below”
2. Salary. Section 4.1 of the Employment Agreement is deleted in its entirety and the following Section 4.1 is inserted in its place:
“4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, the Company shall pay to the executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to Two Hundred Fifty Thousand Dollars ($250,000.00) per annum (the “Salary”).”
3. Automobile. Section 6.4 of the Employment Agreement shall remain with an automobile allowance of Two Thousand Five Hundred Dollars ($2,500.00) per month
4. Conflict. If and to the extent that a conflict may arise or exist between any provision of this Amendment and any provision of the Employment Agreement, to the fullest extent permitted by applicable law, the provision of this Amendment shall be controlling, and shall take precedence over, the provision of the Employment Agreement.
5. Governing Law. This Amendment shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of laws provisions thereof.
6. Entire Agreement. This Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. This Amendment may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
7. Benefits; Binding Effect. This Amendment shall be for the benefit of, and shall be binding upon, the parties and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
8. Headings. The headings contained in this Amendment are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
9. Counterparts. This Amendment may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
| FreeCast, Inc. | |||
| By: | /s/ Christopher M. Savine | /s/ William A. Mobley, Jr. | |
| Christopher M. Savine, | William A. Mobley, Jr. | ||
| Chief Financial Officer | |||
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Exhibit 10.18
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of February 1, 2020 and effective as of February 1, 2020 by and between FreeCast, Inc., a Florida corporation (the “Company”), and Tracy J West, an individual (the “Executive”).
RECITALS:
A. The Company and the Executive seek to enter into this Employment Agreement dated as of February 1, 2020 (the “Initial Agreement”), effective February 1, 2020 through February 1, 2021.
B. Each of the Company and the Executive desires to enter into the Employment Agreement in accordance with the terms contained herein.
C. The Company owns, operates and controls the SelectTV subscription platform powered by its SmartGuide Technology, which for clarification is an interactive digital content aggregation platform, delivering all free and pay entertainment distributed via the public internet to various aggregation points in the form of an electronic program guide.
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“Agreement” shall have the meaning set forth in the Recital B.
“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, or is controlled by or is under common control with, such specified Person. For purposes of this definition, the concept of “control,” when used with respect to any specified Person, signifies the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities or partnership or other equity or ownership interests, by contract or otherwise.
“Cause” means any of the following:
(a) any action by the Executive or any failure to act by the Executive which constitutes fraud, embezzlement, mis-appropriation, dishonesty or breach of trust;
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(b) any action by the Executive which constitutes assault or any other act of violence;
(c) any action by the Executive which constitutes sexual harassment or discrimination on the basis of race, ethnicity, religion, gender or sexual preference;
(d) the Executive’s conviction or plea of guilty or nob o contendre to any felony whatsoever or to any misdemeanor if the sentence therefor includes incarceration;
(e) the Executive’s attendance at work in a state of intoxication or being found with any drug or substance possession which would constitute a criminal offense of any kind;
(f) the Executive’s carrying out any activity or making any public statement which prejudices or diminishes the good name, reputation or standing of the Company or any its Affiliates or would cause any of them to be subjected to public contempt or ridicule;
(g) any action or failure to act by the Executive which constitutes a violation of law, including without limitation any violation of any federal or state securities laws;
(h) any breach or violation by the Executive of any or all of her material covenants or agreements set forth in this Agreement;
(i) any failure or refusal by the Executive to perform any or all of her material duties and responsibilities as an employee of the Company; or
(j) gross negligence by the Executive in the performance of any or all of her material duties and responsibilities as an employee of the Company.
“Warrants” shall have the meaning set forth in Section 5.1.
“Bonus” shall have the meaning set forth in Section 5.2.
“Employee Stock Option Program” shall have the meaning set forth in Section 5.3.
“Tax Related Items” shall have the meaning set forth in Section 5.1-3.
“Company” means FreeCast, Inc., a Florida corporation.
“Confidential Information” shall have the meaning set forth in Section 9.1(a).
“Disability” means any mental or physical illness, condition, disability or incapacity which prevents the Executive from reasonably discharging her duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Executive as to whether the Executive suffers from any Disability, then, in such event, the Executive shall submit to the physical or mental examination of a licensed physician chosen solely by the Company, and such physician shall determine whether the Executive suffers from. any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon the Company and the Executive. The entire cost of such examination shall be paid for solely by the Company.
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“Executive” means Tracy J West, an individual.
“Initial Agreement” shall have the meaning set forth in Recital A.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Policies” shall have the meaning set forth in Section 8.5.
“Restrictive Covenants” shall have the meaning set forth in Section 8.2.
“Salary” shall have the meaning set forth in Section 4.1.
“Term” shall have the meaning set forth in Section 3.1.
“Termination Date” means a specific date not less than fifteen nor more than forty-five days from and after the date of any Termination Notice upon which the Executive’s employment by the Company shall terminate.
“Termination Notice” shall mean a written notice which sets forth (a) the specific provision of this Agreement relied upon to terminate the Executive’s employment and (b) a Termination Date.
“Territory” means the United States of America and its territories and possessions. “Trade Secrets” shall have the meaning set forth in Section 9.1(b).
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ARTICLE
II
Employment
2.1 Employment. The Company employs the Executive and the Executive accepts such employment. Subject to the direction of the Board of Directors and the Chief Executive Officer, the Executive shall serve as the Executive Vice President of Digital Content & Channel Distribution of the Company. The Executive shall have such responsibilities, perform such duties and exercise such power and authority as may from time to time be delegated to her by the Board of Directors or the Chief Executive Officer or are inherent in, or incident to, such office. The Executive shall devote substantially all of his business time and attention and his best efforts to the diligent, professional and ethical performance of his duties as an employee of the Company.
2.2 Change in Position. If the Executive’s position with the Company shall change for any reason, then this Agreement shall terminate, and the provisions of Section 7.4 shall apply.
ARTICLE
III
Term
3.1 Term. The term of the Executive’s employment by the Company shall be for a period of one year, commencing on February 1, 2020 and continuing through February 1, 2021 (the “Term”). Subsequent to February 1, 2021, the Term shall be automatically extended on a month-to-month basis. Notwithstanding the provisions of the immediately preceding sentences, the Executive’s employment by the Company may be terminated prior to the expiration of the initial Term or any extension thereof in accordance with the provisions of Article VII below.
ARTICLE
IV
Salary
4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, effective as of February 1, 2020, the Company shall pay to the Executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to One Hundred & Eighty Thousand Dollars ($180,000.00) for the year ending February 1, 2020 (the “Salary”), per annum thereafter until a new extension is executed between the parties.
4.2 Payment of Salary. The Salary shall be paid to the Executive in installments from time to time on the same dates payments of salary and/or normal and customary payroll periods are generally made to all senior management employees of the Company.
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ARTICLE
V
Incentives
5.1 Warrants. In order to induce the Executive to enter into this Employment Agreement and extend her employment through February 1 , 2021, and perform her obligations thereunder; the Executive has executed and delivered to the Company a subscription agreement and the Company has issued to the Executive, Warrants to purchase an aggregate amount of Sixty Thousand (60,000) shares of its common stock, with a par value $0.0001 per share (the “Common Stock”), at a purchase price of One Dollar and Seventy Five Cents USD ($1.75) per share upon exercising said Warrants. The aforementioned Warrants shall vest immediately. The initial exercise period will begin July 1 20, 2020 and expire on July 1, 2021. Any such Warrants shall be subject to applicable taxes required by law to be withheld.
5.2 Bonus. The Executive shall have the opportunity to earn a discretionary bonus on an annual basis as may be determined in the sole discretion of the Board of Directors of the Company. Any such bonus shall be subject to applicable payroll and/or other taxes required by law to be withheld.
5.3 Employee Stock Option Program. The Executive shall have the opportunity to participate in a (ESOP) “Employee Stock Option Program” on an annual basis as may be determined and created by the Company, and at the sole discretion of the Board of Directors of the Company. Any earnings from such Employee Stock Option Program shall be subject to applicable taxes required by law to be withheld.
ARTICLE VI
Certain Fringe Benefits
6.1 Generally. The Executive may receive such benefits and participate in such benefit plans as are generally provided from time to time such as discounted group participation Medical / Health Insurance plans by the Company to its senior management employees; provided, however, that nothing contained in this Section 6.1 shall be construed to obligate the Company to provide any specific benefits to its respective senior management employees generally or to the Executive specifically.
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6.2 Vacations. The Executive shall be entitled to three weeks’ vacation time on an annual basis in accordance with such policies as are from time to time adopted by the Company’s Board of Directors with respect to its senior management employees.
6.3 Business, Travel and Entertainment Expenses. Within a reasonable time, after the submission of appropriate receipts and other evidence by the Executive, the Company shall pay, or reimburse the Executive for, all reasonable business, travel and entertainment expenses incurred by the Executive in connection with the performance of her duties and responsibilities on behalf of the Company.
ARTICLE VII
Termination of Employment
7.1 Termination of Employment.
(a) Notwithstanding the provisions of Article III above, the employment of the Executive (i) shall automatically terminate upon the death of the Executive pursuant to the provisions of Section 7.2, (ii) may be terminated at any time by the Company pursuant to the provisions of Sections 7.3 or 7.4 and (iii) may be terminated at any time by the Executive pursuant to the provisions of Section 7.5.
(b) If the Company shall desire to terminate the Executive’s employment by the Company pursuant to any of the provisions of Sections 7.3 or 7.4 of this Agreement, then, in such event, the Company shall provide a Termination Notice to the Executive.
(c) If the Executive shall desire to terminate her employment by the Company pursuant to the provisions of Sections 7.5 of this Agreement, then, in such event, the Executive shall provide a Termination Notice to the Company.
(d) If the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Article VII, then the Company shall be discharged from all of its obligations to the Executive under this Agreement upon the payment to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination of employment shall occur. The Executive’s sole and exclusive remedy for the termination of his employment by the Company prior to the expiration of the Term, regardless of whether such termination shall be initiated by the Company or the Executive, shall be the payment by the Company to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination shall occur.
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7.2 Death of Executive. If during the Term the Executive shall die, then the employment of the Executive by the Company shall automatically terminate on the date of the Executive’s death. In such event, the Company shall be obligated to pay to the Executive’s estate or as otherwise directed by the Executive’s personal representative or executor, the Executive’s Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the date of the Executive’s death.
7.3 Disability of Executive. If during the Term the Executive shall suffer any Disability, then the Company may terminate the Executive’s employment. In such event, the Company shall pay to the Executive or as otherwise directed by the Executive’s legal representative his Salary and earned Warrants and Shares (subject to applicable payroll and/or taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
7.4 Termination of Employment by Company.
(a) The Company may terminate the Executive’s employment at any time with Cause. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
(b) The Company may terminate the Executive’s employment at any time without Cause. In such event, (i) the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice and (ii) the Company shall continue to pay to the Executive a salary at the rate of One Hundred & Eighty Thousand Dollars ($180,000.00) per annum (subject to applicable payroll and/or other taxes required by law to be withheld) for a period of six months subsequent to the Termination Date set forth in the Termination Notice and (iii) all Warrants and Shares as defined in this Agreement shall vest on the Termination Date.
7.5 Termination of Employment by Executive. The Executive may terminate her employment at any time. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business her Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
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ARTICLE VIII
Certain Covenants of the Executive
8.1 Certain Restrictive Covenants. The Executive covenants and agrees with the Company and each Affiliate of the Company as follows:
(a) She shall not at any time, directly or indirectly, for herself or for any other Person, approach, counsel, solicit, induce or attempt to approach, counsel, solicit or induce any Person employed or engaged by the Company or any Affiliate of the Company, whether such Person is a full-time employee, part-time employee or independent contractor, to terminate his, her or its employment or independent contractor relationship with the Company or any Affiliate of the Company.
(b) She shall not at any time, directly or indirectly, for herself or for any other Person employ, attempt to employ or enter into any contractual arrangement for employment with, engage, attempt to engage or enter into any contractual arrangement for the engagement of, any employee or former employee or independent contractor or former independent contractor of the Company or any Affiliate of the Company, unless such former employee or independent contractor shall not have been employed or engaged by the Company or any Affiliate of the Company for a period of at least one year.
(c) She shall not, while she is employed by the Company and for a period of one year from and after the date that her employment by the Company ceases or terminates for any reason, directly or indirectly, for herself or for any other Person:
(i) acquire or own in any manner any interest in, or loan any amount to, any Person which competes in any manner with the Company or any Affiliate of the Company anywhere in the Territory;
(ii) be employed by or serve as an employee, agent, officer, director or manager of, or as a consultant to, or as an independent contractor or salesperson for, any Person which directly competes in any manner with the Company or any Affiliate of the Company in the Territory;
(iii) solicit, attempt to solicit, market, sell or provide, or attempt to market, sell or provide, any goods or services to any customer of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such customer has not been a customer of the Company or any Affiliate of the Company for a period of at least one year;
(iv) procure goods or services from any supplier or vendor of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such supplier or vendor has not been a supplier or vendor to the Company or any Affiliate of the Company for a period of at least one year;
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(v) directly compete in any manner with the Company or any of its Affiliates in the Territory; or
(vi) interfere with, disrupt, or attempt to interfere with or disrupt, any existing relationship, contractual or otherwise, between the Company or any Affiliate of the Company on the one hand, and any of the respective employees, independent contractors, customers, suppliers, vendors or other Persons with which any of the Company or its Affiliates has business relations or deals with on the other.
The foregoing provisions of this Section 8.1(c) shall not prevent the Executive from acquiring and owning not more than one percent of the equity securities of any Person whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market.
For clarification and for purposes of this Section 8.1, a customer, vendor or supplier of the Company shall not include entertainment platforms (ie. Sling, DISH, FuboTV etc) or Media companies/programming channels (ie. Viacom, Scripps, CBS etc.) for purposes of this provision and this Employment Agreement shall not restrict Executive from working for the aforementioned companies if she so chooses after the termination of this Employment Agreement, however must remain obligated and bound to Article IX of this Agreement for a period of one (1) year.
8.2 Independent Agreements. The restrictive covenants set forth in Section 8.1 above (collectively, the “Restrictive Covenants”) shall be construed as agreements independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of the Restrictive Covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefits of the Restrictive Covenants, and that the Restrictive Covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
8.3 Reasonable Restraint. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is a reasonable and necessary restraint of trade and does not violate any applicable laws, rules or regulations, including without limitation the Sherman Antitrust Act, the Florida Antitrust Act or the common law. Each of the Company and the Executive acknowledges that the Company conducts its business activities on a worldwide basis and throughout the Territory. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is supported by valid and legitimate business interests, including without limitation the need to protect the Confidential Information and Trade Secrets (as such terms are hereinafter defined) of the Company and its Affiliates, and the need to protect the substantial relationships of the Company and its Affiliates with their respective employees and independent contractors, current and prospective customers, and current and prospective vendors, and that the period of restriction set forth in Section 8.1(c) above is essential to the full protection of each of such valid and legitimate business interests.
8.4 Severabilitv. Each of the Company and the Executive agrees that each of the Restrictive Covenants is reasonable and proper with respect to duration, geographical scope, and lines of business. If all or any portion of any of the Restrictive Covenants is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy for any reason, then all or such portion of such Restrictive Covenants shall be considered divisible as to duration, geographical scope or lines of business, or may be otherwise narrowed so as to be enforceable. If a court of competent jurisdiction shall determine that a time period, a geographical area or specified line of business is unreasonable, arbitrary or against public policy for any reason, then a shorter period, a smaller geographical area or a narrower line of business, as shall be determined by such court to be reasonable, non-arbitrary and not against public policy, may be enforced against the Executive by the Company.
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8.5 Certain Policies. The Executive acknowledges that (a) she has been provided with a copy of the Company’s Policies Regarding Electronic Information Systems, Electronic Mail, Internet and Telephone and Other Communications (the “Policies”), (b) she has read the Policies, (c) she has had an opportunity ask questions of and to seek information regarding the Policies, (d) she understands the Policies and (e) she accepts, consents to and agrees to abide by the Policies.
8.6 Assignment of Works. The Executive assigns to the Company or its assigns all of the Executive’s right, title and interest in and to all developments, inventions and ideas made, conceived or reduced to practice solely or jointly by the Executive while engaging in activities within the scope of his employment by the Company, regardless of whether any of such developments, inventions and ideas qualify as intellectual property or were conceived or developed during business hours. The Executive acknowledges and agrees that all original works of authorship that are made with the scope of his employment by the Company and which can be legally protected are “works for hire” under applicable law. The Executive shall notify the Company of all developments, inventions and ideas and to take all actions necessary to enable the Company to seek legal protection for them.
ARTICLE IX
Confidential Information and Trade Secrets
9.1 Certain Definitions.
(a) “Confidential Information” includes information which (a) has been or is developed or is otherwise owned by the Company or any of its Affiliates, whether developed by the Company or an Affiliate of the Company or by any other Person, (b) is not readily available to the public and not generally ascertainable by proper means by the public, (c) if disclosed to the public, would be harmful to the interests of the Company or any Affiliate of the Company, (d) has limited disclosure within the Company or any Affiliate of the Company, or (e) is treated or designated by the Company or any Affiliate of the Company as being confidential. Confidential Information may consist of technical information, including without limitation inventions, formulas, compilations, computer programs, software, databases, methods, purchasing techniques and processes, sales techniques and processes, market data and pricing and discounting practices, as well as business information relating to the financial condition, financial arrangements, business plans or strategies (such as new products and services and plans for sales, marketing, purchasing, distribution, services or promotions), employee training materials, sales manuals, customer needs, contacts, accounts and the like, vendor or supplier lists, vendor or supplier needs, contacts, accounts and the like, personnel, payroll and financial data and records, and any and all data, information, plans, processes, procedures, methods and records of any kind or nature whatsoever, regardless of the form of storage medium and wherever located, related in any manner to the Company or any Affiliate of the Company or their respective businesses, operations or affairs or their respective members, managers, directors, officers, employees, agents or independent contractors.
