Callan Jmb Inc S-1/A, filed Nov 18, 2024
Callan Jmb Inc. (CJMB)
As filed with the U.S. Securities and Exchange Commission on November 18, 2024
Registration No. 333-282879
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 1 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
CALLAN JMB INC.
(Exact name of registrant as specified in its charter)
| Nevada | 7389 | 99-0931141 | ||
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S.
Employer Identification Number) |
244 Flightline Drive
Spring Branch, Texas 78070-6241
(830) 438-0395
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Mr.
Wayne Williams
Chief Executive Officer
Callan JMB Inc.
244 Flightline Drive
Spring Branch, Texas 78070-6241
(830) 438-0395
(Name, address, including zip code, and telephone number, including area code, of agent for service)
| Copies to: | |
Ross David Carmel, Esq. Barry P. Biggar, Esq Sichenzia Ross Ference Carmel LLP 1185 Avenue of the Americas, 31st Floor New York, New York 10036 (212) 930-9700
|
David E. Danovitch, Esq. Michael DeDonato, Esq. Charles E. Chambers, Jr., Esq. Sullivan & Worcester LLP 1251 Avenue of the Americas New York, New York 10020 (212) 660-3000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
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 Securities Exchange Act of 1934, as amended (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 comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of 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 of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to such 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 these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 18, 2024
PRELIMINARY PROSPECTUS
CALLAN JMB INC.
1,280,000 shares of Common Stock
Representative’s Warrants to purchase up to 64,000 shares of Common Stock
64,000 shares of Common Stock underlying the Representative’s Warrants
This is the initial public offering (the “offering”) of Callan JMB Inc. We are offering 1,280,000 shares of our common stock, par value $0.001 per share (“common stock”). We currently expect the initial public offering price to be between $4.00 and $6.00 per share. The actual initial public offering price of our common stock offered hereby will be determined between the underwriter and us at the time of pricing of this initial public offering, considering our historical performance and capital structure, prevailing market conditions, and overall assessment of our business. Therefore, the initial public offering price per share of our common stock used throughout this prospectus may not be indicative of the actual initial public offering price for our common stock (see “Underwriting – Determination of Initial Public Offering Price” for additional information). Prior to this offering, there has been no public market for our shares of common stock.
In addition, we are also registering shares of Common Stock underlying the Representative’s Warrants (defined below).
We have applied to have our shares of common stock listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CJMB”. If our shares of common stock are not approved for initial listing on Nasdaq, we will not consummate this offering and the offering will be terminated. No assurance can be given that such initial listing application will be approved.
Wayne Williams, our Chief Executive Officer (“CEO”) and President, owns 2,250,000 shares (75%) of our common stock and Dr. David Croyle, our Chief Medical Officer, owns 750,000 shares (25%) of our common stock, which currently constitutes 100% of the aggregate voting power of our common stock. Upon the closing of this offering, Mr. Williams and Dr. Croyle will possess approximately 52.6% and 17.5%, respectively, of the voting power of our common stock. Accordingly, we currently are, and upon the consummation of the offering, will be a “controlled company” under the corporate governance rules of Nasdaq. However, we do not currently expect to rely upon any corporate governance exemptions available to a “controlled company.”
We are an emerging growth company under the federal securities laws and as such, we have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company” for additional information.
Investing in our shares of common stock involves a high degree of risk. See “Risk Factors” beginning on page 11 of this prospectus for a discussion of information that should be considered in connection with an investment in our shares of common stock.
Neither the U.S. 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.
| Per Share | Total | |||||||
| Assumed initial public offering price | $ | $ | ||||||
| Underwriting discounts and commissions(1) | $ | $ | ||||||
| Proceeds, before expenses, to us(2) | $ | $ | ||||||
| (1) | We have also agreed to (i) issue a warrant or warrants to the representatives of the underwriters exercisable in the aggregate for up to such number of shares of common stock equal to 5% of the number of shares of common stock sold in this offering, at a price equal to 120% of the initial public offering price (the “Representative’s Warrants”), (ii) reimburse the underwriters for certain expenses and (iii) provide the representatives a non-accountable expense allowance equal to 1.0% of the gross proceeds of this offering. See “Underwriting” for additional information regarding compensation payable to the underwriter. |
| (2) | The amount of offering proceeds to us presented in this table does not give effect to the exercise of (i) the over-allotment option by the underwriters or (ii) the Representative’s Warrants. |
This offering is being conducted on a firm commitment basis. The underwriters are obligated to take and purchase all of the shares of common stock offered under this prospectus if any such shares are taken.