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(b) “Trade Secrets” include Confidential Information which is sufficiently secret to derive actual or potential economic value to the Company or an Affiliate of the Company from not being generally known to, and not being readily ascertainable by, the competitors of the Company or an Affiliate of the Company and other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company), which information gives, or has the potential of giving, the Company or any Affiliate of the Company an advantage over the competitors of the Company or any Affiliate of the Company or other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company) which can obtain economic value from the disclosure or use of the information and which information the Company or any Affiliate of the Company has taken, and will continue to take, reasonable steps to maintain as secret or confidential vis-a-vis its current and potential competitors and other Persons (including without limitation the Company’s vendors, suppliers and customers).
9.2 Ownership of Confidential Information and Trade Secrets. The Executive acknowledges that, in the course of her relationship with the Company, she has received, used, had access to and became familiar with, or in the future will receive, use, have access to and become familiar with, the Confidential Information and the Trade Secrets which are owned by the Company or by an Affiliate of the Company or which are or will be otherwise used in connection with the current or future business of the Company or an Affiliate of the Company. The Executive acknowledges and agrees that all such Confidential Information and Trade Secrets are and shall remain the sole and exclusive property of the Company or an Affiliate of the Company, as the case may be, and that the covenants set forth in Section 9.3 below are fair and reasonable.
9.3 Non-Disclosure. The Executive shall not, directly or indirectly, at any time disclose to any Person, or take or use for the purposes of any Person, other than the Company or its Affiliates, any Confidential Information or Trade Secrets. The Executive shall not, directly or indirectly, at any time copy or place any Confidential Information or Trade Secrets on to any personal computer or other data collection or storage device that is not owned by the Company or an Affiliate of the Company. The obligations of the Executive set forth in this Section 9.3 apply to, and are intended to prevent, the direct or indirect disclosure of any Confidential Information or Trade Secrets to Persons where such disclosure of the Confidential Information or the Trade Secrets would reasonably be considered to be useful to the competitors of the Company or any of its Affiliates or to any other Person to become a competitor based, in whole or in part, on such Confidential Information or Trade Secrets. Immediately upon the termination of the Executive’s employment by the Company for any reason, the Executive shall deliver to the Company all Confidential Information and Trade Secrets and all Company property then in his possession.
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9.4 Independent Agreements. The covenants set forth in Section 9.3 above shall be construed as an agreement independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of such covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefit of the covenants set forth in Section 9.3 above, and that such covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
ARTICLE X
Remedies; Survival
10.1 Injunction; Specific Performance. It is recognized and acknowledged by each of the parties that a breach or violation by the Executive of any or all or the provisions contained in this Agreement will cause irreparable harm and damage to the Company and/or its Affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, each of the parties recognizes and acknowledges that the Company and/or its Affiliates shall be entitled to the remedies of injunction and/or specific performance from any court of competent jurisdiction enjoining and restraining any breach or violation by the Executive of any or all of the provisions contained herein and/or requiring the specific performance of any or all of the provisions contained herein, and that such rights to injunction and specific performance shall be cumulative and in addition to whatever other rights and remedies the Company and/or its Affiliates may possess hereunder, at law and in equity.
10.2 Damages. Except as otherwise provided in Article VII above, nothing contained in this Agreement shall be construed to prevent either of the parties from seeking and recovering from the other party damages sustained by it, him or her as a result of the other party’s breach or violation of any or all of the provisions of this Agreement.
10.3 Survival. The provisions of Articles I, VIII, IX, X and XI of this Agreement shall survive indefinitely the expiration of the Term or the termination of the Executive’s employment prior to the expiration of the Term.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of law provisions thereof.
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11.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
| If to the Company: | FreeCast, Inc. |
| 6901 TPC Drive | |
| Suite 200 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive Officer | |
| If to the Executive: | Tracy J West |
| 7899 Forest Keep Circle | |
| Parker, CO 80134 |
or to such other address or facsimile telephone number as either party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 11.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 11.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
11.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Initial Agreement is superseded hereby and the Initial Agreement shall be of no further force or effect. This Agreement may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
11.4 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties hereto and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
11.5 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or her address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or her in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
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11.6 No Waivers. The waiver by either party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by either party to exercise any right or remedy it or she may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
11.7 Third Party Beneficiaries. The Executive acknowledges and agrees that each and every present and future Affiliate of the Company shall be entitled, as a third party beneficiary, to the rights and benefits of the representations, warranties, covenants and agreements of the Executive set forth in this Agreement. Nothing contained in this Section 11.7 shall prohibit the modification of this Agreement by the Company and the Executive in accordance with the provisions hereof.
11.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11.9 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
FreeCast, Inc.
By:
| /s/William A. Mobley | /s/ Tracy J. West | |||
| William A. Mobley, Jr., | Tracy J. West | |||
| Chief Executive Officer | Executive | |||
| Date: ______________ | Date:_______________ |
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Exhibit 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of April 24, 2023 and effective as of April 24, 2023 by and between FreeCast, Inc., a Florida corporation (the “Company”), and Gary J Engel an individual (the “Executive”).
RECITALS:
A. The Company and the Executive seek to enter into this Employment Agreement dated as of April 24, 2023 (the “Initial Agreement”), effective May 1, 2023 through April 30, 2024.
B. Each of the Company and the Executive desires to enter into the Employment Agreement in accordance with the terms contained herein.
C. The Company owns, operates and controls the FreeCast subscription platform powered by its SmartGuide Technology, which for clarification is an interactive digital content aggregation platform, delivering all free and pay entertainment distributed via the public internet to various aggregation points in the form of an electronic program guide.
NOW, THISEFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“Agreement” shall have the meaning set forth in Recital A and Understanding Between the Parties in Addendum A.
“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, or is controlled by or is under common control with, such specified Person. For purposes of this definition, the concept of “control,” when used with respect to any specified Person, signifies the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities or partnership or other equity or ownership interests, by contract or otherwise.
“Cause” means any of the following:
(a) any action by the Executive or any failure to act by the Executive which constitutes fraud, embezzlement, mis-appropriation, dishonesty or breach of trust;
(b) any action by the Executive which constitutes assault or any othis act of violence;
(c) any action by the Executive which constitutes sexual harassment or discrimination on the basis of race, ethnicity, religion, gender or sexual preference;
(d) the Executive’s conviction or plea of guilty or nob o contendre to any felony whatsoever or to any misdemeanor if the sentence therefor includes incarceration;
(e) the Executive’s attendance at work in a state of intoxication or being found with any drug or substance possession which would constitute a criminal offense of any kind;
the Executive’s carrying out any activity or making any public statement which prejudices or diminishes the good name, reputation or standing of the Company or any its Affiliates or would cause any of them to be subjected to public contempt or ridicule;
(g) any action or failure to act by the Executive which constitutes a violation of law, including without limitation any violation of any federal or state securities laws;
(h) any breach or violation by the Executive of any or all of his material covenants or agreements set forth in this Agreement;
(i) any failure or refusal by the Executive to perform any or all of his material duties and responsibilities as an employee of the Company; or
(j) gross negligence by the Executive in the performance of any or all of his material duties and responsibilities as an employee of the Company.
“Warrants” shall have the meaning set forth in Section 5.1.
“Commission” shall have the meaning set forth in Section 5.2.
“Employee Stock Option Program” shall have the meaning set forth in Section 5.3.
“Tax Related Items” shall have the meaning set forth in Section 5.1-3.
“Company” means FreeCast, Inc., a Florida corporation.
“Confidential Information” shall have the meaning set forth in Section 9.1(a).
“Disability” means any mental or physical illness, condition, disability or incapacity which prevents the Executive from reasonably discharging his duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Executive as to whereas the Executive suffers from any Disability, then, in such event, the Executive shall submit to the physical or mental examination of a licensed physician chosen solely by the Company, and such physician shall determine what the Executive suffers from any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon the Company and the Executive. The entire cost of such an examination shall be paid for solely by the Company.
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“Executive” means Gary J Engel, an individual.
“Initial Agreement” shall have the meaning set forth in Recital A.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or this entity, or any combination of the foregoing.
“Policies” shall have the meaning set forth in Section 8.5.
“Restrictive Covenants” shall have the meaning set forth in Section 8.2.
“Salary” shall have the meaning set forth in Section 4.1.
“Term” shall have the meaning set forth in Section 3.1.
“Termination Date” means a specific date not less than fifteen nor more than forty-five days from and after the date of any Termination Notice upon which the Executive’s employment by the Company shall terminate.
“Termination Notice” shall mean a written notice which sets forth (a) the specific provision of this Agreement relied upon to terminate the Executive’s employment and (b) a Termination Date.
“Territory” means the United States of America and its territories and possessions.
“Trade Secrets” shall have the meaning set forth in Section 9.1(b).
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ARTICLE
II
Employment
2.1 Employment. The Company employs the Executive and the Executive accepts such employment. Subject to the direction of the Board of Directors and the Chief Executive Officer, the Executive shall serve as the Chief Marketing Officer of the Company. The Executive shall have such responsibilities, perform such duties and exercise such power and authority as may from time to time be delegated to his by the Board of Directors or the Chief Executive Officer or are inherent in, or incident to, such office. The Executive shall devote substantially all of his business time and attention and his best efforts to the diligent, professional and ethical performance of his duties as an employee of the Company.
2.2 Change in Position. If the Executive’s position with the Company shall change for any reason, then this Agreement shall terminate, and the provisions of Section 7.4 shall apply.
ARTICLE
III
Term
3.1 Term. The term of the Executive’s employment by the Company shall be for a period of one year, commencing on May 1, 2023 and continuing through April 30, 2024 (the “Term”). Subsequent to April 30, 2024, the Term shall be automatically extended on a month-to-month basis. Notwithstanding the provisions of the immediately preceding sentences, the Executive’s employment by the Company may be terminated prior to the expiration of the initial Term or any extension thereof in accordance with the provisions of Article VII below.
ARTICLE
IV
Salary
4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, effective as of May 1, 2023, the Company shall pay to the Executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to Two Hundred & Ten Thousand Dollars ($210,000.00) for the year ending April 30, 2024, (the “Salary”), per annum thereafter until a new extension is executed between the parties.
4.2 Payment of Salary. The Salary shall be paid to the Executive in bi-weekly installments on the same dates payments of salary and/or normal and customary payroll periods are generally made to all senior management employees of the Company.
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ARTICLE
V
Incentives
5.1 Warrants. In order to induce the Executive to enter into this Employment Agreement and extend his employment through April 30, 2023, and perform his obligations thereunder; the Executive has executed and delivered to the Company a subscription agreement and the Company has issued to the Executive, Warrants to purchase an aggregate amount of Twenty Five Thousand (25,000) shares of its common stock, with a par value $0.0001 per share (the “Common Stock”), at a purchase price of Three Dollars USD ($3.00) per share upon exercising said Warrants. The aforementioned Warrants shall vest immediately. The initial exercise period will begin January 1, 2024 and expire on December 31, 2026. Any such Warrants shall be subject to applicable taxes required by law to be withheld.
5.2 Commission. The Executive shall have the opportunity to earn a discretionary commission equivalent to two percentage (2%) of the pre-tax gross revenues driven vertically from your department of the Company on an annualized basis paid to the Company, immediately following any or all COS (Cost of Sales) expenses, subtractions, debts, fees, and commissions to ALL third-parties; including but not limited to advertising/media fees, content/programming partners, distribution/marketing vendors, device manufacturers, app stores, various other partnership payments as may be determined in the sole discretion of the Board of Directors of the Company. Any such commission shall be paid quarterly following 90 days of accounting reconciliations provided to the Company by the numerous entities, vendors, Finance/Legal/Audit teams and subject to applicable payroll and/or other taxes required by law to be withheld.
5.3 Employee Stock Option Program. The Executive shall have the opportunity to participate in a (ESOP) “Employee Stock Option Program” on an annual basis as may be determined and created by the Company, and at the sole discretion of the Board of Directors of the Company. Any earnings from such Employee Stock Option Program shall be subject to applicable taxes required by law to be withheld.
ARTICLE VI
Certain Fringe Benefits
6.1 Generally. The Executive may receive such benefits and participate in such benefit plans as are generally provided from time to time such as discounted group participation Medical / Health Insurance plans by the Company to its senior management employees; provided, however, that nothing contained in this Section 6.1 shall be construed to obligate the Company to provide any specific benefits to its respective senior management employees generally or to the Executive specifically.
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6.2 Vacations. The Executive shall be entitled to three weeks’ vacation time on an annual basis in accordance with such policies as are from time to time adopted by the Company’s Board of Directors with respect to its senior management employees.
6.3 Business, Travel and Entertainment Expenses. Within a reasonable time, after the submission of appropriate receipts and other evidence by the Executive, the Company shall pay, or reimburse the Executive for, all reasonable business, travel and entertainment expenses incurred by the Executive in connection with the performance of his duties and responsibilities on behalf of the Company.
ARTICLE VII
Termination of Employment
7.1 Termination of Employment.
(a) Notwithstanding the provisions of Article III above, the employment of the Executive (i) shall automatically terminate upon the death of the Executive pursuant to the provisions of Section 7.2, (ii) may be terminated at any time by the Company pursuant to the provisions of Sections 7.3 or 7.4 and (iii) may be terminated at any time by the Executive pursuant to the provisions of Section 7.5.
(b) If the Company shall desire to terminate the Executive’s employment by the Company pursuant to any of the provisions of Sections 7.3 or 7.4 of this Agreement, then, in such event, the Company shall provide a Termination Notice to the Executive.
(c) If the Executive shall desire to terminate his employment by the Company pursuant to the provisions of Sections 7.5 of this Agreement, then, in such event, the Executive shall provide a Termination Notice to the Company.
(d) If the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Article VII, then the Company shall be discharged from all of its obligations to the Executive under this Agreement upon the payment to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination of employment shall occur. The Executive’s sole and exclusive remedy for the termination of his employment by the Company prior to the expiration of the Term, regardless of whether such termination shall be initiated by the Company or the Executive, shall be the payment by the Company to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination shall occur.
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7.2 Death of Executive. If during the Term the Executive shall die, then the employment of the Executive by the Company shall automatically terminate on the date of the Executive’s death. In such event, the Company shall be obligated to pay to the Executive’s estate or as otherwise directed by the Executive’s personal representative or executor, the Executive’s Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the date of the Executive’s death.
7.3 Disability of Executive. If during the Term the Executive shall suffer any Disability, then the Company may terminate the Executive’s employment. In such event, the Company shall pay to the Executive or as otherwise directed by the Executive’s legal representative his Salary and earned Warrants and Shares (subject to applicable payroll and/or taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
7.4 Termination of Employment by Company.
(a) The Company may terminate the Executive’s employment at any time with Cause. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
(b) The Company may terminate the Executive’s employment at any time without Cause. In such event, (i) the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice and (ii) the Company shall continue to pay to the Executive a salary at the rate of Two Hundred & Ten Thousand Dollars ($210,000.00) per annum (subject to applicable payroll and/or other taxes required by law to be withheld) for a period of three (3) months subsequent to the Termination Date set forth in the Termination Notice and (iii) all Warrants and Shares as defined in this Agreement shall vest on the Termination Date.
7.5 Termination of Employment by Executive. The Executive may terminate his employment at any time. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
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ARTICLE VIII
Certain Covenants of the Executive
8.1 Certain Restrictive Covenants. The Executive covenants and agrees with the Company and each Affiliate of the Company as follows:
| (a) | He shall not at any time, directly or indirectly, for himself or for any other Person, approach, counsel, solicit, induce or attempt to approach, counsel, solicit or induce any Person employed or engaged by the Company or any Affiliate of the Company, whether such Person is a full-time employee, part-time employee or independent contractor, to terminate his, his or its employment or independent contractor relationship with the Company or any Affiliate of the Company. |
| (b) | He shall not at any time, directly or indirectly, for himself or for any other Person employ, attempt to employ or enter into any contractual arrangement for employment with, engage, attempt to engage or enter into any contractual arrangement for the engagement of, any employee or former employee or independent contractor or former independent contractor of the Company or any Affiliate of the Company, unless such former employee or independent contractor shall not have been employed or engaged by the Company or any Affiliate of the Company for a period of at least one year. |
| (c) | He shall not, while He is employed by the Company and for a period of one year from and after the date that his employment by the Company ceases or terminates for any reason, directly or indirectly, for himself or for any other Person: |
(i) acquire or own in any manner any interest in, or loan any amount to, any Person which competes in any manner with the Company or any Affiliate of the Company anywhere in the Territory;
(ii) be employed by or serve as an employee, agent, officer, director or manager of, or as a consultant to, or as an independent contractor or salesperson for, any Person which directly competes in any manner with the Company or any Affiliate of the Company in the Territory;
(iii) solicit, attempt to solicit, market, sell or provide, or attempt to market, sell or provide, any goods or services to any customer of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such customer has not been a customer of the Company or any Affiliate of the Company for a period of at least one year;
(iv) procure goods or services from any supplier or vendor of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such supplier or vendor has not been a supplier or vendor to the Company or any Affiliate of the Company for a period of at least one year;
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(v) directly compete in any manner with the Company or any of its Affiliates in the Territory; or
(vi) interfere with, disrupt, or attempt to interfere with or disrupt, any existing relationship, contractual or otherwise, between the Company or any Affiliate of the Company on the one hand, and any of the respective employees, independent contractors, customers, suppliers, vendors or other Persons with which any of the Company or its Affiliates has business relations or deals with on the other.
The foregoing provisions of this Section 8.1(c) shall not prevent the Executive from acquiring and owning not more than one percent of the equity securities of any Person whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market.