We have granted a 45-day option to the underwriters to purchase up to 192,000 additional shares of common stock, representing 15% of the shares of common stock sold in this offering, solely to cover over-allotments, if any. If the underwriters exercise the option in full, the total proceeds to us, less underwriting discounts, commissions, and non-accountable expenses and other offering expenses payable by us, will be $5,934,000 based on an assumed initial public offering price of $5.00 per share.
Delivery of the shares of common stock is expected to be made on or about ______ , 2024.
Sole Book-Runner
ALEXANDER CAPITAL, L.P.
The date of this prospectus is _________, 2024.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
The registration statement on Form S-1 of which this prospectus forms a part and that we have filed with the SEC, includes exhibits that provide more detail of the matters discussed in this prospectus. You should read this prospectus and the related exhibits filed with the SEC, together with the additional information described under the heading “Where You Can Find More Information.”
You should rely only on the information contained in this prospectus. Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that contained in this prospectus. This prospectus, and any prospectus supplement or amendments thereto do not constitute an offer to sell, or a solicitation to buy, our shares of common stock to or from any person or entity to whom or from whom it is unlawful to make such offer or solicitation of an offer in such jurisdiction. You are required to inform yourself about, and to observe any restrictions relating to, this offering and the distribution of this prospectus.
The information in this prospectus may only be accurate as of the date on the front of this prospectus regardless of the time of delivery of this prospectus or any sale of our securities. You should not assume that the information contained in this prospectus, any prospectus supplement or amendments thereto, as well as information we have previously filed with the SEC, is accurate as of any date other than the date on the front cover of the applicable document. Our business, financial condition, results of operations and prospects may have changed since those dates. Neither the delivery of this prospectus nor any distribution of our shares of common stock in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus.
No person is authorized in connection with this prospectus to give any information or to make any representations about us, our common stock hereby or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.
For investors outside the United States: 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 the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
Unless otherwise indicated, information in this prospectus concerning economic conditions, our industries, and our markets is based on a variety of sources, including information from third-party industry analysts and publications and our estimates and research. This information involves a number of assumptions, estimates, and limitations. The industry publications, surveys and forecasts, and other public information generally indicate or suggest that their information has been obtained from sources believed to be reliable. None of the third-party industry publications used in this prospectus were prepared on our behalf. The industries in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” in this prospectus. These and other factors could cause results to differ materially from those expressed in these publications.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on our management’s beliefs and assumptions and on information currently available to us. All statements other than statements of historical facts are forward-looking statements. The forward-looking statements are contained principally in, but not limited to, the sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:
| ● | our ability to achieve and maintain profitability in the future; | |
| ● | disruption of our supply chain and competition; | |
| ● | difficulty in staffing and managing geographically widespread operations; | |
| ● | our ability to respond to general economic conditions; | |
| ● | our ability to manage our growth effectively and our expectations regarding the development and expansion of our business; | |
| ● | our ability to access sources of capital, including debt financing and other sources of capital to finance operations and growth; | |
| ● | the loss of or reduced purchasing by any of our major customers, and our ability to acquire new customers and successfully retain existing customers; | |
| ● | our ability to grow market share in existing markets or any new markets we may enter; | |
| ● | our ability to develop new products, features and functionality that are competitive and meet market needs; | |
| ● | our ability to obtain approval of our application for the listing of our securities on Nasdaq; | |
| ● | the outcome of any legal or governmental proceedings that may be instituted against us; and | |
| ● | other factors detailed under the section titled “Risk Factors.” |
In some cases, you can identify forward-looking statements by terms such as “may,” “could,” “will,” “should,” “would,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “project” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the heading “Risk Factors” and elsewhere in this prospectus. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance.