8.2 Independent Agreements. The restrictive covenants set forth in Section 8.1 above (collectively, the “Restrictive Covenants”) shall be construed as agreements independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of the Restrictive Covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefits of the Restrictive Covenants, and that the Restrictive Covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
8.3 Reasonable Restraint. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is a reasonable and necessary restraint of trade and does not violate any applicable laws, rules or regulations, including without limitation the Herman Antitrust Act, the Florida Antitrust Act or the common law. Each of the Company and the Executive acknowledges that the Company conducts its business activities on a worldwide basis and throughout the Territory. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is supported by valid and legitimate business interests, including without limitation the need to protect the Confidential Information and Trade Secrets (as such terms are hereinafter defined) of the Company and its Affiliates, and the need to protect the substantial relationships of the Company and its Affiliates with their respective employees and independent contractors, current and prospective customers, and current and prospective vendors, and that the period of restriction set forth in Section 8.1(c) above is essential to the full protection of each of such valid and legitimate business interests.
8.4 Severabilitv. Each of the Company and the Executive agrees that each of the Restrictive Covenants is reasonable and proper with respect to duration, geographical scope, and lines of business. If all or any portion of any of the Restrictive Covenants is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy for any reason, then all or such portion of such Restrictive Covenants shall be considered divisible as to duration, geographical scope or lines of business, or may be otherwise narrowed so as to be enforceable. If a court of competent jurisdiction shall determine that a time period, a geographical area or specified line of business is unreasonable, arbitrary or against public policy for any reason, then a shorter period, a smaller geographical area or a narrower line of business, as shall be determined by such court to be reasonable, non-arbitrary and not against public policy, may be enforced against the Executive by the Company.
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8.5 Certain Policies. The Executive acknowledges that (a) He has been provided with a copy of the Company’s Policies Regarding Electronic Information Systems, Electronic Mail, Internet and Telephone and Other Communications (the “Policies”), (b) He has read the Policies, (c) He has had an opportunity ask questions of and to seek information regarding the Policies, (d) He understands the Policies and (e) He accepts, consents to and agrees to abide by the Policies.
8.6 Assignment of Works. The Executive assigns to the Company or its assigns all of the Executive’s right, title and interest in and to all developments, inventions and ideas made, conceived or reduced to practice solely or jointly by the Executive while engaging in activities within the scope of his employment by the Company, regardless of whether any of such developments, inventions and ideas qualify as intellectual property or were conceived or developed during business hours. The Executive acknowledges and agrees that all original works of authorship that are made with the scope of his employment by the Company and which can be legally protected are “works for hire” under applicable law. The Executive shall notify the Company of all developments, inventions and ideas and to take all actions necessary to enable the Company to seek legal protection for them.
ARTICLE IX
Confidential Information and Trade Secrets
9.1 Certain Definitions.
(a) “Confidential Information” includes information which (a) has been or is developed or is otherwise owned by the Company or any of its Affiliates, whether developed by the Company or an Affiliate of the Company or by any other Person, (b) is not readily available to the public and not generally ascertainable by proper means by the public, (c) if disclosed to the public, would be harmful to the interests of the Company or any Affiliate of the Company, (d) has limited disclosure within the Company or any Affiliate of the Company, or (e) is treated or designated by the Company or any Affiliate of the Company as being confidential. Confidential Information may consist of technical information, including without limitation inventions, formulas, compilations, computer programs, software, databases, methods, purchasing techniques and processes, sales techniques and processes, market data and pricing and discounting practices, as well as business information relating to the financial condition, financial arrangements, business plans or strategies (such as new products and services and plans for sales, marketing, purchasing, distribution, services or promotions), employee training materials, sales manuals, customer needs, contacts, accounts and the like, vendor or supplier lists, vendor or supplier needs, contacts, accounts and the like, personnel, payroll and financial data and records, and any and all data, information, plans, processes, procedures, methods and records of any kind or nature whatsoever, regardless of the form of storage medium and wherever located, related in any manner to the Company or any Affiliate of the Company or their respective businesses, operations or affairs or their respective members, managers, directors, officers, employees, agents or independent contractors.
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(b) “Trade Secrets” include Confidential Information which is sufficiently secret to derive actual or potential economic value to the Company or an Affiliate of the Company from not being generally known to, and not being readily ascertainable by, the competitors of the Company or an Affiliate of the Company and other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company), which information gives, or has the potential of giving, the Company or any Affiliate of the Company an advantage over the competitors of the Company or any Affiliate of the Company or other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company) which can obtain economic value from the disclosure or use of the information and which information the Company or any Affiliate of the Company has taken, and will continue to take, reasonable steps to maintain as secret or confidential vis-a-vis its current and potential competitors and other Persons (including without limitation the Company’s vendors, suppliers and customers).
9.2 Ownership of Confidential Information and Trade Secrets. The Executive acknowledges that, in the course of his relationship with the Company, He has received, used, had access to and became familiar with, or in the future will receive, use, have access to and become familiar with, the Confidential Information and the Trade Secrets which are owned by the Company or by an Affiliate of the Company or which are or will be otherwise used in connection with the current or future business of the Company or an Affiliate of the Company. The Executive acknowledges and agrees that all such Confidential Information and Trade Secrets are and shall remain the sole and exclusive property of the Company or an Affiliate of the Company, as the case may be, and that the covenants set forth in Section 9.3 below are fair and reasonable.
9.3 Non-Disclosure. The Executive shall not, directly or indirectly, at any time disclose to any Person, or take or use for the purposes of any Person, other than the Company or its Affiliates, any Confidential Information or Trade Secrets. The Executive shall not, directly or indirectly, at any time copy or place any Confidential Information or Trade Secrets on to any personal computer or other data collection or storage device that is not owned by the Company or an Affiliate of the Company. The obligations of the Executive set forth in this Section 9.3 apply to, and are intended to prevent, the direct or indirect disclosure of any Confidential Information or Trade Secrets to Persons where such disclosure of the Confidential Information or the Trade Secrets would reasonably be considered to be useful to the competitors of the Company or any of its Affiliates or to any other Person to become a competitor based, in whole or in part, on such Confidential Information or Trade Secrets. Immediately upon the termination of the Executive’s employment by the Company for any reason, the Executive shall deliver to the Company all Confidential Information and Trade Secrets and all Company property then in his possession.
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9.4 Independent Agreements. The covenants set forth in Section 9.3 above shall be construed as an agreement independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or othiswise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of such covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefit of the covenants set forth in Section 9.3 above, and that such covenants, therefore, are not executory or othiswise subject to rejection under the Bankruptcy Code of 1978.
ARTICLE X
Remedies; Survival
10.1 Injunction; Specific Performance. It is recognized and acknowledged by each of the parties that a breach or violation by the Executive of any or all or the provisions contained in this Agreement will cause irreparable harm and damage to the Company and/or its Affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, each of the parties recognizes and acknowledges that the Company and/or its Affiliates shall be entitled to the remedies of injunction and/or specific performance from any court of competent jurisdiction enjoining and restraining any breach or violation by the Executive of any or all of the provisions contained herein and/or requiring the specific performance of any or all of the provisions contained herein, and that such rights to injunction and specific performance shall be cumulative and in addition to whatever other rights and remedies the Company and/or its Affiliates may possess hereunder, at law and in equity.
10.2 Damages. Except as otherwise provided in Article VII above, nothing contained in this Agreement shall be construed to prevent either of the parties from seeking and recovering from the other party damages sustained by it, him or his as a result of the other party’s breach or violation of any or all of the provisions of this Agreement.
10.3 Survival. The provisions of Articles I, VIII, IX, X and XI of this Agreement shall survive indefinitely the expiration of the Term or the termination of the Executive’s employment prior to the expiration of the Term.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of law provisions thereof.
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11.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
If to the Company: |
FreeCast, Inc. 6901 TPC Drive Suite 100 Orlando, Florida 32822 Attention: Chief Executive Officer |
| If to the Executive: | Gary
J Engel 18 Ronald Terrace Springfield, NJ 07081 |
or to such other address or facsimile telephone number as either party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 11.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 11.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
11.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Initial Agreement is superseded hereby and the Initial Agreement shall be of no furthis force or effect. This Agreement may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
11.4 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties hereto and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
11.5 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or his address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or his in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
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11.6 No Waivers. The waiver by either party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by either party to exercise any right or remedy it or He may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
11.7 Third Party Beneficiaries. The Executive acknowledges and agrees that each and every present and future Affiliate of the Company shall be entitled, as a third party beneficiary, to the rights and benefits of the representations, warranties, covenants and agreements of the Executive set forth in this Agreement. Nothing contained in this Section 11.7 shall prohibit the modification of this Agreement by the Company and the Executive in accordance with the provisions hereof.
11.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11.9 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
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IN WITNESS WHISEOF, each of the parties has executed and delivered this Agreement as of the date first written above.
FreeCast, Inc.
| /s/ William A. Mobley, Jr. | /s/ Gary Engel | |
| William A. Mobley, Jr., | Gary J Engel | |
| Chief Executive Officer | Executive | |
| Date: April 24, 2023 | Date: April 24, 2023 |
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ADDENDUM A
EMPLOYMENT AGREEMENT
GARY J ENGEL: EXECUTIVE
FREECAST INC: COMPANY
| 1) | Term: 1 Year Ending April 30, 2024 with Month-to-Month Employment Until Parties Can/Will Agree on a Contract Extension (both prior or at that time). Goals Withstanding, the Parties are Seeking 3 Year or greater extension as may be determined and created by the Company, and at the sole discretion of the Board of Directors of the Company. |
| 2) | Office vs Remote Work: Executive (absent Paid Holidays) Work On-Site Monday through Thursday in Orlando Office Hours 9:00a-5:30p ET, and Remotely in New Jersey on Friday Office Hours 9:00a-5:30p ET, each week until such time Executive relocates permanently to Orlando, Florida. |
| 3) | Annual Salary $210,000.00 until April 30, 2024 or until such time Executive relocates permanently to Orlando, Florida, the Company will adjust Salary to $275,000.00 annually, in lieu of the elimination and exchange of housing/hotel/airfare/transportation expensed by the Company and for the duration of that annual period, or until the Parties reach contract extension negotiations and at the sole discretion of the Board of Directors of the Company. |
| 4) | Executive seeks to opt-out of Company Group Health Insurance and Benefits. In lieu of this, Executive upon providing proof of Insurance elsewhere, can receive a monthly stipend equal to the Florida Blue rate Company contribution share of insurance as a credit, determined by the Florida Blue Group Rate Card, Gender, Age and Health survey. Subject to applicable payroll and/or other taxes required by law to be withheld. |
| 5) | Executive understands and acknowledges by signature herein that the State of Florida does not require employers to provide short-term disability insurance and is not among the five U.S. states to offer temporary disability insurance. |
| 6) | The Company will arrange and expense upfront in most cases and/or reimburse in others the following items for the Executive prior to relocation to Orlando, Florida; |
- Hotel/Corporate Housing (at the Company’s selection)
- Airfare to/from Orlando (MCO) and Newark (EWR) (at the Company’s selection)
- Use of Car and/or Uber / Lift transport costs (receipts must be provided)
| William A. Mobley, Jr., | Gary J Engel | |
| Chief Executive Officer | Executive | |
| Date: April 24, 2023 | Date: April 24, 2023 |
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Exhibit 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of February 17, 2020 and effective as of February 17, 2020 by and between FreeCast, Inc., a Florida corporation (the “Company”), and Irwin Podhajser, an individual (the “Executive”).
RECITALS:
A. The Company and the Executive seek to enter into this Employment Agreement dated as of February 17, 2020 (the “Initial Agreement”), effective February 17, 2020 through February 17, 2021.
B. Each of the Company and the Executive desires to enter into the Employment Agreement in accordance with the terms contained herein.
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“Agreement” shall have the meaning set forth in the Recital B.
“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, or is controlled by or is under common control with, such specified Person. For purposes of this definition, the concept of “control,” when used with respect to any specified Person, signifies the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities or partnership or other equity or ownership interests, by contract or otherwise.
“Cause” means any of the following:
(a) any action by the Executive or any failure to act by the Executive which constitutes fraud, embezzlement, mis-appropriation, dishonesty or breach of trust;any action by the Executive which constitutes assault or any other act of violence;
(b) any action by the Executive which constitutes sexual harassment or discrimination on the basis of race, ethnicity, religion, gender or sexual preference;
(c) the Executive’s conviction or plea of guilty or nob o contendre to any felony whatsoever or to any misdemeanor if the sentence therefor includes incarceration;
(d) the Executive’s attendance at work in a state of intoxication or being found with any drug or substance possession which would constitute a criminal offense of any kind;
(e) the Executive’s carrying out any activity or making any public statement which prejudices or diminishes the good name, reputation or standing of the Company or any its Affiliates or would cause any of them to be subjected to public contempt or ridicule;
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(g) any action or failure to act by the Executive which constitutes a violation of law, including without limitation any violation of any federal or state securities laws;
(h) any breach or violation by the Executive of any or all of his material covenants or agreements set forth in this Agreement;
(i) any failure or refusal by the Executive to perform any or all of his material duties and responsibilities as an employee of the Company; or
(j) gross negligence by the Executive in the performance of any or all of his material duties and responsibilities as an employee of the Company.
“Warrants” shall have the meaning set forth in Section 5.1.
“Bonus” shall have the meaning set forth in Section 5.2.
“Employee Stock Option Program” shall have the meaning set forth in Section 5.3.
“Tax Related Items” shall have the meaning set forth in Section 5.1-3.
“Company” means FreeCast, Inc., a Florida corporation.
“Confidential Information” shall have the meaning set forth in Section 9.1(a).
“Disability” means any mental or physical illness, condition, disability or incapacity which prevents the Executive from reasonably discharging his duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Executive as to whether the Executive suffers from any Disability, then, in such event, the Executive shall submit to the physical or mental examination of a licensed physician chosen solely by the Company, and such physician shall determine whether the Executive suffers from any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon the Company and the Executive. The entire cost of such examination shall be paid for solely by the Company.
“Executive” means Irwin Podhajser, an individual.
“Initial Agreement” shall have the meaning set forth in Recital A.
“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Policies” shall have the meaning set forth in Section 8.5.
“Restrictive Covenants” shall have the meaning set forth in Section 8.2.
“Salary” shall have the meaning set forth in Section 4.1.
“Term” shall have the meaning set forth in Section 3.1.
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“Termination Date” means a specific date not less than fifteen nor more than forty-five days from and after the date of any Termination Notice upon which the Executive’s employment by the Company shall terminate.
“Termination Notice” shall mean a written notice which sets forth (a) the specific provision of this Agreement relied upon to terminate the Executive’s employment and (b) a Termination Date.
“Territory” means the United States of America and its territories and possessions. “Trade Secrets” shall have the meaning set forth in Section 9.1(b).
ARTICLE II
Employment
2.1 Employment. The Company employs the Executive and the Executive accepts such employment. Subject to the direction of the Board of Directors and the Chief Executive Officer, the Executive shall serve as the Executive Vice President of Media and Network Partnerships of the Company. The Executive shall have such responsibilities, perform such duties and exercise such power and authority as may from time to time be delegated to him by the Board of Directors or the Chief Executive Officer or are inherent in, or incident to, such office. The Executive shall devote substantially all of his business time and attention and his best efforts to the diligent, professional and ethical performance of his duties as an employee of the Company.
2.2 Change in Position. If the Executive’s position with the Company shall change for any reason, then this Agreement shall terminate, and the provisions of Section 7.4 shall apply.
ARTICLE III
Term
3.1 Term. The term of the Executive’s employment by the Company shall be for a period of one year, commencing on February 17, 2020 and continuing through February 17, 2021 (the “Term”). Subsequent to February 17, 2021, the Term shall be automatically extended on a month-to-month basis. Notwithstanding the provisions of the immediately preceding sentences, the Executive’s employment by the Company may be terminated prior to the expiration of the initial Term or any extension thereof in accordance with the provisions of Article VII below.
ARTICLE IV
Salary
4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, effective as of February 17, 2020, the Company shall pay to the Executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to Two Hundred Thousand Dollars ($200,000.00) for the year ending February 17, 2020 (the “Salary”), per annum thereafter until a new extension is executed between the parties.
4.2 Payment of Salary. The Salary shall be paid to the Executive in installments from time to time on the same dates payments of salary and/or normal and customary payroll periods are generally made to all senior management employees of the Company.
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ARTICLE V
Incentives
5.1 Warrants. In order to induce the Executive to enter into this Employment Agreement and extend his employment through January 20, 2021, and perform his obligations thereunder; the Executive has executed and delivered to the Company a subscription agreement and the Company has issued to the Executive, Warrants to purchase an aggregate amount of Sixty Thousand (60,000) shares of its common stock, with a par value $0.0001 per share (the “Common Stock”), at a purchase price of One Dollar and Seventy Five Cents USD ($1.75) per share upon exercising said Warrants. The aforementioned Warrants shall vest immediately. The initial exercise period will begin July 17, 2020 and expire on July 17, 2021. Any such bonus shall be subject to applicable taxes required by law to be withheld.
5.2 Bonus. The Executive shall have the opportunity to earn a discretionary bonus on a monthly, quarterly, or annual basis as may be determined in the sole discretion of the Board of Directors of the Company. It is understood that the Executive and Company will meet collectively to structure the Bonus Program with the intention (to be determined). This agreement may be amended upon determination of the specifications of the Bonus Program forthcoming, with the details of the proposed Bonus Program. Any such bonus shall be subject to applicable payroll and/or other taxes required by law to be withheld.
5.3 Employee Stock Option Program. The Executive shall have the opportunity to participate in a (ESOP) “Employee Stock Option Program” on an annual basis as may be determined and created by the Company, and at the sole discretion of the Board of Directors of the Company. Any earnings from such Employee Stock Option Program shall be subject to applicable taxes required by law to be withheld.
ARTICLE VI
Certain Fringe Benefits
6.1 Generally. The Executive may receive such benefits and participate in such benefit plans as are generally provided from time to time such as discounted group participation Medical / Health Insurance plans by the Company to its senior management employees; provided, however, that nothing contained in this Section 6.1 shall be construed to obligate the Company to provide any specific benefits to its respective senior management employees generally or to the Executive specifically.