In addition, statements such as “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
MARKET DATA
The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosures contained in this prospectus, and we believe these industry publications and third-party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third-party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties, and are subject to change based on various factors, including those discussed under the section entitled “Risk Factors” and elsewhere in this prospectus. Some data are also based on our good faith estimates.
TRADEMARKS
We own or have rights to the Ship2Q ® trademark and are in the process of applying for registered trademarks for certain trade names that we use in connection with the operation of our business. This prospectus may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks and trade names or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, ™ or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.
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This summary highlights selected information contained in other parts of this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing in shares of our common stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read the entire prospectus carefully, especially “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes, before deciding to invest in shares of our common stock. Unless the context requires otherwise, the words “we,” “us,” “our,” “Company” and “Callan JMB” refer collectively to Callan JMB Inc., a Nevada corporation.
Overview
Callan JMB is a vertically integrated logistics and fulfillment company which provides thermal management logistics solutions to the life sciences industry through a combination of proprietary packaging, information technology and specialized cold chain logistics knowhow. We provide a system that utilizes advanced predictive technology to revolutionize the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time-sensitive industries while ensuring environmental responsibility. We view our solutions as disruptive to the “older technologies” of dry ice and liquid nitrogen, in that our solutions are comprehensive and combine our competencies in configurations that are customized to our client’s requirements. We provide comprehensive, reliable, and economic alternatives to all existing logistics solutions and services utilized for frozen shipping in the life sciences industry (e.g., personalized medicine, cell therapies, stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, organs, bio-pharmaceuticals, infectious substances, and other commodities that require continuous exposure to cryogenic or frozen temperatures). As part of our services, we provide the ability to monitor, record and archive crucial information for each shipment that can be used for scientific and regulatory purposes.
Our Ship2Q® ultraviolet disinfection process (Safe Hygienic Irradiation Performance Process & Qualification) ensures fitness, thermal reliability, and cleanliness of the system components within the manufacturer specifications equal to new “off-the-shelf” shipper systems. Our systematic Ship2Q® process meets all good current manufacturing practices (“cGMP”) and good current distribution practices (“cGDP”) compliance standards and generates shipper specific track and trace documentation key to any deployment and reuse. Ship2Q® applies a system of control over the recovery and reuse phase of the logistics loop. We are able to recover and reuse the Greenbox shipper, amortizing its total cost across numerous shipments making it cost-neutral in the first few cycles. Additionally, our sophisticated cloud-based logistics operating platform, which is branded as our “Sentry” system, integrates GPS and precise temperature diagnostics throughout a package’s journey, maintaining the efficacy, safety, and quality of temperature-sensitive goods throughout transit—with zero bench time required. The Sentry system supports the management of the entire shipment and logistics process through a single interface, including initial order input, document preparation, customs clearance, courier management, shipment tracking, issue resolution, and delivery. In addition, it provides unique and incisive information dashboards and validation documentation for every shipment. The Sentry platform records and retains a fully documented “chain-of-custody” and, at the client’s option, “chain-of-condition” for every shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process. This recorded and archived information allows our clients to meet exacting requirements necessary for scientific work and for proof of regulatory compliance during the logistics phase.
With extensive experience in quality assurance and quality control, we deliver reliability by anticipating, responding, and overcoming the most complex situations with precision and compassion, providing peace of mind and a comprehensive solution for our customers. This empowers the healthcare and emergency response industries with solutions to ensure temperature-sensitive goods remain within specified parameters throughout transit through tracking mechanisms and predictive technology to ensure its integrity for patients, providers, and their communities.
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Our Strategy and Value Proposition
Our strategy involves leveraging our core competitive strengths to develop and maintain ongoing relationships with a diversified group of customers while continuing to grow our service lines, ensuring that we can meet our customers’ changing needs. We strive to be recognized as the premier provider of logistics and fulfillment of a broad range of value-added services based upon the breadth of those services, quality, responsiveness, customer service, information technologies, safety, and cost effectiveness.
The principal elements of our business strategy are:
Cross-Sell Our Solutions: The breadth of our service offerings allows us the opportunity to provide various services and products to meet our customers’ objectives. Our significant North American footprint allows us to quickly respond to customer needs, especially in emergency response situations. We can assist with remediation needs for small-and-large-scale efforts, either planned or unplanned, by providing remediation contractors and project managers with support services, particularly in emergency situations. We look for opportunities to be a one-stop-shop service provider, expanding the range of services we traditionally provide to a customer. Our team is committed to identifying opportunities to cross-sell among and across our divisions which we expect will continue to drive additional revenue for our Company.