6.2 Vacations. The Executive shall be entitled to three weeks’ vacation time on an annual basis in accordance with such policies as are from time to time adopted by the Company’s Board of Directors with respect to its senior management employees.
6.3 Business, Travel and Entertainment Expenses. Within a reasonable time, after the submission of appropriate receipts and other evidence by the Executive, the Company shall pay, or reimburse the Executive for, all reasonable business, travel and entertainment expenses incurred by the Executive in connection with the performance of his duties and responsibilities on behalf of the Company.
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ARTICLE VII
Termination of Employment
7.1 Termination of Employment.
(a) Notwithstanding the provisions of Article III above, the employment of the Executive (i) shall automatically terminate upon the death of the Executive pursuant to the provisions of Section 7.2, (ii) may be terminated at any time by the Company pursuant to the provisions of Sections 7.3 or 7.4 and (iii) may be terminated at any time by the Executive pursuant to the provisions of Section 7.5.
(b) If the Company shall desire to terminate the Executive’s employment by the Company pursuant to any of the provisions of Sections 7.3 or 7.4 of this Agreement, then, in such event, the Company shall provide a Termination Notice to the Executive.
(c) If the Executive shall desire to terminate his employment by the Company pursuant to the provisions of Sections 7.5 of this Agreement, then, in such event, the Executive shall provide a Termination Notice to the Company.
(d) If the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Article VII, then the Company shall be discharged from all of its obligations to the Executive under this Agreement upon the payment to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination of employment shall occur. The Executive’s sole and exclusive remedy for the termination of his employment by the Company prior to the expiration of the Term, regardless of whether such termination shall be initiated by the Company or the Executive, shall be the payment by the Company to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination shall occur.
7.2 Death of Executive. If during the Term the Executive shall die, then the employment of the Executive by the Company shall automatically terminate on the date of the Executive’s death. In such event, the Company shall be obligated to pay to the Executive’s estate or as otherwise directed by the Executive’s personal representative or executor, the Executive’s Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the date of the Executive’s death.
7.3 Disability of Executive. If during the Term the Executive shall suffer any Disability, then the Company may terminate the Executive’s employment. In such event, the Company shall pay to the Executive or as otherwise directed by the Executive’s legal representative his Salary and earned Warrants and Shares (subject to applicable payroll and/or taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
7.4 Termination of Employment by Company.
(a) The Company may terminate the Executive’s employment at any time with Cause. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
(b) The Company may terminate the Executive’s employment at any time without Cause. In such event, (i) the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice and (ii) the Company shall continue to pay to the Executive a salary at the rate of Two Hundred Thousand Dollars ($200,000.00) per annum (subject to applicable payroll and/or other taxes required by law to be withheld) for a period of four months subsequent to the Termination Date set forth in the Termination Notice and (iii) all Warrants and Shares as defined in this Agreement shall vest on the Termination Date.
7.5 Termination of Employment by Executive. The Executive may terminate his employment at any time. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
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ARTICLE VIII
Certain Covenants of the Executive
8.1 Certain Restrictive Covenants. The Executive covenants and agrees with the Company and each Affiliate of the Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or for any other Person, approach, counsel, solicit, induce or attempt to approach, counsel, solicit or induce any Person employed or engaged by the Company or any Affiliate of the Company, whether such Person is a full-time employee, part-time employee or independent contractor, to terminate his, her or its employment or independent contractor relationship with the Company or any Affiliate of the Company.
(b) He shall not at any time, directly or indirectly, for himself or for any other Person employ, attempt to employ or enter into any contractual arrangement for employment with, engage, attempt to engage or enter into any contractual arrangement for the engagement of, any employee or former employee or independent contractor or former independent contractor of the Company or any Affiliate of the Company, unless such former employee or independent contractor shall not have been employed or engaged by the Company or any Affiliate of the Company for a period of at least one year.
(c) He shall not, while he is employed by the Company and for a period of one year from and after the date that his employment by the Company ceases or terminates for any reason, directly or indirectly, for himself or for any other Person:
(i) acquire or own in any manner any interest in, or loan any amount to, any Person which competes in any manner with the Company or any Affiliate of the Company anywhere in the Territory;
(ii) be employed by or serve as an employee, agent, officer, director or manager of, or as a consultant to, or as an independent contractor or salesperson for, any Person which competes in any manner with the Company or any Affiliate of the Company in the Territory;
(iii) solicit, attempt to solicit, market, sell or provide, or attempt to market, sell or provide, any goods or services to any customer of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such customer has not been a customer of the Company or any Affiliate of the Company for a period of at least one year;
(iv) procure goods or services from any supplier or vendor of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such supplier or vendor has not been a supplier or vendor to the Company or any Affiliate of the Company for a period of at least one year;
(v) compete in any manner with the Company or any of its Affiliates in the Territory; or
(vi) interfere with, disrupt, or attempt to interfere with or disrupt, any existing relationship, contractual or otherwise, between the Company or any Affiliate of the Company on the one hand, and any of the respective employees, independent contractors, customers, suppliers, vendors or other Persons with which any of the Company or its Affiliates has business relations or deals with on the other.
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The foregoing provisions of this Section 8.1(c) shall not prevent the Executive from acquiring and owning not more than one percent of the equity securities of any Person whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market.
For clarification and for purposes of this Section 8.1, a customer, vendor or supplier of the Company shall not include Over-the-Air Broadcast (including Low Power) Television Networks for purposes of this provision and this Employment Agreement shall not restrict Executive from working for the aforementioned companies if she so chooses after the termination of this Employment Agreement, however must remain obligated and bound to Article IX of this Agreement for a period of one (1) year.
8.2 Independent Agreements. The restrictive covenants set forth in Section 8.1 above (collectively, the “Restrictive Covenants”) shall be construed as agreements independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of the Restrictive Covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefits of the Restrictive Covenants, and that the Restrictive Covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
8.3 Reasonable Restraint. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is a reasonable and necessary restraint of trade and does not violate any applicable laws, rules or regulations, including without limitation the Sherman Antitrust Act, the Florida Antitrust Act or the common law. Each of the Company and the Executive acknowledges that the Company conducts its business activities on a worldwide basis and throughout the Territory. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is supported by valid and legitimate business interests, including without limitation the need to protect the Confidential Information and Trade Secrets (as such terms are hereinafter defined) of the Company and its Affiliates, and the need to protect the substantial relationships of the Company and its Affiliates with their respective employees and independent contractors, current and prospective customers, and current and prospective vendors, and that the period of restriction set forth in Section 8.1(c) above is essential to the full protection of each of such valid and legitimate business interests.
8.4 Severabilitv. Each of the Company and the Executive agrees that each of the Restrictive Covenants is reasonable and proper with respect to duration, geographical scope, and lines of business. If all or any portion of any of the Restrictive Covenants is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy for any reason, then all or such portion of such Restrictive Covenants shall be considered divisible as to duration, geographical scope or lines of business, or may be otherwise narrowed so as to be enforceable. If a court of competent jurisdiction shall determine that a time period, a geographical area or a specified line of business is unreasonable, arbitrary or against public policy for any reason, then a shorter period, a smaller geographical area or a narrower line of business, as shall be determined by such court to be reasonable, non-arbitrary and not against public policy, may be enforced against the Executive by the Company.
8.5 Certain Policies. The Executive acknowledges that (a) he has been provided with a copy of the Company’s Policies Regarding Electronic Information Systems, Electronic Mail, Internet and Telephone and Other Communications (the “Policies”), (b) he has read the Policies, (c) he has had an opportunity ask questions of and to seek information regarding the Policies, (d) he understands the Policies and (e) he accepts, consents to and agrees to abide by the Policies.
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8.6 Assignment of Works. The Executive assigns to the Company or its assigns all of the Executive’s right, title and interest in and to all developments, inventions and ideas made, conceived or reduced to practice solely or jointly by the Executive while engaging in activities within the scope of his employment by the Company, regardless of whether any of such developments, inventions and ideas qualify as intellectual property or were conceived or developed during business hours. The Executive acknowledges and agrees that all original works of authorship that are made with the scope of his employment by the Company and which can be legally protected are “works for hire” under applicable law. The Executive shall notify the Company of all developments, inventions and ideas and to take all actions necessary to enable the Company to seek legal protection for them.
ARTICLE IX
Confidential Information and Trade Secrets
9.1 Certain Definitions.
(a) “Confidential Information” includes information which (a) has been or is developed or is otherwise owned by the Company or any of its Affiliates, whether developed by the Company or an Affiliate of the Company or by any other Person, (b) is not readily available to the public and not generally ascertainable by proper means by the public, (c) if disclosed to the public, would be harmful to the interests of the Company or any Affiliate of the Company, (d) has limited disclosure within the Company or any Affiliate of the Company, or (e) is treated or designated by the Company or any Affiliate of the Company as being confidential. Confidential Information may consist of technical information, including without limitation inventions, formulas, compilations, computer programs, software, databases, methods, purchasing techniques and processes, sales techniques and processes, market data and pricing and discounting practices, as well as business information relating to the financial condition, financial arrangements, business plans or strategies (such as new products and services and plans for sales, marketing, purchasing, distribution, services or promotions), employee training materials, sales manuals, customer needs, contacts, accounts and the like, vendor or supplier lists, vendor or supplier needs, contacts, accounts and the like, personnel, payroll and financial data and records, and any and all data, information, plans, processes, procedures, methods and records of any kind or nature whatsoever, regardless of the form of storage medium and wherever located, related in any manner to the Company or any Affiliate of the Company or their respective businesses, operations or affairs or their respective members, managers, directors, officers, employees, agents or independent contractors.
(b) “Trade Secrets” include Confidential Information which is sufficiently secret to derive actual or potential economic value to the Company or an Affiliate of the Company from not being generally known to, and not being readily ascertainable by, the competitors of the Company or an Affiliate of the Company and other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company), which information gives, or has the potential of giving, the Company or any Affiliate of the Company an advantage over the competitors of the Company or any Affiliate of the Company or other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company) which can obtain economic value from the disclosure or use of the information and which information the Company or any Affiliate of the Company has taken, and will continue to take, reasonable steps to maintain as secret or confidential vis-a-vis its current and potential competitors and other Persons (including without limitation the Company’s vendors, suppliers and customers).
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9.2 Ownership of Confidential Information and Trade Secrets. The Executive acknowledges that, in the course of his relationship with the Company, he has received, used, had access to and became familiar with, or in the future will receive, use, have access to and become familiar with, the Confidential Information and the Trade Secrets which are owned by the Company or by an Affiliate of the Company or which are or will be otherwise used in connection with the current or future business of the Company or an Affiliate of the Company. The Executive acknowledges and agrees that all such Confidential Information and Trade Secrets are and shall remain the sole and exclusive property of the Company or an Affiliate of the Company, as the case may be, and that the covenants set forth in Section 9.3 below are fair and reasonable.
9.3 Non-Disclosure. The Executive shall not, directly or indirectly, at any time disclose to any Person, or take or use for the purposes of any Person, other than the Company or its Affiliates, any Confidential Information or Trade Secrets. The Executive shall not, directly or indirectly, at any time copy or place any Confidential Information or Trade Secrets on to any personal computer or other data collection or storage device that is not owned by the Company or an Affiliate of the Company. The obligations of the Executive set forth in this Section 9.3 apply to, and are intended to prevent, the direct or indirect disclosure of any Confidential Information or Trade Secrets to Persons where such disclosure of the Confidential Information or the Trade Secrets would reasonably be considered to be useful to the competitors of the Company or any of its Affiliates or to any other Person to become a competitor based, in whole or in part, on such Confidential Information or Trade Secrets. Immediately upon the termination of the Executive’s employment by the Company for any reason, the Executive shall deliver to the Company all Confidential Information and Trade Secrets and all Company property then in his possession.
9.4 Independent Agreements. The covenants set forth in Section 9.3 above shall be construed as an agreement independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of such covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefit of the covenants set forth in Section 9.3 above, and that such covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
ARTICLE X
Remedies; Survival
10.1 Injunction; Specific Performance. It is recognized and acknowledged by each of the parties that a breach or violation by the Executive of any or all or the provisions contained in this Agreement will cause irreparable harm and damage to the Company and/or its Affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, each of the parties recognizes and acknowledges that the Company and/or its Affiliates shall be entitled to the remedies of injunction and/or specific performance from any court of competent jurisdiction enjoining and restraining any breach or violation by the Executive of any or all of the provisions contained herein and/or requiring the specific performance of any or all of the provisions contained herein, and that such rights to injunction and specific performance shall be cumulative and in addition to whatever other rights and remedies the Company and/or its Affiliates may possess hereunder, at law and in equity.
10.2 Damages. Except as otherwise provided in Article VII above, nothing contained in this Agreement shall be construed to prevent either of the parties from seeking and recovering from the other party damages sustained by it, him or her as a result of the other party’s breach or violation of any or all of the provisions of this Agreement.
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10.3 Survival. The provisions of Articles I, VIII, IX, X and XI of this Agreement shall survive indefinitely the expiration of the Term or the termination of the Executive’s employment prior to the expiration of the Term.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of law provisions thereof.
11.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express, UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
| If to the Company: | FreeCast, Inc. |
| 6901 TPC Drive | |
| Suite 200 | |
| Orlando, Florida 32822 | |
| Attention: Chief Executive Officer | |
| If to the Executive: | Irwin Podhajser 15215 SW 25th Terrace Miami, Florida 33185 |
or to such other address or facsimile telephone number as either party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 11.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 11.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
11.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Initial Agreement is superseded hereby and the Initial Agreement shall be of no further force or effect. This Agreement may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
11.4 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties hereto and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
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11.5 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or her address set forth in or as provided herein shall be effective service of process for any suit, action or proceeding brought against it or him in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
11.6 No Waivers. The waiver by either party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by either party to exercise any right or remedy it or he may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
11.7 Third Party Beneficiaries. The Executive acknowledges and agrees that each and every present and future Affiliate of the Company shall be entitled, as a third party beneficiary, to the rights and benefits of the representations, warranties, covenants and agreements of the Executive set forth in this Agreement. Nothing contained in this Section 11.7 shall prohibit the modification of this Agreement by the Company and the Executive in accordance with the provisions hereof.
11.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11.9 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
FreeCast, Inc.
| By: | /s/ William A. Mobley, Jr. | /s/ Irwin Podhajser | |
| William A. Mobley, Jr. | Irwin Podhajser | ||
| Chief Executive Officer | Executive | ||
| Date: February 6, 2020 | Date: February 6, 2020 |
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Exhibit 10.21
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of May 29, 2020by and between FreeCast, Inc., a Florida corporation (the “Company”), and Jonathan Morris, an individual (the “Executive”).
RECITALS:
A. Each of the Company and the Executive desires to enter into the Employment Agreement in accordance with the terms contained herein.
NOW, THEREFORE, in consideration of the Recitals, and the respective covenants and agreements of each of the Company and the Executive contained in this Agreement, each of the Company and the Executive agrees as follows:
ARTICLE I
Certain Definitions
The following terms shall have the following respective meanings when utilized in this Agreement:
“Agreement” shall have the meaning set forth in the Recital B.
“Affiliate” means, with respect to any specified Person, any other Person which, directly or indirectly, controls, or is controlled by or is under common control with, such specified Person. For purposes of this definition, the concept of “control,” when used with respect to any specified Person, signifies the possession of the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities or partnership or other equity or ownership interests, by contract or otherwise.
“Cause” means any of the following:
(a) any action by the Executive or any failure to act by the Executive which constitutes fraud, embezzlement, misappropriation, dishonesty or breach of trust;
(b) any action by the Executive which constitutes assault or any other act of violence;
(c) any action by the Executive which constitutes sexual harassment or discrimination on the basis of race, ethnicity, religion, gender or sexual preference;
(d) the Executive’s conviction or plea of guilty or nolo contendre to any felony whatsoever or to any misdemeanor if the sentence therefor includes incarceration;
(e) the Executive’s attendance at work in a state of intoxication or being found with any drug or substance possession which would constitute a criminal offense of any kind;
(f) the Executive’s carrying out any activity or making any public statement which prejudices or diminishes the good name, reputation or standing of the Company or any its Affiliates or would cause any of them to be subjected to public contempt or ridicule;
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(g) any action or failure to act by the Executive which constitutes a violation of law, including without limitation any violation of any federal or state securities laws;
(h) any breach or violation by the Executive of any or all of his material covenants or agreements set forth in this Agreement;
(i) any failure or refusal by the Executive to perform any or all of his material duties and responsibilities as an employee of the Company; or
(j) gross negligence by the Executive in the performance of any or all of his material duties and responsibilities as an employee of the Company.
“Certificate” shall have the meaning set forth in Section 5.2(a).
“Common Stock” shall have the meaning set forth in Section 5.1.
“Company” means FreeCast, Inc., a Florida corporation.
“Confidential Information” shall have the meaning set forth in Section 9.1(a).
“Disability” means any mental or physical illness, condition, disability or incapacity which prevents the Executive from reasonably discharging his duties and responsibilities as an officer of the Company. If any disagreement or dispute shall arise between the Company and the Executive as to whether the Executive suffers from any Disability, then, in such event, the Executive shall submit to the physical or mental examination of a licensed physician chosen solely by the Company, and such physician shall determine whether the Executive suffers from any Disability. In the absence of fraud or bad faith, the determination of such physician shall be final and binding upon the Company and the Executive. The entire cost of such examination shall be paid for solely by the Company.
“Escrow Agreement” shall have the meaning set forth in Section 5.2(a). “Executive” means, Jonathan Morris an individual.