Expand into Additional Market Opportunities: There is a market opportunity to leverage the Company’s system. Industries such as pharmaceuticals require the ability to ensure the integrity of packages as they reach their destination, which is paramount to maintaining safety and quality. Sentry monitoring provides a solution to address critical aspects of thermal management of temperature sensitive packages. In the future, we hope to expand our business to include support for glucagon-like peptide receptor-1 agonist (“GLP-1”) transport, compounding pharmacies and high-end food packaging. We believe that our system can minimize the risk of spoilage, contamination, and other issues that can compromise drug effectiveness and food safety. With Sentry monitoring, we intend to provide customers with confidence that their drug and food shipments will arrive in the same pristine condition as when they were dispatched, safeguarding patient and consumer health and satisfaction.
Execute on Cost, Pricing and Productivity Initiatives: We continually seek to increase efficiency and reduce costs through enhanced technology, process improvements and strategic expense management. We seek to identify areas in our business where strategic investments in automation, process improvements and employees can serve to increase productivity, efficiency, and safety compliance. We continuously focus on the operating leverage of our support functions, including expanding globally to achieve profitability and productivity benefits. We aim to price our services and products competitively, understanding the demands of our customers, the inherent value of our network of assets and operations and our ability to quickly respond to market and macroeconomic changes. We also understand the value our customers place on our products and services in a global market continuously focusing on sustainability, environmental compliance, and safety.
Foster Innovation through Technology: Remote temperature monitoring technology has always been part of our core operations, influencing our strategy from increasing throughput at our facilities to automation, including artificial intelligence and predictive technology, to enhance productivity. We aim to utilize advanced technologies in our operations while also integrating technology-based solutions for our customers to use, which promotes the safety, efficiency, and profitability of these operations. With such technology, and our proprietary inventory management software, Ship2Q® and Sentry monitoring we are able to centrally manage our transportation network, deploying, monitoring, and adjusting our transportation operations as needs change. We believe that making technological investments that increase the value of our services delivered to our customers pays off in a variety of ways including growth, retention, profitability, and overall customer experience.
Product and Service Offerings
We continuously expand our service offerings across the supply chain with innovative, technology-centric solutions to support the development and distribution of life sciences products and therapies.
Emergency Preparedness and Response. Our crews and equipment are dispatched on a planned or emergency basis and perform services such as emergency preparedness and readiness plans, 12-hour or less U.S. deployment, surge capacity, product integrity and compliance, efficient response implementation, and system of record.
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Specialty Packaging. Our specialty temperature-regulating packaging solutions provide a better thermal system to maintain and protect products and ensure peak customer experience. In utilizing this packaging, customers yield the benefits of lower costs and overhead while improving process, agility, velocity, accuracy, and repeatability of complex fulfillment networks. Integrating Callan JMB’s technology with the packaging which we obtain allows for scalable ordering, inventory, pick, pack, fulfillment, tracking and recovery.
We remain committed to environmental sustainability. The reusable packaging systems we utilize, and our leasing model help reduce waste and costs, offering an effective alternative to traditional, single-use packaging.
Fulfillment Service. As part of our service capability offered to customers, we provide technical services through a service center from which a fleet of crew and equipment can be dispatched to emergency response locations. This timely response is built on safety, quality, efficiency, and integrity, and has been offered by us for more than 17 years. By leveraging our expertise and capabilities, we provide our customers with the safest, most cost-effective, and sustainable solutions to service their needs. Our technical services and technological offerings are bundled with our emergency response services and perishable packaging offerings and are not deemed to be separate revenue streams and not disaggregated.
Advanced Monitoring Sentry Technology. Our customers have the ability to use the Sentry system which helps ensure that their temperature-sensitive goods will remain within specified parameters throughout transit by tracking factors such as temperature, humidity, and location to ensure the physical material integrity of packages for governments and organizations that are preparing emergency responses and for patients, providers, and their communities.
Intellectual Property
As of the date of this prospectus, we are in the process of applying for trademark rights in Sentry, Callan JMB, Coldchain and other brand indicia, and have received a trademark registration for “Ship2Q®”, our proprietary certified sanitization technology. This trademark expires on February 22, 2030. We intend to pursue additional trademark registrations to the extent we believe it will be beneficial. We also are developing a registered domain name for a website that we use in our business. We may be subject to third-party claims from time to time with respect to our intellectual property.
Competition and Competitive Advantages
As noted above, Callan JMB has extensive experience in quality assurance and control, delivering reliability by anticipating, responding, and overcoming complex situations with precision and compassion. We provide peace of mind and a competitive solution for our customers.
We believe that we have attained a significant market position in emergency thermal management response despite facing robust competition from local, regional, and national firms. However, no one competitor directly competes with our full suite of offerings as a result of the Company’s breadth of service offerings. Sources of competition vary by locality and by type of service rendered, with competition from national and regional services companies and hundreds of privately-owned firms. We believe that we offer a more comprehensive range of services and products than our competitors in major portions of the United States and Canada.
We believe the following are our core competitive strengths developed over our 17+ years of operations, which have facilitated our prominent position in the marketplace:
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Provider of Logistics and Fulfillment in the Emergency Response Industry: Callan JMB has a long history and a recognized reputation for delivering swift, decisive, and reliable emergency response support for Fortune 500 firms, the North Atlantic Treaty Organization (“NATO”), the United Nations (“UN”), and government agencies at all levels. Our vertically-integrated logistics and fulfillment system utilizes advanced predictive technology that allows us to plan for and respond to emergencies. Our system provides our customers enhanced safety, effectiveness, and potency for every shipment handled, ensuring product integrity, environmental responsibility, and immediate response in time-sensitive events.
Specialty Temperature-Regulating Reusable Packaging: Many of our customers operate in time-sensitive industries. The specialty temperature-regulated packaging we utilize and obtain for customers from suppliers is critical to ensuring the quality of the delivered product. The Company is committed to environmental sustainability, as the packaging we arrange for is reusable which reduces waste and cost as compared to traditional, single-use packaging.
End Market Value Propositions and Flexibility: Our systems provide our customers with a variety of services that allow for immediate flexibility. Our emergency response offering includes emergency preparedness and readiness plans, 12-hour or less domestic deployment, surge capacity, product integrity and compliance, and efficient response implementation.
Experience in Highly Regulated Industries: Many of our target customers are in highly regulated industries where thermal monitoring and compliance are crucial. To address their needs, we developed an inventory management system for customers that handle regulated, sensitive products that guarantees their products arrive safe and effective through our rigorous quality assurance and quality control process and function as the system of record for their customers. Callan JMB’s long standing relationships with Fortune 500 firms, the City of Chicago, NATO, the UN, and certain other government agencies at all levels provide examples of and opportunities for our expertise.
Highly Trained and Experienced Team: Our well-trained workforce responds to customer needs across a variety of service lines, particularly emergency response services. We provide multi-faceted, high-quality services to a broad mix of customers and our vast capabilities, valuable and unique assets, skilled workforce, safety profile and breadth of services as well as our overall size, scale and geographic footprint help us attract customers and provide them with environmentally responsible solutions.
Successful History Provides Growth Opportunity: Leveraging its experience in emergency response, there are other large market industries that we intend to explore as part of our growth strategy includes the high-end food packaging industry. We aspire to enter into high-end food thermal packaging management. Our systems can ensure the integrity of food packages (such as caviar) as they reach their destination in order to maintain safety and quality. This would not only preserve the freshness and quality of the food, but also minimize the risk of spoilage, contamination, and other issues that can compromise food safety. With Sentry monitoring, we intend to provide customers with confidence that their food shipments will arrive in the same pristine condition as when they were dispatched, safeguarding consumer health and satisfaction.
Listing on Nasdaq
In connection with this offering, we have applied to list our common stock on Nasdaq under the symbol “CJMB”. If Nasdaq approves our listing application, we expect to list our common stock and consummate this offering. Nasdaq’s listing requirements include, among other things, a stock price threshold. If Nasdaq does not approve our application and the listing of our common stock, we will not proceed with this offering. There can be no assurance that our common stock will be listed on Nasdaq.