“Good Reason” means resignation by you based upon the occurrence without your express written consent of any of the following: (i) a significant diminution by the Company of your role with the Company or a significant detrimental change in the nature and/or scope of the your status with the Company; (ii) you no longer holds the title and position of Chief Financial Officer of the Company; (iii) a change your position, duties, and work location; (iv) Change of Control in the Company without your consent, which consent shall not be unreasonably withheld; (v) Assignment of this Agreement without your consent, which consent shall not be unreasonably withheld; or (vi) any other material breach by the Company of any of the terms and conditions of this Agreement.
“Initial Agreement” shall have the meaning set forth in Recital A.
“Law Firm” shall have the meaning set forth in Section 5.2(a).
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“Person” means any individual, person, sole proprietorship, company, corporation, partnership, limited liability company, joint venture, trust, association or other entity, or any combination of the foregoing.
“Policies” shall have the meaning set forth in Section 8.5.
“Restrictive Covenants” shall have the meaning set forth in Section 8.2.
“Salary” shall have the meaning set forth in Section 4.1.
“Section 83(b) Election” shall have the meaning set forth in Section 5.2(e).
“Shares” shall have the meaning set forth in Section 5.2(a).
“Tax Related Items” shall have the meaning set forth in Section 5.2(d).
“Term” shall have the meaning set forth in Section 3.1.
“Termination Date” means a specific date not less than fifteen nor more than forty-five days from and after the date of any Termination Notice upon which the Executive’s employment by the Company shall terminate.
“Termination Notice” shall mean a written notice which sets forth (a) the specific provision of this Agreement relied upon to terminate the Executive’s employment and (b) a Termination Date.
“Territory” means the United States of America and its territories and possessions. “Trade Secrets” shall have the meaning set forth in Section 9.1(b).
ARTICLE II
Employment
2.1 Employment. The Company employs the Executive and the Executive accepts such employment. Subject to the direction of the Board of Directors and the Chief Executive Officer, the Executive shall serve as the Chief Financial Officer of the Company. The Executive shall have such responsibilities, perform such duties and exercise such power and authority as may from time to time be delegated to him by the Board of Directors or the Chief Executive Officer or are inherent in, or incident to, such office. The Executive shall devote substantially all of his business time and attention and his best efforts to the diligent, professional and ethical performance of his duties as an employee of the Company.
2.2 Change in Position. If the Executive’s position with the Company shall change for any reason, then this Agreement shall terminate, and the provisions of Section 7.4 shall apply.
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ARTICLE III
Term
3.1 Term. The term of the Executive’s employment by the Company shall be for a period of one year, commencing on May 29, 2020 and continuing through May 29, 2021 (the “Term”). Subsequent to May 29, 2021, the Term shall be automatically extended on a month-to-month basis. Notwithstanding the provisions of the immediately preceding sentences, the Executive’s employment by the Company may be terminated prior to the expiration of the initial Term or any extension thereof in accordance with the provisions of Article VII below.
ARTICLE IV
Salary
4.1 Salary. In full payment for the obligations to be performed by the Executive during the term of this Agreement, effective as of May 29, 2020, the Company shall pay to the Executive a salary (subject to applicable payroll and/or other taxes required by law to be withheld) equal to Two Hundred Fifty Thousand Dollars ($250,000.00) for the year ending May 29, 2021 (the “Salary”), and Two Hundred Fifty Thousand Dollars ($250,000.00) per annum thereafter until a new extension is executed between the parties.
4.2 Payment of Salary. The Salary shall be paid to the Executive in installments from time to time on the same dates payments of salary are generally made to all senior management employees of the Company.
ARTICLE V
Incentives
5.1 Warrants. In order to induce the Executive to enter into this Employment Agreement and extend his employment through May 29, 2021 and perform his obligations thereunder and hereunder and the payment to the Company of Fifty Dollars ($50.00), the Executive has executed and delivered to the Company a subscription agreement and the Company has issued to the Executive warrants to purchase an aggregate of One Hundred Thousand (100,000) shares of its common stock, par value $0.0001 per share (the “Common Stock”), at a purchase price of One Dollar and Seventy Five Cents ($1.75) per share. The aforementioned warrants shall vest ratably over a 12 month period upon with a 36 month expiration period.
5.2 Bonus. The Executive shall receive a discretionary bonus on an annual basis as may be determined in the sole discretion of the Board of Directors of the Company. Any such bonus shall be subject to applicable payroll and/or other taxes required by law to be withheld.
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ARTICLE VI
Certain Fringe Benefits
6.1 Generally. The Executive may receive such benefits and participate in such benefit plans as are generally provided from time to time by the Company to its senior management employees; provided, however, that nothing contained in this Section 6.1 shall be construed to obligate the Company to provide any specific benefits to its respective senior management employees generally or to the Executive specifically.
6.2 Vacations. The Executive shall be entitled to four weeks’ vacation time on an annual basis in accordance with such policies as are from time to time adopted by the Company’s Board of Directors with respect to its senior management employees.
6.3 Business, Travel and Entertainment Expenses. Within a reasonable time, after the submission of appropriate receipts and other evidence by the Executive, the Company shall pay, or reimburse the Executive for, all reasonable business, travel and entertainment expenses incurred by the Executive in connection with the performance of his duties and responsibilities on behalf of the Company.
ARTICLE VII
Termination of Employment
7.1 Termination of Employment.
(a) Notwithstanding the provisions of Article III above, the employment of the Executive (i) shall automatically terminate upon the death of the Executive pursuant to the provisions of Section 7.2, (ii) may be terminated at any time by the Company pursuant to the provisions of Sections 7.3 or 7.4 and (iii) may be terminated at any time by the Executive pursuant to the provisions of Section 7.5.
(b) If the Company shall desire to terminate the Executive’s employment by the Company pursuant to any of the provisions of Sections 7.3 or 7.4 of this Agreement, then, in such event, the Company shall provide a Termination Notice to the Executive.
(c) If the Executive shall desire to terminate his employment by the Company pursuant to the provisions of Sections 7.5 of this Agreement, then, in such event, the Executive shall provide a Termination Notice to the Company.
(d) If the Executive’s employment by the Company shall be terminated pursuant to any of the provisions of this Article VII, then the Company shall be discharged from all of its obligations to the Executive under this Agreement upon the payment to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination of employment shall occur. The Executive’s sole and exclusive remedy for the termination of his employment by the Company prior to the expiration of the Term, regardless of whether such termination shall be initiated by the Company or the Executive, shall be the payment by the Company to the Executive of the amount set forth in the Section of this Article VII pursuant to which such termination shall occur.
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7.2 Death of Executive. If during the Term the Executive shall die, then the employment of the Executive by the Company shall automatically terminate on the date of the Executive’s death. In such event, the Company shall be obligated to pay to the Executive’s estate or as otherwise directed by the Executive’s personal representative or executor, the Executive’s Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the date of the Executive’s death.
7.3 Disability of Executive. If during the Term the Executive shall suffer any Disability, then the Company may terminate the Executive’s employment. In such event, the Company shall pay to the Executive or as otherwise directed by the Executive’s legal representative his Salary and earned Warrants and Shares (subject to applicable payroll and/or taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
7.4 Termination of Employment by Company.
(a) The Company may terminate the Executive’s employment at any time with Cause. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
(b) . In the event Company believes “Cause” exists for terminating the Agreement pursuant to this Section, the Company shall give the Executive written notice of the acts or omissions constituting “Cause” (“Cause Notice”), and no termination of the Agreement shall be effective unless and until the Executive fails to cure such acts or omissions within fifteen (15) calendar days after receipt of the Cause Notice.
(c) If the Executive is terminated without “cause” or if the Executive terminates his employment for “good reason,” he will receive as severance: (1) continued payment, or lump sum equal to an aggregate, of twelve (12) months of your base pay then in effect; (2) a lump sum payment of the prorated portion of any bonus earned for that year; (3) accelerated vesting of 50% of your unvested stock options; and (4) continued health insurance coverage (to the extent provided by the company), then in effect, for twelve (12) months following your termination (or reimbursement by the Company of your cost for same). However, your receipt of these severance benefits would be contingent upon you signing a mutually acceptable release of any and all claims against the Company arising out of or in connection with your employment with the Company. All payments under this clause shall be made as soon as administratively practicable following your termination of employment, but in no event beyond the later of (x) the 15th day of the third month following the end of the calendar year of your termination of employment or (y) the 15th day of the third month following the end of the Company’s taxable year after your termination of employment.
7.5 Termination of Employment by Executive. The Executive may also terminate his employment at any time other than for “good reason”. In such event, the Company shall continue to pay to the Executive in the ordinary and normal course of its business his Salary and earned Warrants and Shares (subject to applicable payroll and/or other taxes required by law to be withheld) through the Termination Date set forth in the Termination Notice.
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ARTICLE VIII
Certain Covenants of the Executive
8.1 Certain Restrictive Covenants. The Executive covenants and agrees with the Company and each Affiliate of the Company as follows:
(a) He shall not at any time, directly or indirectly, for himself or for any other Person, approach, counsel, solicit, induce or attempt to approach, counsel, solicit or induce any Person employed or engaged by the Company or any Affiliate of the Company, whether such Person is a full-time employee, part-time employee or independent contractor, to terminate his, her or its employment or independent contractor relationship with the Company or any Affiliate of the Company.
(b) He shall not at any time, directly or indirectly, for himself or for any other Person employ, attempt to employ or enter into any contractual arrangement for employment with, engage, attempt to engage or enter into any contractual arrangement for the engagement of, any employee or former employee or independent contractor or former independent contractor of the Company or any Affiliate of the Company, unless such former employee or independent contractor shall not have been employed or engaged by the Company or any Affiliate of the Company for a period of at least one year.
(c) He shall not, while he is employed by the Company and for a period of one year from and after the date that his employment by the Company ceases or terminates for any reason, directly or indirectly, for himself or for any other Person:
(i) acquire or own in any manner any interest in, or loan any amount to, any Person which competes in any manner with the Company or any Affiliate of the Company anywhere in the Territory;
(ii) be employed by or serve as an employee, agent, officer, director or manager of, or as a consultant to, or as an independent contractor or salesperson for, any Person which competes in any manner with the Company or any Affiliate of the Company in the Territory;
(iii) solicit, attempt to solicit, market, sell or provide, or attempt to market, sell or provide, any goods or services to any customer of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such customer has not been a customer of the Company or any Affiliate of the Company for a period of at least one year;
(v) procure goods or services from any supplier or vendor of the Company or any Affiliate of the Company, other than on behalf of the Company or an Affiliate of the Company or unless any such supplier or vendor has not been a supplier or vendor to the Company or any Affiliate of the Company for a period of at least one year;compete in any manner with the Company or any of its Affiliates in the Territory; or
(vi) interfere with, disrupt, or attempt to interfere with or disrupt, any existing relationship, contractual or otherwise, between the Company or any Affiliate of the Company on the one hand, and any of the respective employees, independent contractors, customers, suppliers, vendors or other Persons with which any of the Company or its Affiliates has business relations or deals with on the other.
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The foregoing provisions of this Section 8.1(c) shall not prevent the Executive from acquiring and owning not more than five percent of the equity securities of any Person whose securities are listed for trading on a national securities exchange or are regularly traded in the over-the-counter securities market.
8.2 Independent Agreements. The restrictive covenants set forth in Section 8.1 above (collectively, the “Restrictive Covenants”) shall be construed as agreements independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of the Restrictive Covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefits of the Restrictive Covenants, and that the Restrictive Covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
8.3 Reasonable Restraint. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is a reasonable and necessary restraint of trade and does not violate any applicable laws, rules or regulations, including without limitation the Sherman Antitrust Act, the Florida Antitrust Act or the common law. Each of the Company and the Executive acknowledges that the Company conducts its business activities on a worldwide basis and throughout the Territory. Each of the Company and the Executive acknowledges that each of the Restrictive Covenants is supported by valid and legitimate business interests, including without limitation the need to protect the Confidential Information and Trade Secrets (as such terms are hereinafter defined) of the Company and its Affiliates, and the need to protect the substantial relationships of the Company and its Affiliates with their respective employees and independent contractors, current and prospective customers, and current and prospective vendors, and that the period of restriction set forth in Section 8.1(c) above is essential to the full protection of each of such valid and legitimate business interests.
8.4 Severabilitv. Each of the Company and the Executive agrees that each of the Restrictive Covenants is reasonable and proper with respect to duration, geographical scope, and lines of business. If all or any portion of any of the Restrictive Covenants is held by a court of competent jurisdiction to be unreasonable, arbitrary or against public policy for any reason, then all or such portion of such Restrictive Covenants shall be considered divisible as to duration, geographical scope or lines of business, or may be otherwise narrowed so as to be enforceable. If a court of competent jurisdiction shall determine that a time period, a geographical area or a specified line of business is unreasonable, arbitrary or against public policy for any reason, then a shorter period, a smaller geographical area or a narrower line of business, as shall be determined by such court to be reasonable, non-arbitrary and not against public policy, may be enforced against the Executive by the Company.
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8.5 Certain Policies. The Executive acknowledges that (a) he has been provided with a copy of the Company’s Policies Regarding Electronic Information Systems, Electronic Mail, Internet and Telephone and Other Communications (the “Policies”), (b) he has read the Policies, (c) he has had an opportunity ask questions of and to seek information regarding the Policies, (d) he understands the Policies and (e) he accepts, consents to and agrees to abide by the Policies.
8.6 Assignment of Works. The Executive assigns to the Company or its assigns all of the Executive’s right, title and interest in and to all developments, inventions and ideas made, conceived or reduced to practice solely or jointly by the Executive while engaging in activities within the scope of his employment by the Company, regardless of whether any of such developments, inventions and ideas qualify as intellectual property or were conceived or developed during business hours. The Executive acknowledges and agrees that all original works of authorship that are made with the scope of his employment by the Company and which can be legally protected are “works for hire” under applicable law. The Executive shall notify the Company of all developments, inventions and ideas and to take all actions necessary to enable the Company to seek legal protection for them.
ARTICLE IX
Confidential Information and Trade Secrets
9.1 Certain Definitions.
(a) “Confidential Information” includes information which (a) has been or is developed or is otherwise owned by the Company or any of its Affiliates, whether developed by the Company or an Affiliate of the Company or by any other Person, (b) is not readily available to the public and not generally ascertainable by proper means by the public, (c) if disclosed to the public, would be harmful to the interests of the Company or any Affiliate of the Company, (d) has limited disclosure within the Company or any Affiliate of the Company, or (e) is treated or designated by the Company or any Affiliate of the Company as being confidential. Confidential Information may consist of technical information, including without limitation inventions, formulas, compilations, computer programs, software, databases, methods, purchasing techniques and processes, sales techniques and processes, market data and pricing and discounting practices, as well as business information relating to the financial condition, financial arrangements, business plans or strategies (such as new products and services and plans for sales, marketing, purchasing, distribution, services or promotions), employee training materials, sales manuals, customer needs, contacts, accounts and the like, vendor or supplier lists, vendor or supplier needs, contacts, accounts and the like, personnel, payroll and financial data and records, and any and all data, information, plans, processes, procedures, methods andrecords of any kind or nature whatsoever, regardless of the form of storage medium and wherever located, related in any manner to the Company or any Affiliate of the Company or their respective businesses, operations or affairs or their respective members, managers, directors, officers, employees, agents or independent contractors.
(b) “Trade Secrets” include Confidential Information which is sufficiently secret to derive actual or potential economic value to the Company or an Affiliate of the Company from not being generally known to, and not being readily ascertainable by, the competitors of the Company or an Affiliate of the Company and other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company), which information gives, or has the potential of giving, the Company or any Affiliate of the Company an advantage over the competitors of the Company or any Affiliate of the Company or other Persons (including without limitation the vendors, suppliers and customers of the Company or any Affiliate of the Company) which can obtain economic value from the disclosure or use of the information and which information the Company or any Affiliate of the Company has taken, and will continue to take, reasonable steps to maintain as secret or confidential vis-a-vis its current and potential competitors and other Persons (including without limitation the Company’s vendors, suppliers and customers).
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9.2 Ownership of Confidential Information and Trade Secrets. The Executive acknowledges that, in the course of his relationship with the Company, he has received, used, had access to and became familiar with, or in the future will receive, use, have access to and become familiar with, the Confidential Information and the Trade Secrets which are owned by the Company or by an Affiliate of the Company or which are or will be otherwise used in connection with the current or future business of the Company or an Affiliate of the Company. The Executive acknowledges and agrees that all such Confidential Information and Trade Secrets are and shall remain the sole and exclusive property of the Company or an Affiliate of the Company, as the case may be, and that the covenants set forth in Section 9.3 below are fair and reasonable.
9.3 Non-Disclosure. The Executive shall not, directly or indirectly, at any time disclose to any Person, or take or use for the purposes of any Person, other than the Company or its Affiliates, any Confidential Information or Trade Secrets. The Executive shall not, directly or indirectly, at any time copy or place any Confidential Information or Trade Secrets on to any personal computer or other data collection or storage device that is not owned by the Company or an Affiliate of the Company. The obligations of the Executive set forth in this Section 9.3 apply to, and are intended to prevent, the direct or indirect disclosure of any Confidential Information or Trade Secrets to Persons where such disclosure of the Confidential Information or the Trade Secrets would reasonably be considered to be useful to the competitors of the Company or any of its Affiliates or to any other Person to become a competitor based, in whole or in part, on such Confidential Information or Trade Secrets. Immediately upon the termination of the Executive’s employment by the Company for any reason, the Executive shall deliver to the Company all Confidential Information and Trade Secrets and all Company property then in his possession.
9.4 Independent Agreements. The covenants set forth in Section 9.3 above shall be construed as an agreement independent of any other provision contained in this Agreement, and the existence of any claim or cause of action, whether predicated upon this Agreement or otherwise, against the Company or any of its Affiliates shall not constitute a defense to the enforcement by the Company or any of its Affiliates of any of such covenants. The Executive acknowledges that the Company has fully performed all obligations entitling it to the benefit of the covenants set forth in Section 9.3 above, and that such covenants, therefore, are not executory or otherwise subject to rejection under the Bankruptcy Code of 1978.