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Corporate Information
We were originally formed as Coldchain Technology Services, LLC, a Texas limited liability company. We reorganized as a holding company to Callan JMB Inc., a Nevada corporation, on February 14 2024. We are headquartered at 244 Flightline Dr., Spring Branch, TX 78070. The Company’s website is www.coldchain-tech.com. Information contained on or accessible through our website shall not be deemed incorporated into and is not a part of this prospectus or the registration statement of which it forms a part, and the inclusion of our website address in this prospectus is an inactive textual reference only.
Recent Developments
Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company and its only stockholders, Messrs. Williams and Croyle, each share of outstanding common stock of the Company was converted and exchanged for 0.6 new shares (the “Share Exchange”) of common stock such that the total outstanding shares of the Company’s common stock was reduced from 5,000,000 shares to 3,000,000 shares.
Summary of Risk Factors
An investment in our shares of common stock involves a high degree of risk. You should carefully consider the risks summarized below. These risks are discussed more fully in the “Risk Factors” section immediately following this Prospectus Summary. These risks include, but are not limited to, the following:
Risks Related to the Company and Our Business
| ● | We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses, and difficulties, and makes it difficult to evaluate our prospects. | |
| ● | We track certain operational metrics, which are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and adversely affect our stock price, business, results of operations, and financial condition. | |
| ● | We are subject to concentration risk. | |
| ● | We depend on our executive team and other employees to manage the business and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could materially harm our business. | |
| ● | Our management team has limited experience managing a public company. | |
| ● | Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people. | |
| ● | We have a limited sales force and may be dependent on the proceeds of this offering to fund additional sales personnel. |
Risks Related to Regulatory Environment and Taxation
| ● | We operate in a heavily regulated environment and maintain a number of licenses essential to our operations. If we were to fail to maintain such licenses, our operations may be materially and negatively affected. | |
| ● | We have made significant estimates and judgments in calculating our income tax provision and other tax assets and liabilities. If these estimates or judgments are incorrect, our operating results and financial condition may be materially affected. | |
| ● | Changes in tax laws could have a material adverse effect on our business, financial condition and results of operations. |
Risks Related to This Offering and Ownership of Our Common Stock
| ● | Our founder and CEO has control over key decision-making as a result of his control of a majority of our voting shares of common stock. | |
| ● | While we are seeking to have our common stock listed on Nasdaq, there is no assurance that either of such securities will be listed on Nasdaq. Even if we meet the initial listing requirements of Nasdaq, there can be no assurance that we will be able to comply with the continued listing standards of Nasdaq, a failure that could result in a delisting of our common stock. | |
| ● | The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members. | |
| ● | Our management has broad discretion as to the use of the net proceeds from this offering. | |
| ● | We may issue additional debt and equity securities, which are senior to our common stock as to distributions and in liquidation, which could materially adversely affect the market price of our securities. | |
| ● | Our potential future earnings and cash distributions to our stockholders may affect the market price of our common stock. |
| 7 |
Implications of Being an Emerging Growth Company
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended (“Securities Act”), and we may remain an emerging growth company for up to five years following the closing of this offering. For so long as we remain an emerging growth company, we are permitted and intend to rely on certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. In particular, in this prospectus, we have provided only two years of audited financial statements and have not included all of the executive compensation-related information that would be required if we were not an emerging growth company. Accordingly, the information contained herein may be different from the information you receive from other public companies in which you hold stock.
In addition, the federal securities laws provide that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same requirements to adopt new or revised accounting standards as other public companies that are not emerging growth companies.
We would cease to be an “emerging growth company” upon the earliest to occur of: (i) the last day of the fiscal year in which we have $1.235 billion or more in annual revenue, (ii) the date on which we first qualify as a large accelerated filer under the rules of the United States Securities and Exchange Commission (the “SEC”), (iii) the date on which we have, in any three-year period, issued more than $1.0 billion in non-convertible debt securities, and (iv) the last day of the fiscal year ending after the fifth anniversary of this offering.