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ARTICLE X
Remedies; Survival
10.1 Injunction; Specific Performance. It is recognized and acknowledged by each of the parties that a breach or violation by the Executive of any or all or the provisions contained in this Agreement will cause irreparable harm and damage to the Company and/or its Affiliates in a monetary amount which would be virtually impossible to ascertain. As a result, each of the parties recognizes and acknowledges that the Company and/or its Affiliates shall be entitled to the remedies of injunction and/or specific performance from any court of competent jurisdiction enjoining and restraining any breach or violation by the Executive of any or all of the provisions contained herein and/or requiring the specific performance of any or all of the provisions contained herein, and that such rights to injunction and specific performance shall be cumulative and in addition to whatever other rights and remedies the Company and/or its Affiliates may possess hereunder, at law and in equity.
10.2 Damages. Except as otherwise provided in Article VII above, nothing contained in this Agreement shall be construed to prevent either of the parties from seeking and recovering from the other party damages sustained by it, him or her as a result of the other party’s breach or violation of any or all of the provisions of this Agreement.
10.3 Survival. The provisions of Articles I, VIII, IX, X and XI of this Agreement shall survive indefinitely the expiration of the Term or the termination of the Executive’s employment prior to the expiration of the Term.
ARTICLE XI
Miscellaneous Provisions
11.1 Governing Law. This Agreement shall be governed by, and shall be construed and interpreted in accordance with, the laws of the State of Florida, without giving effect to the conflicts of law provisions thereof.
11.2 Notices. Any and all notices and other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) two days after having been delivered to Federal Express,UPS or another recognized overnight courier or delivery service, (c) when delivered by facsimile transmission, provided that an original copy of such transmission shall be sent by first class mail, postage prepaid, or (d) five days after having been deposited into the United States mail, by registered or certified mail, return receipt requested, postage prepaid, to the respective parties at their respective addresses or to their respective facsimile telephone numbers, as follow:
|
If to the Company:
If to the Executive: |
FreeCast, Inc. 6901 TPC Drive Suite 200 Orlando, Florida 32822 Attention: Chief Executive Officer
Jonathan Morris. 270 W. 17th St Apt. 9E New York, NY 10011 |
or to such other address or facsimile telephone number as either party may from time to time give written notice of to the others pursuant to the foregoing provisions of this Section 11.2. It is specifically understood and agreed by the parties that any notice or other communication given by telephone, email, texting, tweeting or any other form or forms of communication not specifically permitted by subsections (a), (b), (c) or (d) of this Section 11.2 shall not be deemed to be properly delivered for purposes of this Agreement and shall, therefore, be ineffective.
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11.3 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and arrangements, both oral and written, between the parties with respect to such subject matter. Without limiting the generality of the immediately preceding sentence, the Initial Agreement is superseded hereby and the Initial Agreement shall be of no further force or effect. This Agreement may not be amended or modified in any manner, except by a written instrument executed by each of the parties.
11.4 Company agrees that at all times during the term of this Agreement the Company shall maintain Directors and Officers Liability Insurance (with a reasonable policy limit based upon typical policy limits for similarly situated companies). Company further agrees that it shall indemnify the Executive for any actions taken in the course and scope of your employment.
11.5 Benefits; Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, the parties hereto and their respective heirs, personal representatives, executors, legal representatives, successors and assigns.
11.6 Jurisdiction and Venue; Service of Process; Waiver of Trial by Jury. If any dispute, controversy, suit, action or proceeding shall arise between the parties, then such dispute, controversy, suit, action or proceeding may only be brought for resolution in the United States District Court for the Middle District of Florida, Orlando Division, or in the Judicial Circuit Court in and for Orange County, Florida. Each of the parties consents to the jurisdiction and venue of such courts, and agrees that it or he shall not contest or challenge the jurisdiction or venue of such courts. Each of the parties agrees that service of any process, summons, notice or document, by United States registered or certified mail, to its or her address set forth in or as provided herein shall be effective service of process forany suit, action or proceeding brought against it or him in any such court. In recognition of the fact that the issues which would arise under this Agreement are of such a complex nature that they could not be properly tried before a jury, each of the parties waives trial by jury.
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11.6 No Waivers. The waiver by either party of a breach or violation of any provision of this Agreement by the other party shall not operate nor be construed as a waiver of any subsequent breach or violation. The waiver by either party to exercise any right or remedy it or he may possess shall not operate nor be construed as a bar to the exercise of such right or remedy by such party upon the occurrence of any subsequent breach or violation.
11.7 Third Party Beneficiaries. The Executive acknowledges and agrees that each and every present and future Affiliate of the Company shall be entitled, as a third party beneficiary, to the rights and benefits of the representations, warranties, covenants and agreements of the Executive set forth in this Agreement. Nothing contained in this Section 11.7 shall prohibit the modification of this Agreement by the Company and the Executive in accordance with the provisions hereof.
11.8 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of any or all of the provisions hereof.
11.9 Counterparts. This Agreement may be executed in any number of counterparts and by the separate parties in separate counterparts, each of which shall be deemed to constitute an original and all of which shall be deemed to constitute the one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed and delivered this Agreement as of the date first written above.
| FreeCast, Inc. | ||
| /s/ William A. Mobley, Jr. | /s/ Jonathan Morris | |
| William A. Mobley, Jr., | Jonathan Morris | |
| Chief Executive Officer |
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ADDENDUM “A”
EMPLOYMENT AGREEMENT
Executive Convertible Option:
Executive may elect to forgo a pro-rated portion of his annual salary in leu of a convertible option into company Warrants as described herein and under the terms as described within ARTICLE V item 5.1 of this Employment Agreement.
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Exhibit 10.22(a)
FREECAST, INC.
2021 INCENTIVE AWARD PLAN
ARTICLE I.
PURPOSE
The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities.
ARTICLE II.
DEFINITIONS
As used in the Plan, the following words and phrases have the meanings specified below, unless the context clearly indicates otherwise:
2.1 “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee. With reference to the Board’s or a Committee’s powers or authority under the Plan that have been delegated to one or more officers pursuant to Section 4.2, the term “Administrator” shall refer to such officer(s) unless and until such delegation has been revoked.
2.2 “Applicable Law” means any applicable law, including without limitation: (a) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether U.S. or non-U.S. federal, state, or local; and (c) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
2.3 “Automatic Exercise Date” shall mean, with respect to an Option or a Stock Appreciation Right, the last business day of the applicable Option Term or Stock Appreciation Right Term that was initially established by the Administrator for such Option or Stock Appreciation Right (e.g., the last business day prior to the tenth anniversary of the date of grant of such Option or Stock Appreciation Right if the Option or Stock Appreciation Right initially had a ten-year Option Term or Stock Appreciation Right Term, as applicable).
2.4 “Award” means an Option, Stock Appreciation Right, Restricted Stock award, Restricted Stock Unit award, Performance Bonus Award, Performance Stock Unit award, Dividend Equivalents award or Other Stock or Cash Based Award granted to a Participant under the Plan.
2.5 “Award Agreement” means an agreement evidencing an Award, which may be written or electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.
2.6 “Board” means the Board of Directors of the Company.
2.7 “Cause” means, if the Participant is a party to a written employment or consulting agreement with the Company or any of its Subsidiaries or an Award Agreement in which the term “cause” is defined, “Cause” shall be as defined in such agreement, or if no such agreement exists: (a) any willful, material violation by the Participant of any law or regulation applicable to the business of the Company or a Subsidiary or other affiliate of the Company; (b) the Participant’s conviction for, or plea of guilty or no contest to, a felony (or crime of similar magnitude under Applicable Law outside the United States) or a crime involving fraud, deception, moral turpitude, or any willful perpetration or act by the Participant involving malfeasance, breach of fiduciary duties or other common law fraud; (c) the Participant’s commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company; (d) any material breach or violation by the Participant of any provision of any agreement or understanding between the Company or any Subsidiary or other affiliate of the Company and the Participant regarding the terms of the Participant’s service as an employee, officer, director or consultant to the Company or a Subsidiary or other affiliate of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, officer, director or consultant of the Company or a Subsidiary or other affiliate of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company or a Subsidiary or other affiliate of the Company and the Participant; (e) the Participant’s violation of the Company’s code of ethics; (f) the Participant’s disregard of the policies of the Company or any Subsidiary or other affiliate of the Company so as to cause loss, harm, damage or injury to the property, reputation or employees of the Company or a Subsidiary or other affiliate of the Company; or (g) any other conduct by the Participant which is injurious to the financial condition or business reputation of, or that brings or is reasonably likely to bring, the Company or a Subsidiary or other affiliate of the Company negative publicity or into public disgrace, embarrassment, or disrepute.
2.8 “Change in Control” means any of the following:
(a) A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of the Company’s securities possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition by the Company or any of its Subsidiaries; (ii) any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries; (iii) any acquisition which complies with Sections 2.8(c)(i), 2.8(c)(ii) and 2.8(c)(iii); or (iv) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant);
(b) The Incumbent Directors cease for any reason to constitute a majority of the Board;
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(c) The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions, or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:
(i) which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction;
(ii) after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 2.8(c)(ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and
(iii) after which at least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or
(d) The completion of a liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) of this Section 2.8 with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
The Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.
2.9 “Code” means the U.S. Internal Revenue Code of 1986, as amended, and all regulations, guidance, compliance programs and other interpretative authority issued thereunder.
2.10 “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent permitted by Applicable Law. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
2.11 “Common Stock” means the common stock of the Company.
2.12 “Company” means FreeCast, Inc., a Florida corporation, or any successor.
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2.13 “Consultant” means any person, including any adviser, engaged by the Company or a Subsidiary to render services to such entity if the consultant or adviser: (a) renders bona fide services to the Company or a Subsidiary; (b) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (c) is a natural person.
2.14 “Designated Beneficiary” means, if permitted by the Company, the beneficiary or beneficiaries the Participant designates, in a manner the Company determines, to receive amounts due or exercise the Participant’s rights if the Participant dies. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate or legal heirs.
2.15 “Director” means a Board member.
2.16 “Disability” means a permanent and total disability under Section 22(e)(3) of the Code.
2.17 “Dividend Equivalents” means a right granted to a Participant to receive the equivalent value (in cash or Shares) of dividends paid on a specified number of Shares. Such Dividend Equivalent shall be converted to cash or additional Shares, or a combination of cash and Shares, by such formula and at such time and subject to such limitations as may be determined by the Administrator.
2.18 “DRO” means a “domestic relations order” as defined by the Code or Title I of the U.S. Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.
2.19 “Effective Date” means June 25, 2021.
2.20 “Employee” means any employee of the Company or any of its Subsidiaries.
2.21 “Equity Restructuring” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split (including a reverse stock split), spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.
2.22 “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and all regulations, guidance and other interpretative authority issued thereunder.
2.23 “Fair Market Value” means, as of any date, the value of a Share determined as follows: (a) if the Common Stock is listed on any established stock exchange, the value of a Share will be the closing sales price for a Share as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (b) if the Common Stock is not listed on an established stock exchange but is quoted on a national market or other quotation system, the value of a Share will be the closing sales price for a Share on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (c) if the Common Stock is not listed on any established stock exchange or quoted on a national market or other quotation system, the value established by the Administrator in good faith using established methods. Notwithstanding the foregoing, with respect to any Award granted on or after the effectiveness of the Company’s registration statement relating to its initial public offering and prior to the Public Trading Date, the Fair Market Value means the initial public offering price of a Share as set forth in the Company’s final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.
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2.24 “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any parent corporation or subsidiary corporation of the Company, as determined in accordance with in Section 424(e) and (f) of the Code, respectively.
2.25 “Incentive Stock Option” means an Option that meets the requirements to qualify as an “incentive stock option” as defined in Section 422 of the Code.
2.26 “Incumbent Directors” means, for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.8(a) or 2.8(c)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) of the Directors then still in office who either were Directors at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.
2.27 “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.
2.28 “Option” means a right granted under Article VI to purchase a specified number of Shares at a specified price per Share during a specified time period. An Option may be either an Incentive Stock Option or a Nonqualified Stock Option.
2.29 “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.
2.30 “Overall Share Limit” means the sum of 6,000,000 Shares.
2.31 “Participant” means a Service Provider who has been granted an Award.
2.32 “Performance Bonus Award” has the meaning set forth in Section 8.3.
2.33 “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.1 and subject to Section 8.2, to receive Shares, the payment of which is contingent upon achieving certain performance goals or other performance-based targets established by the Administrator.
2.34 “Permitted Transferee” means, with respect to a Participant, any “family member” of the Participant, as defined in the General Instructions to Form S-8 Registration Statement under the Securities Act (or any successor form thereto), or any other transferee specifically approved by the Administrator after taking into account Applicable Law.
2.35 “Plan” means this 2021 Incentive Award Plan.
2.38 “Public Trading Date” means the first date upon which Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.
2.39 “Restricted Stock” means Shares awarded to a Participant under Article VII, subject to certain vesting conditions and other restrictions.
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2.40 “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.
2.41 “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.
2.42 “Section 409A” means Section 409A of the Code.
2.43 “Securities Act” means the U.S. Securities Act of 1933, as amended, and all regulations, guidance and other interpretative authority issued thereunder.
2.44 “Service Provider” means an Employee, Consultant or Director.
2.45 “Shares” means shares of Common Stock.
2.46 “Stock Appreciation Right” or “SAR” means a right granted under Article VI to receive a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date the right is exercised over the exercise price set forth in the applicable Award Agreement.
2.47 “Subsidiary” means any entity (other than the Company), whether U.S. or non-U.S., in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.
2.48 “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company or other entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.
2.49 “Tax-Related Items” means any U.S. and non-U.S. federal, state and/or local taxes (including, without limitation, income tax, social insurance contributions, fringe benefit tax, employment tax, stamp tax and any employer tax liability which has been transferred to a Participant) for which a Participant is liable in connection with Awards and/or Shares.
2.50 “Termination of Service” means:
(a) As to a Consultant, the time when the engagement of a Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without Cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
(b) As to a Non-Employee Director, the time when a Participant who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Participant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
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(c) As to an Employee, the time when the employee-employer relationship between a Participant and the Company or any Subsidiary is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, Disability or retirement; but excluding terminations where the Participant simultaneously commences or remains in employment or service with the Company or any Subsidiary.
The Company, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, whether a Termination of Service has occurred, whether a Termination of Service resulted from a discharge for Cause and all questions of whether particular leaves of absence constitute a Termination of Service. For purposes of the Plan, a Participant’s employee-employer relationship or consultancy relationship shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Participant ceases to remain a Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off), even though the Participant may subsequently continue to perform services for that entity.
ARTICLE III.
ELIGIBILITY
Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein. No Service Provider shall have any right to be granted an Award pursuant to the Plan and neither the Company nor the Administrator is obligated to treat Service Providers, Participants or any other persons uniformly.
ARTICLE IV.
ADMINISTRATION AND DELEGATION
4.1 Administration.
(a) The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions, reconcile inconsistencies in the Plan or any Award and make all other determinations that it deems necessary or appropriate to administer the Plan and any Awards. The Administrator (and each member thereof) is entitled to, in good faith, rely or act upon any report or other information furnished to it, him or her by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. The Administrator’s determinations under the Plan are in its sole discretion and will be final, binding and conclusive on all persons having or claiming any interest in the Plan or any Award.
(b) Without limiting the foregoing, the Administrator has the exclusive power, authority and sole discretion to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant; (iii) determine the number of Awards to be granted and the number of Shares to which an Award will relate; (iv) subject to the limitations in the Plan, determine the terms and conditions of any Award and related Award Agreement, including, but not limited to, the exercise price, grant price, purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations, waivers or amendments thereof; (v) determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, or other property, or an Award may be canceled, forfeited, or surrendered; and (vi) make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.
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4.2 Delegation of Authority. To the extent permitted by Applicable Law, the Board or any Committee may delegate any or all of its powers under the Plan to one or more Committees or officers of the Company or any of its Subsidiaries; provided,however, that in no event shall an officer of the Company or any of its Subsidiaries be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, or (b) officers of the Company or any of its Subsidiaries or Directors to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation or that are otherwise included in the applicable organizational documents, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 4.2shall serve in such capacity at the pleasure of the Board or the Committee, as applicable, and the Board or the Committee may abolish any committee at any time and re-vest in itself any previously delegated authority. Further, regardless of any delegation, the Board or a Committee may, in its discretion, exercise any and all rights and duties as the Administrator under the Plan delegated thereby, except with respect to Awards that are required to be determined in the sole discretion of the Committee under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.
ARTICLE V.
STOCK AVAILABLE FOR AWARDS
5.1 Number of Shares. Subject to adjustment under Article IX and the terms of this Article V, Awards may be made under the Plan covering up to the Overall Share Limit. Shares issued or delivered under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.
5.2 Share Recycling.
(a) If all or any part of an Award expires, lapses or is terminated, converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award, the unused Shares covered by the Award will become or again be available for Awards under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards shall not count against the Overall Share Limit.
(b) In addition, the following Shares shall be available for future grants of Awards: (i) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award; and (ii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof. Notwithstanding the provisions of this Section 5.2(b), no Shares may again be optioned, granted or awarded pursuant to an Incentive Stock Option if such action would cause such Option to fail to qualify as an incentive stock option under Section 422 of the Code.
5.3 Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 6,000,000 Shares (as adjusted to reflect any Equity Restructuring) may be issued pursuant to the exercise of Incentive Stock Options.
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5.4 Substitute Awards. In connection with an entity’s merger or consolidation with the Company or any Subsidiary or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms and conditions as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards may again become available for Awards under the Plan as provided under Section 5.2 above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or any of its Subsidiaries prior to such acquisition or combination.
5.5 Non-Employee Director Award Limit. Notwithstanding any provision to the contrary in the Plan or in any policy of the Company regarding non-employee director compensation, the sum of the grant date fair value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all equity-based Awards and the maximum amount that may become payable pursuant to all cash-based Awards that may be granted to a Service Provider as compensation for services as a Non-Employee Director during any calendar year shall not exceed $50,000.
ARTICLE VI.
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 General. The Administrator may grant Options or Stock Appreciation Rights to one or more Service Providers, subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value on the date of exercise or a combination of the two as the Administrator may determine or provide in the Award Agreement.
6.2 Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. Subject to Section 6.7, the exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Section 424 and 409A of the Code.
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6.3 Duration of Options. Subject to Section 6.7, each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years; provided, further, that, unless otherwise specified in the Award Agreement: (a) no portion of an Option or Stock Appreciation Right which is unexercisable at a Participant’s Termination of Service shall thereafter become exercisable; and (b) the portion of an Option or Stock Appreciation Right that is unexercisable at a Participant’s Termination of Service shall automatically expire on the date of such Termination of Service. In addition, in no event shall an Option or Stock Appreciation Right granted to an Employee who is a non-exempt employee for purposes of overtime pay under the U.S. Fair Labor Standards Act of 1938 be exercisable earlier than six months after its date of grant. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, commits an act of Cause (as determined by the Administrator), or violates any non-competition, non-solicitation or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, the right to exercise the Option or Stock Appreciation Right, as applicable, shall be terminated, unless otherwise determined by the Administrator and the Administrator may suspend the Participant’s right to exercise the Option or Stock Appreciation Right when it reasonably believes that the Participant may have participated in any such act or violation.
6.4 Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company (or such other person or entity designated by the Administrator) a notice of exercise, in a form and manner the Company approves (which may be written, electronic or telephonic and may contain representations and warranties deemed advisable by the Administrator), signed or authenticated by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable: (a) payment in full of the exercise price for the number of Shares for which the Option is exercised in a manner specified in Section 6.5; and (b) satisfaction in full of any withholding obligation for Tax-Related Items in a manner specified in Section 10.5. The Administrator may, in its discretion, require that any partial exercise of an Option or Stock Appreciation Right be with respect to a minimum number of Shares.
6.5 Payment Upon Exercise. The Administrator shall determine the methods by which payment of the exercise price of an Option shall be made, including, without limitation:
(a) Cash, check or wire transfer of immediately available funds; provided that the Company may limit the use of one of the foregoing methods if one or more of the methods below is permitted;
(b) If there is a public market for Shares at the time of exercise, unless the Company otherwise determines: (i) delivery (including electronically or telephonically to the extent permitted by the Company) of a notice that the Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option and that the broker has been directed to deliver promptly to the Company funds sufficient to pay the exercise price; or (ii) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company an amount sufficient to pay the exercise price by cash, wire transfer of immediately available funds or check; provided that such amount is paid to the Company at such time as may be required by the Company;
(c) To the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value on the date of delivery;
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(d) To the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;
(e) To the extent permitted by the Administrator, delivery of a promissory note or any other lawful consideration; or
(f) To the extent permitted by the Administrator, any combination of the above payment forms.
6.6 Expiration of Option Term or SAR Term: Automatic Exercise of In-The-Money Options and Stock Appreciation Rights. Unless otherwise provided by the Administrator in an Award Agreement or otherwise or as otherwise directed by a holder of Option or Stock Appreciation Rights in writing to the Company, each vested and exercisable Option and Stock Appreciation Right outstanding on the Automatic Exercise Date with an exercise price per Share that is less than the Fair Market Value per Share as of such date shall automatically and without further action by the holder of the Option or Stock Appreciation Rights or the Company be exercised on the Automatic Exercise Date. In the sole discretion of the Administrator, payment of the exercise price of any such Option shall be made pursuant to Section 6.5(b) or 6.5(d) and the Company or any Subsidiary shall be entitled to deduct or withhold an amount sufficient to satisfy any withholding obligation for Tax-Related Items associated with such exercise in accordance with Section 10.5. Unless otherwise determined by the Administrator, this Section 6.6 shall not apply to an Option or Stock Appreciation Right if the holder of such Option or Stock Appreciation Right incurs a Termination of Service on or before the Automatic Exercise Date. For the avoidance of doubt, no Option or Stock Appreciation Right with an exercise price per Share that is equal to or greater than the Fair Market Value per Share on the Automatic Exercise Date shall be exercised pursuant to this Section 6.6.
6.7 Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to Employees, and any employees of the Company’s future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options (and Award Agreements related thereto) will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within: (a) two years from the grant date of the Option; or (b) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Nonqualified Stock Option.
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6.8 Termination of Service. Unless otherwise provided by the Administrator in an Award Agreement or in an employment agreement the terms of which have been approved by the Administrator, in the event a Participant incurs a Termination of Service:
(a) other than upon the Participant’s death or Disability, the Participant may exercise his or her Option or Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Option or Stock Appreciation Right as of the date of Termination of Service) but only within such period of time ending on the earlier of: (i) the date three months following the Participant’s date of Termination of Service; or (ii) the expiration of the term of the Option or Stock Appreciation Right as set forth in the applicable Award Agreement; provided, however, that if a Participant incurs a Termination of Service for Cause, all outstanding Options or Stock Appreciation Rights (whether or not vested) shall immediately terminate and cease to be exercisable; provided, further, however, if, after such Termination of Service, the Participant does not exercise his or her Option or Stock Appreciation Right within the time specified above, the applicable Option or Stock Appreciation Right shall terminate;
(b) as a result of the Participant’s Disability, the Participant may exercise his or her Option or Stock Appreciation Right (to the extent that the Participant was entitled to exercise such Option or Stock Appreciation Right as of the date of termination), but only within such period of time ending on the earlier of: (i) the date 12 months following the Participant’s date of Termination of Service; or (ii) the expiration of the term of the Option or Stock Appreciation Right as set forth in the applicable Award Agreement; provided, however, if, after such Termination of Service, the Participant does not exercise his or her Option or Stock Appreciation Right within the time specified above, the applicable Option or Stock Appreciation Right shall terminate; or
(c) as a result of the Participant’s death, then the Option or Stock Appreciation Right may be exercised (to the extent the Participant was entitled to exercise such Option or Stock Appreciation Right as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or Stock Appreciation Right by bequest or inheritance or by a person designated to exercise the Option or Stock Appreciation Right upon the Participant ’s death, but only within the period ending on the earlier of: (i) the date 12 months following the date of death; or (b) the expiration of the term of such Option or Stock Appreciation Right as set forth in the applicable Award Agreement; provided, however, if, after such Termination of Service, the applicable Option or Stock Appreciation Right is not exercised within the time specified above, the applicable Option or Stock Appreciation Right shall terminate.
ARTICLE VII.
RESTRICTED STOCK; RESTRICTED STOCK UNITS
7.1 General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to forfeiture or the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement, to Service Providers. The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock and Restricted Stock Units; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock and Restricted Stock Units to the extent required by Applicable Law. The Award Agreement for each Award of Restricted Stock and Restricted Stock Units shall set forth the terms and conditions not inconsistent with the Plan as the Administrator shall determine.
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7.2 Restricted Stock.
(a) Stockholder Rights. Unless otherwise determined by the Administrator, each Participant holding shares of Restricted Stock will be entitled to all the rights of a stockholder with respect to such Shares, subject to the restrictions in the Plan and the applicable Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares to the extent such dividends and other distributions have a record date that is on or after the date on which such Participant becomes the record holder of such Shares; provided, however, that with respect to a share of Restricted Stock subject to restrictions or vesting conditions, except in connection with a spin-off or other similar event as otherwise permitted under Section 9.2, dividends which are paid to Company stockholders prior to the removal of restrictions and satisfaction of vesting conditions shall only be paid to the Participant to the extent that the restrictions are subsequently removed and the vesting conditions are subsequently satisfied and the share of Restricted Stock vests.
(b) Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.
(c) Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which such Participant would otherwise be taxable under Section 83(a) of the Code, such Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof.
7.3 Restricted Stock Units. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, subject to compliance with Applicable Law.
ARTICLE VIII.
OTHER TYPES OF AWARDS
8.1 General. The Administrator may grant Performance Stock Unit awards, Performance Bonus Awards, Dividend Equivalents or Other Stock or Cash Based Awards, to one or more Service Providers, in such amounts and subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine.
8.2 Performance Stock Unit Awards. Each Performance Stock Unit award shall be denominated in a number of Shares or in unit equivalents of Shares or units of value (including a dollar value of Shares) and may be linked to any one or more of performance or other specific criteria, including service to the Company or Subsidiaries, determined to be appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. In making such determinations, the Administrator may consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.
8.3 Performance Bonus Awards. Each right to receive a bonus granted under this Section 8.3 shall be denominated in the form of cash (but may be payable in cash, stock or a combination thereof) (a “Performance Bonus Award”) and shall be payable upon the attainment of performance goals that are established by the Administrator and relate to one or more of performance or other specific criteria, including service to the Company or Subsidiaries, in each case on a specified date or dates or over any period or periods determined by the Administrator.
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8.4 Dividend Equivalents. If the Administrator provides, an Award (other than an Option or Stock Appreciation Right) may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, Dividend Equivalents with respect to an Award subject to vesting shall either: (a) to the extent permitted by Applicable Law, not be paid or credited; or (b) be accumulated and subject to vesting to the same extent as the related Award. All such Dividend Equivalents shall be paid at such time as the Administrator shall specify in the applicable Award Agreement.
8.5 Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive cash or Shares to be delivered in the future and annual or other periodic or long-term cash bonus awards (whether based on specified performance criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal(s), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement. Except in connection with a spin-off or other similar event as otherwise permitted under Article IX, dividends that are paid prior to vesting of any Other Stock or Cash Based Award shall only be paid to the applicable Participant to the extent that the vesting conditions are subsequently satisfied and the Other Stock or Cash Based Award vests.
ARTICLE IX.
ADJUSTMENTS FOR CHANGES IN COMMON STOCK
AND CERTAIN OTHER EVENTS
9.1 Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article IX the Administrator will equitably adjust the terms of the Plan and each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include: (a) adjusting the number and type of securities subject to each outstanding Award or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares that may be issued); (b) adjusting the terms and conditions of (including the grant or exercise price), and the performance goals or other criteria included in, outstanding Awards; and (c) granting new Awards or making cash payments to Participants. The adjustments provided under this Section 9.1 will be nondiscretionary and final and binding on all interested parties, including the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.
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9.2 Corporate Transactions. In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, split-up, spin off, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Law or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Law or accounting principles:
(a) To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;
(b) To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares (or other property) covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;
(c) To provide that such Award be assumed by the successor or survivor corporation or entity, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation or entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;
(d) To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares which may be issued) or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;
(e) To replace such Award with other rights or property selected by the Administrator; or
(f) To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.
9.3 Change in Control.
(a) Notwithstanding any other provision of the Plan, in the event of a Change in Control, unless the Administrator elects to: (i) terminate an Award in exchange for cash, rights or property; or (ii) cause an Award to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a Change in Control, pursuant to Section 9.2: (A) such Award (other than any portion subject to performance-based vesting) shall continue in effect or be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation; and (B) the portion of such Award subject to performance-based vesting shall be subject to the terms and conditions of the applicable Award Agreement and, in the absence of applicable terms and conditions, the Administrator’s discretion.
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(b) In the event that the successor corporation in a Change in Control refuses to assume or substitute for an Award (other than any portion subject to performance-based vesting), the Administrator shall cause such Award to become fully vested and, if applicable, exercisable immediately prior to the consummation of such transaction and all forfeiture restrictions on such Award to lapse and, to the extent unexercised upon the consummation of such transaction, to terminate in exchange for cash, rights or other property. The Administrator shall notify the Participant of any Award that becomes exercisable pursuant to the preceding sentence that such Award shall be fully exercisable for a period of 15 days from the date of such notice, contingent upon the occurrence of the Change in Control, and such Award shall terminate upon the consummation of the Change in Control in accordance with the preceding sentence.
(c) For the purposes of this Section 9.3, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per-share consideration received by holders of Common Stock in the Change in Control.
9.4 Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock (including any Equity Restructuring or any securities offering or other similar transaction) or for reasons of administrative convenience or to facilitate compliance with any Applicable Law, the Company may refuse to permit the exercise or settlement of one or more Awards for such period of time as the Company may determine to be reasonably appropriate under the circumstances.
9.5 General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 9.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business; (b) any merger, consolidation, spinoff, dissolution or liquidation of the Company or sale of Company assets; or (c) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares.
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ARTICLE X.
PROVISIONS APPLICABLE TO AWARDS
10.1 Transferability.
(a) No Award may be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, in its sole discretion, pursuant to a DRO, unless and until such Award has been exercised or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed. During the life of a Participant, Awards will be exercisable only by the Participant, unless it has been disposed of pursuant to a DRO. After the death of a Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-Applicable Law of descent and distribution. References to a Participant, to the extent relevant in the context, will include references to a transferee approved by the Administrator.
(b) Notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant or a Permitted Transferee of such Participant to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is intended to become a Nonqualified Stock Option) to any one or more Permitted Transferees of such Participant, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than: (A) to another Permitted Transferee of the applicable Participant; or (B) by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award to any person other than another Permitted Transferee of the applicable Participant); (iii) the Participant (or transferring Permitted Transferee) and the receiving Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to: (A) confirm the status of the transferee as a Permitted Transferee; (B) satisfy any requirements for an exemption for the transfer under Applicable Law; and (C) evidence the transfer; and (iv) any transfer of an Award to a Permitted Transferee shall be without consideration, except as required by Applicable Law. In addition, and further notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant to transfer Incentive Stock Options to a trust that constitutes a Permitted Transferee if, under Section 671 of the Code and other Applicable Law, the Participant is considered the sole beneficial owner of the Incentive Stock Option while it is held in the trust.
(c) Notwithstanding Section 10.1(a), if permitted by the Administrator, a Participant may, in the manner determined by the Administrator, designate a Designated Beneficiary. A Designated Beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant and any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Participant’s spouse or domestic partner, as applicable, as the Participant’s Designated Beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse or domestic partner. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time; provided that the change or revocation is delivered in writing to the Administrator prior to the Participant’s death.
10.2 Documentation. Each Award will be evidenced in an Award Agreement in such form as the Administrator determines in its discretion. Each Award may contain such terms and conditions as are determined by the Administrator in its sole discretion, to the extent not inconsistent with those set forth in the Plan.
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10.3 Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.
10.4 Changes in Participant’s Status. Except to the extent otherwise provided in this Plan, including Article 6, or an Award Agreement, the Administrator will determine how a change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant may exercise rights under the Award, if applicable. Except to the extent otherwise required by Applicable Law or expressly authorized by the Company or by the Company’s written policy on leaves of absence, no service credit shall be given for vesting purposes for any period the Participant is on a leave of absence.
10.5 Withholding.
(a) Each Participant must pay the Company or a Subsidiary, as applicable, or make provision satisfactory to the Administrator for payment of, any Tax-Related Items required by Applicable Law to be withheld in connection with such Participant’s Awards and/or Shares by the date of the event creating the liability for Tax-Related Items.
(b) At the Company’s discretion and subject to any Company insider trading policy (including black-out periods), any withholding obligation for Tax-Related Items may be satisfied by: (i) deducting an amount sufficient to satisfy such withholding obligation from any payment of any kind otherwise due to a Participant; (ii) accepting a payment from the Participant in cash, by wire transfer of immediately available funds, or by check made payable to the order of the Company or a Subsidiary, as applicable; (iii) accepting the delivery of Shares, including Shares delivered by attestation; (iv) retaining Shares from the Award creating the withholding obligation for Tax-Related Items, valued on the date of delivery; (v) if there is a public market for Shares at the time the withholding obligation for Tax-Related Items is satisfied, selling Shares issued pursuant to the Award creating the withholding obligation for Tax-Related Items, either voluntarily by the Participant or mandatorily by the Company; (vi) accepting delivery of a promissory note or any other lawful consideration; or (vii) any combination of the foregoing payment forms. The amount withheld pursuant to any of the foregoing payment forms shall be determined by the Company and may be up to, but no greater than, the aggregate amount of such obligations based on the maximum statutory withholding rates in the applicable Participant’s jurisdiction for all Tax-Related Items that are applicable to such taxable income.
(c) If any tax withholding obligation will be satisfied under clause (v) of Section 10.5(b), each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to any brokerage firm selected by the Company to effect the sale to complete the transactions described in such clause (v).
10.6 Amendment of Award; Repricing. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Nonqualified Stock Option. The Participant’s consent to such action will be required unless: (a) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award; or (b) the change is permitted under Article IX or pursuant to Section 11.6. In addition, the Administrator shall, without the approval of the stockholders of the Company, have the authority to: (i) amend any outstanding Option or Stock Appreciation Right to reduce its exercise price per Share; or (ii) cancel any Option or Stock Appreciation Right in exchange for cash or another Award.
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10.7 Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until: (a) all Award conditions have been met or removed to the Company’s satisfaction; (b) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including, without limitation, any applicable securities laws and stock exchange or stock market rules and regulations; (c) any approvals from governmental agencies that the Company determines are necessary or advisable have been obtained, and (d) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy Applicable Law. The inability or impracticability of the Company to obtain or maintain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained, and shall constitute circumstances in which the Administrator may determine to amend or cancel Awards pertaining to such Shares, with or without consideration to the Participant.
10.8 Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.
ARTICLE XI.
MISCELLANEOUS
11.1 No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continue employment or any other relationship with the Company or a Subsidiary. The Company and its Subsidiaries expressly reserve the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or other written agreement between the Participant and the Company or any Subsidiary.
11.2 No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Law requires, the Company will not be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on any share certificate or book entry to reference restrictions applicable to the Shares (including, without limitation, restrictions applicable to Restricted Stock).
11.3 Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of an Incentive Stock Option, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within 12 months before or after the date the Plan is adopted by the Board. No Incentive Stock Option may be granted pursuant to the Plan after the tenth anniversary of the earlier of: (a) the date the Plan was approved by the Board; and (b) the date the Plan was approved by the Company’s shareholders.