Implications of Being a Smaller Reporting Company
We are a “smaller reporting company” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and may continue to qualify as such even after we no longer qualify as an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. As a result of qualifying as a smaller reporting company, to the extent we take advantage of the allowable reduced reporting burdens, the information that we provide to our stockholders may be different than what you might receive from other public reporting companies in which you hold equity interests.
| 8 |
The Offering
| Shares of common stock to be offered by us: | 1,280,000 shares of common stock (or 1,472,000 shares if the underwriters exercise their over-allotment option in full), based on an assumed initial public offering price of $5.00 per share. | |
| Assumed initial public offering price: | $5.00 per share of our common stock, the midpoint of the range of $4.00 to $6.00 per share set forth on the cover page of this prospectus. | |
| Over-allotment option: | We have granted a 45-day option to the underwriters to purchase up to 192,000 additional shares of common stock, representing 15% of the shares of common stock sold in this offering, based on an assumed initial public offering price of $5.00 per share. | |
| Shares of common stock outstanding before this initial public offering: | 3,000,000 shares of common stock. | |
| Shares of common stock outstanding after this initial public offering (1): | 4,280,000 shares of common stock (or 4,472,000, assuming the underwriters exercise their over-allotment option in full). | |
| Use of proceeds: | We estimate that the net proceeds from the sale of the shares of common stock in this initial public offering, at an assumed initial public offering price per share of $5.00, will be approximately $5,100,000 after deducting the underwriting discounts and commissions and estimated offering expenses, or $5,934,000 if the underwriters exercise their over-allotment option in full and, in either case, assuming no Representative Warrants have been exercised. We currently expect to use the net proceeds of this offering primarily for sales support, marketing, customer expansion and general corporate purposes, including working capital. | |
| Proposed Nasdaq listing and symbol: | We have applied to list our common stock on Nasdaq under the symbol “CJMB”. No assurance can be given that our initial listing application for our common stock will be approved by Nasdaq or that a trading market will develop for the common stock. We will not proceed with this offering in the event the common stock is not approved for listing on Nasdaq. | |
| Representative’s Warrants: | We have agreed to issue to the representatives of the underwriters or their designees at the closing of this offering, Representative’s Warrants to purchase a number of shares of our common stock equal to 5% of the aggregate number of shares of common stock sold in this offering. The Representative’s Warrants will be exercisable at any time and from time to time, in whole or in part, during the five-year period commencing 180 days from the commencement of sales of common stock in this offering. The exercise price of the Representative’s Warrants will equal 120% of the initial public offering price per share, subject to adjustments. The registration statement of which this prospectus forms a part also registers the Representative’s Warrant and the common stock underlying the Representative’s Warrant. See “Underwriting — Representative’s Warrant” in this prospectus for more information regarding the Representative’s Warrant. |
| Lock-up agreements: | We will agree that we will not, without the prior written consent of the Representative, for a period of one (1) year after the date of the underwriting agreement: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any classes of our stocks or any securities convertible into or exercisable or exchangeable for any classes of our stocks; (ii) file or caused to be filed any registration statement with the SEC, relating to the offering of any classes of our stocks or any securities convertible into or exercisable or exchangeable for any classes of our stocks; (iii) complete any offering of debt securities, other than entering into a line of credit with a traditional bank; or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any classes of our stocks, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of any classes of our stocks or such other securities, in cash or otherwise. See “Underwriting—Company Standstill”.