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11.4 Amendment of Plan. The Board may amend, suspend or terminate the Plan at any time and from time to time; provided that (a) no amendment requiring stockholder approval to comply with Applicable Law shall be effective unless approved by the Board, and (b) no amendment, other than an increase to the Overall Share Limit or pursuant to Article IX or Section 11.6, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after Plan termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Law.
11.5 Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are nationals of a country other than the United States or employed or residing outside the United States, establish subplans or procedures under the Plan or take any other necessary or appropriate action to address Applicable Law, including: (a) differences in laws, rules, regulations or customs of such jurisdictions with respect to tax, securities, currency, employee benefit or other matters; (b) listing and other requirements of any non-U.S. securities exchange; and (c) any necessary local governmental or regulatory exemptions or approvals.
11.6 Section 409A.
(a) General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 11.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.
(b) Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a Participant’s Termination of Service will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the Participant’s Termination of Service. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”
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(c) Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.
11.7 Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer or other employee of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer or other employee of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer or other employee of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith; provided that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.
11.8 Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.
11.9 Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary), the Plan will govern, unless such Award Agreement or other written agreement was approved by the Administrator and expressly provides that a specific provision of the Plan will not apply.
11.10 Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Florida, without regard to the conflict of law rules thereof or of any other jurisdiction.
11.11 Clawback Provisions. All Awards (including the gross amount of any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to recoupment by the Company to the extent required to comply with Applicable Law or any policy of the Company providing for the reimbursement of incentive compensation, whether or not such policy was in place at the time of grant of an Award.
11.12 Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.
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11.13 Conformity to Applicable Law. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Law. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in a manner intended to conform with Applicable Law. To the extent Applicable Law permits, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Law.
11.14 Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary, except as expressly provided in writing in such other plan or an agreement thereunder.
11.15 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.
11.16 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
11.17 No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
11.18 Prohibition on Executive Officer Loans. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.
11.19 Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under Section 10.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all Participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.
As adopted by the Board of Directors of FreeCast, Inc. on June 25, 2021.
As approved by the shareholders of FreeCast, Inc. on [ ], 2021.
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Exhibit 10.22(b)
FREECAST, INC.
2021 INCENTIVE AWARD PLAN
STOCK OPTION GRANT NOTICE
FreeCast, Inc., a Florida corporation, (the “Company”), pursuant to its 2021 Incentive Award Plan, as may be amended from time to time (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of Common Stock (the “Shares”), set forth below (the “Option”). The Option is subject to all of the terms and conditions set forth herein, as well as in the Plan and the Stock Option Agreement attached hereto as Exhibit A (the “Agreement”), each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Agreement.
| Participant: | [ ] | |
| Grant Date: | [ ] | |
| Vesting Commencement Date: | [ ] (First day of the month following the six month anniversary of the date of hire for new hires) | |
| Number of Shares Subject to the Option (“Option Shares”): | [ ] | |
| Exercise Price per Share: | $[ ] | |
| Total Exercise Price: | [ ] | |
| Expiration Date: | [ ] | |
| Vesting Schedule: | 1/36th of the Option Shares on the first day of each month, beginning on the Vesting Commencement Date and continuing each successive month until the Option is 100% vested. | |
| Type of Option: | ☐ Incentive Stock Option | ☐ Nonqualified Stock Option |
By Participant’s acceptance, Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. Participant has reviewed the Plan, the Agreement and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to Participant’s acceptance and fully understands all provisions of the Plan, the Agreement and this Grant Notice. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, the Agreement or this Grant Notice.
| FREECAST, INC.: | PARTICIPANT: | |||
| By: | ||||
| William Mobley, Jr., CEO | Print Name: | |||
EXHIBIT A
TO STOCK OPTION GRANT NOTICE
STOCK OPTION AGREEMENT
Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, FreeCast, Inc., a Florida corporation (the “Company”), has granted to the Participant an Option under the Company’s 2021 Incentive Award Plan, as may be amended from time to time (the “Plan”), to purchase the number of Shares indicated in the Grant Notice.
ARTICLE 1.
GENERAL
1.1 Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.
1.2 Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.
ARTICLE 2.
GRANT OF OPTION
2.1 Grant of Option. Effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to the Participant the Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement, subject to adjustments as provided in Article IX of the Plan. Unless designated as a Nonqualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.
2.2 Exercise Price. The exercise price of the Shares subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the price per share of the Shares subject to the Option shall not be less than 100% of the Fair Market Value of a Share on the Grant Date. Notwithstanding the foregoing, if the Option is designated as an Incentive Stock Option and the Participant is a Greater Than 10% Stockholder as of the Grant Date, the exercise price per share of the Shares subject to the Option shall not be less than 110% of the Fair Market Value of a Share on the Grant Date.
ARTICLE 3.
PERIOD OF EXERCISABILITY
3.1 Commencement of Exercisability.
(a) Subject to Sections 3.2, 3.3, 5.7 and 5.12 hereof, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.
(b) No portion of the Option which has not become vested and exercisable at the Termination Date (as defined below) shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and the Participant. For the avoidance of doubt, employment or service during only a portion of the vesting period shall not entitle the Participant to vest in a pro-rata portion of the Option.
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(c) Notwithstanding Section 3.1(a) hereof and the Grant Notice, but subject to Section 3.1(b) hereof, in the event of a Change in Control the Option shall be treated pursuant to Sections 9.2 and 9.3 of the Plan.
3.2 Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3 hereof.
3.3 Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:
(a) The Expiration Date set forth in the Grant Notice, which shall in no event be more than ten years from the Grant Date;
(b) If the Option is designated as an Incentive Stock Option and the Participant, at the time the Option was granted, was a Greater Than 10% Stockholder, the expiration of five years from the Grant Date;
(c) The expiration of 90 days from the Termination Date, unless the Termination of Service is for Cause or occurs by reason of the Participant’s death or Disability;
(d) The expiration of 12 months from the Termination Date if the Termination of Service occurs by reason of the Participant’s death or Disability; or
(e) The Participant’s Termination of Service for Cause.
3.4 Termination Date. For purposes of the Option, the Participant’s Termination of Service is deemed to occur as of the date the Participant is no longer actively providing services to the Company or any Subsidiary (regardless of the reason for the termination and whether or not later found to be invalid or in breach of Applicable Law in the jurisdiction where the Participant is rendering services or the terms of the Participant’s employment or other service agreement, if any) (the “Termination Date”), and unless otherwise determined by the Administrator: (i) the Participant’s right to vest in the Option, if any, will terminate as of the Termination Date and will not be extended by any notice period (e.g., the Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under the Applicable Law of the jurisdiction where the Participant is rendering services or the terms of the Participant’s employment or other service agreement, if any); and (ii) the period (if any) during which the Participant may exercise the Option after Termination of Service will commence on the date the Participant ceases to actively provide services and will not be extended by any notice period mandated under the Applicable Law of the jurisdiction where the Participant is rendering services or the terms of the Participant’s employment or service agreement, if any. The Administrator shall have the exclusive discretion to determine when the Participant is no longer actively providing services for purposes of the Option (including whether the Participant may still be considered to be providing services while on a leave of absence) and, hence, when the Termination Date occurs.
3.5 Special Tax Consequences. The Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Stock Options, including the Option (if applicable), are exercisable for the first time by the Participant in any calendar year exceeds $100,000, the Option and such other options shall be Nonqualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. The Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. The Participant also acknowledges that an Incentive Stock Option exercised more than 90 days after the Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Nonqualified Stock Option.
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3.6 Tax Withholding.
(a) The Participant acknowledges that, regardless of any action taken by the Company or, if different, the Subsidiary or other affiliate of the Company for which the Participant renders services (the “Service Recipient”) the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and may exceed the amount (if any) actually withheld by the Company or the Service Recipient. The Participant further acknowledges that the Company and/or the Service Recipient: (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including, but not limited to, the grant, vesting or exercise of the Option, the subsequent sale of Shares acquired pursuant to such exercise and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate the Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if the Participant is subject to Tax-Related Items in more than one jurisdiction, the Participant acknowledges that the Company and/or the Service Recipient (or former Service Recipient, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.
(b) The Option cannot be exercised until the Participant has made such arrangements as the Company may require for the satisfaction of any Tax-Related Items that may arise in connection with the exercise of the Option or the acquisition of the Shares by the Participant. The Company shall not be required to issue, allot or transfer Shares until the Participant has satisfied this obligation. At the time Participant exercises the Option, in whole or in part, or at the time any other withholding event for Tax-Related Items occurs with respect to the Option, the Participant hereby authorizes the Company and/or Service Recipient, or their respective agents, at their discretion, to satisfy any applicable withholding obligations for Tax-Related Items by one or a combination of the following methods:
(i) withholding from the Participant’s salary, wages, or any other amounts payable to the Participant, in accordance with Applicable Law;
(ii) withholding Shares otherwise issuable to the Participant upon the exercise of the Option, provided that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such Share withholding procedure will be subject to the express prior approval of the Board or the Committee;
(iii) instructing a broker on the Participant’s behalf to sell Shares otherwise issuable to the Participant upon exercise of the Option and to submit the proceeds of such sale to the Company; or
(iv) any other method determined by the Company to be in compliance with Applicable Law.
(c) The Company may withhold or account for Tax-Related Items by considering statutory withholding amounts or other applicable withholding rates, including maximum rates applicable in the Participant’s jurisdiction(s). In the event of over-withholding, the Participant may receive a refund of any over-withheld amount in cash and (with no entitlement to the equivalent in Shares) or if not refunded, the Participant may seek a refund from the local tax authorities. In the event of under-withholding, the Participant may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or the Service Recipient. If the obligations for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, the Participant is deemed to have been issued the full number of Shares subject to the exercised Option, notwithstanding that a number of the Shares is held back solely for the purpose of satisfying the withholding obligations for Tax-Related Items.
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(d) Finally, the Participant agrees to pay the Company or the Service Recipient any amount of Tax-Related Items that cannot be satisfied by the means described above in Section 3.6(b). The Company shall not be obligated to deliver any Shares to the Participant or the Participant’s legal representative unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of any withholding obligation for Tax-Related Items resulting from the Option or the Shares subject to the Option.
ARTICLE 4.
EXERCISE OF OPTION
4.1 Person Eligible to Exercise. Except as provided in Section 5.4 hereof, during the lifetime of the Participant, only the Participant may exercise the Option or any portion thereof, unless it has been disposed of pursuant to a DRO. After the death of the Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by the deceased Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.
4.2 Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof. However, the Option shall not be exercisable with respect to fractional Shares.
4.3 Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company; for the avoidance of doubt, delivery shall include electronic delivery), during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3 hereof:
(a) An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator. The notice shall be signed by the Participant or other person then entitled to exercise the Option or such portion of the Option;
(b) The receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, including payment of any applicable Tax-Related Items, which shall be made by deduction from other compensation payable to the Participant or in such other form of consideration permitted under Section 4.4 hereof that is acceptable to the Company;
(c) Any other written representations or documents as may be required in the Administrator’s sole discretion to evidence compliance with the Securities Act, the Exchange Act or any other applicable law, rule or regulation; and
(d) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other than the Participant, appropriate proof of the right of such person or persons to exercise the Option.
Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.
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4.4 Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of the Participant:
(a) Cash or check;
(b) With the consent of the Administrator, surrender of Shares (including, without limitation, Shares otherwise issuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or
(c) Other legal consideration acceptable to the Administrator including, without limitation, through the delivery of a notice that the Participant has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale (Participant acknowledges that this may convert the Option into a non-qualified stock option).
4.5 Conditions to Issuance of Shares. The Shares deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the conditions in Section 10.7 of the Plan and following conditions:
(a) The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;
(b) The completion of any registration or other qualification of such Shares under any U.S. state or federal law or under rulings or regulations of the U.S. Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any U.S. state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;
(d) The receipt by the Company of full payment for such Shares, including payment of any applicable Tax-Related Items, which may be in one or more of the forms of consideration permitted under Section 4.4 hereof; and
(e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.
4.6 Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of any Shares purchasable upon the exercise of any part of the Option unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Article IX of the Plan.
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ARTICLE 5.
OTHER PROVISIONS
5.1 Nature of Grant. By accepting the Option, the Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, and it is wholly discretionary in nature;
(b) the grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c) all decisions with respect to future option or other grants, if any, will be at the sole discretion of the Company;
(d) the Participant is voluntarily participating in the Plan;
(e) the Option and any Shares acquired under the Plan, and the income from and value of same, are not intended to replace any compensation;
(f) the Option and any Shares acquired under the Plan, and the income from and value of same, are not part of normal or expected compensation for any purposes, including for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, holiday pay, retirement or welfare benefits or similar payments;
(g) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;
(h) if the underlying Shares do not increase in value, the Option will have no value;
(i) if the Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the exercise price;
(j) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the Participant’s Termination of Service (for any reason whatsoever, whether or not later found to be invalid or in breach of Applicable Law in the jurisdiction where the Participant is providing service or the terms of the Participant’s employment or other service agreement, if any);
(k) unless otherwise agreed with the Company, the Option and the Shares subject to the Option, and the income from and value of same, are not granted as consideration for, or in connection with, the service the Participant may provide as a director of a Subsidiary or other affiliate of the Company;
(l) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and
(m) neither the Company, the Service Recipient nor any other Subsidiary or other affiliate of the Company shall be liable for any foreign exchange rate fluctuation between the Participant’s local currency and the U.S. dollar that may affect the value of the Option or of any amounts due to the Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
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5.2 Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option.
5.3 Whole Shares. The Option may only be exercised for whole Shares.
5.4 Transferability.
(a) Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until the Option has been exercised and the Shares underlying the Option have been issued, and all restrictions applicable to such Shares have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until the Option has been exercised, and any attempted disposition thereof prior to exercise shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.
(b) During the lifetime of the Participant, only the Participant may exercise the Option (or any portion thereof), unless it has been disposed of pursuant to a DRO; after the death of the Participant, any exercisable portion of the Option may, prior to the time when such portion becomes unexercisable under the Plan or this Agreement, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-applicable laws of descent and distribution.
(c) Notwithstanding any other provision in this Agreement, the Participant may, in the manner permitted and determined by the Administrator, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to the Option upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and this Agreement, except to the extent the Plan and this Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Participant’s spouse or domestic partner, as applicable, as his or her beneficiary with respect to more than 50% of the Participant’s interest in the Option shall not be effective without the prior written consent of the Participant’s spouse or domestic partner. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by the Participant at any time provided the change or revocation is filed with the Administrator prior to the Participant’s death.
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5.5 No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making recommendations regarding participation in the Plan, or the Participant’s acquisition or sale of the underlying Shares. The Participant understands that the Participant may incur tax consequences as a result of the grant, vesting or exercise of the Option, or with the purchase or disposition of the Shares subject to the Option. The Participant understands and agrees that the Participant should consult with the Participant’s own tax, legal and financial advisors regarding participation in the Plan before taking any action related to the Plan.
5.6 Binding Agreement. Subject to the limitation on the transferability of the Option contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.
5.7 Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the Option in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Article IX of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Shares subject to the Option, the exercise price of the Option and the kind of securities that may be issued upon exercise of the Option. The Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and Article IX of the Plan.
5.8 Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of Clara Bevington, Financial Controller at the Company, at Clara@freecast.com, or the Secretary of the Company, at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 5.8, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to the Participant shall, if the Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 hereof by written notice under this Section 5.8. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.
5.9 Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.
5.10 Governing Law and Venue. The laws of the State of Florida shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of Orange County, Florida, or the federal courts for the United States for the Middle District of Florida, and no other courts, where this grant is made and/or to be performed.
5.11 Conformity to Applicable Law. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all Applicable Law and regulations and rules promulgated by the U.S. Securities and Exchange Commission thereunder, and U.S. state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such Applicable Law. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law.
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5.12 Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator.
5.13 Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.4 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.
5.14 Notification of Disposition. If the Option is designated as an Incentive Stock Option, the Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made: (a) within two years from the Grant Date with respect to such Shares; or (b) within one year after the transfer of such Shares to the Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by the Participant in such disposition or other transfer.
5.15 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.
5.16 Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as a Service Provider or interfere with or restrict in any way with the right of the Company or the Service Recipient, as applicable, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services of the Participant’s at any time.
5.17 Entire Agreement. The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.
5.18 Section 409A. The Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that the Option (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify the Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.
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5.19 Limitation on the Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to options, as and when exercised pursuant to the terms hereof.
5.20 Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the company or a third party designated by the Company.
5.21 Language. The Participant acknowledges that the Participant is sufficiently proficient in English, or has consulted with an advisor who is sufficiently proficient in English, so as to allow the Participant to understand the terms and conditions of this Agreement. If the Participant received this Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
5.22 Insider Trading/Market Abuse Laws. The Participant acknowledges that the Participant may be subject to insider trading restrictions and/or market abuse laws in applicable jurisdictions, which may affect his or her ability to accept, acquire, sell or attempt to sell, or otherwise dispose of the Shares, rights to Shares (e.g., the Option) or rights linked to the value of Shares, during such times as the Participant is considered to have “inside information” regarding the Company (as defined by the laws or regulations in applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders the Participant placed before possessing inside information. Furthermore, the Participant may be prohibited from: (a) disclosing insider information to any third party, including fellow employees (other than on a “need to know” basis); and (b) “tipping” third parties or causing them to otherwise buy or sell securities. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. The Participant acknowledges that it is his or her responsibility to comply with any applicable restrictions, and the Participant should speak to his or her personal advisor on this matter.
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FreeCast, Inc.
Orlando, Florida
We hereby consent to the incorporation by reference in the Registration Statement of FreeCast, Inc. on Form S-1 of our report dated November 13, 2023, with respect to our audits of the financial statements of FreeCast, Inc. as of June 30, 2023 and 2022 and for the years then ended, which appears in this Registration Statement on Form S-1.
/s/ Sadler, Gibb & Associates, LLC
Draper, UT
November 13, 2023