All of our directors and executive officers have agreed that, for a period of one (1) year after the date of this prospectus, they will not, directly or indirectly, without the prior written consent of the Representative: (i) offer pledge, sell, contract to sell, grant, lend or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock or securities convertible into or exercisable or exchangeable for common stock; (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or other securities, in cash or otherwise; (iii) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities; or (iv) publicly disclose the intention to do any of the foregoing, subject to certain exceptions. See “Underwriting—Executive Officer and Director Lock-Ups”. | |
| Dividend policy: | We currently intend to retain all available funds and future earnings, if any, for use in the operation of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Investors should not purchase our common stock with the expectation of receiving cash dividends. | |
| Risk factors: | Investing in our common stock involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section. | |
| Transfer agent and registrar | The transfer agent and registrar for our common stock is ClearTrust LLC, with its business address at Point Village Drive, Lutz, Florida 33558. |
| (1) | The number of shares of common stock outstanding after this offering excludes the following shares: |
| ● | 64,000 shares of common stock issuable upon the exercise of the Representative’s Warrants based on an assumed initial public offering price of $5.00 per share. |
Unless the context otherwise requires, the information in this prospectus gives effect to the Share Exchange and assumes:
| ● | an assumed initial public offering price of $5.00 per share, which is the midpoint of the $4.00 and $6.00 range set forth on the cover page of this prospectus; and |
| ● | no exercise of the Representative’s Warrants or the underwriters’ over-allotment option. |
| 9 |
Summary Financial Information
You should read the following summary financial information and operating data in conjunction with, and it is qualified in its entirety by reference to, our unaudited financial statements and audited financial statements and the related notes thereto, and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Our summary financial information set forth below are derived from our financial statements included elsewhere in this prospectus.
All financial statements included in this prospectus are prepared and presented in accordance with generally accepted accounting principles in the United States (“GAAP”). The summary financial information is only a summary and should be read in conjunction with the financial statements and related notes contained elsewhere in this prospectus. The financial statements contained elsewhere fully represent our financial condition and operations. However, our historical results are not necessarily indicative of our results in any future period and results from our interim period may not necessarily be indicative of the results of the entire year.
Statements of Operations Data:
| (unaudited) | ||||||||
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | 5,211,665 | $ | 11,529,341 | ||||
| Cost of Revenue | 3,067,421 | 6,293,520 | ||||||
| Gross Profit | 2,144,244 | 5,235,821 | ||||||
| Operating Expenses: | ||||||||
| Selling, General and administrative expenses | 3,146,109 | 2,295,897 | ||||||
| Total operating expenses | 3,146,109 | 2,295,897 | ||||||
| Income (loss) from operations | (1,001,865 | ) | 2,939,924 | |||||
| Other income (expense) | 3,269 | (550 | ) | |||||
| Income (loss) before income taxes | (998,596 | ) | 2,939,374 | |||||
| Provision(benefit) for income taxes | - | 23,000 | ||||||
| Net income (loss) | $ | (998,596 | ) | $ | 2,916,374 | |||
Balance Sheet Data:
| September 30, | December 31, | |||||||||||
| 2024 | 2023 | 2022 | ||||||||||
| Actual | ||||||||||||
| (unaudited) | Actual | |||||||||||
| Cash | $ | 2,809,303 | $ | 5,155,620 | $ | 6,193,719 | ||||||
| Total current assets | 4,498,876 | 8,452,465 | 14,369,051 | |||||||||
| Total assets | 6,381,160 | 9,705,529 | 15,250,558 | |||||||||
| Total current liabilities | 1,279,927 | 769,706 | 1,110,255 | |||||||||
| Total liabilities | 1,966,749 | 910,269 | 1,239,510 | |||||||||
| Total stockholders’ equity/members capital | 4,414,411 | 8,795,260 | 14,011,048 | |||||||||
| Total liabilities and Stockholders’ Equity/Members’ Capital | $ | 6,381,160 | $ | 9,705,529 | $ | 15,250,558 | ||||||
| 10 |
An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this prospectus, before purchasing our common stock. We have listed below (not necessarily in order of importance or probability of occurrence) what we believe to be the most significant risk factors applicable to us, but they do not constitute all of the risks that may be applicable. Any of the following factors could harm our business, financial condition, results of operations or prospects, and could result in a partial or complete loss of your investment. Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section titled “Cautionary Statement Regarding Forward-Looking Statements.”
RISKS RELATED TO OUR COMPANY AND OUR BUSINESS
We have a holding company ownership structure and will depend on distributions from our operating subsidiaries to meet our obligations. Contractual or legal restrictions applicable to our subsidiaries could limit payments or distributions from them.
We are a holding company and derive all of our operating income from, and hold substantially all of our assets through, our subsidiaries. The effect of this structure is that we will depend on the earnings of our subsidiaries, and the payment or other distributions to us of these earnings, to meet our obligations and make capital expenditures. Provisions of U.S. corporate and tax law, like those requiring that dividends are paid only out of surplus, and provisions of any future indebtedness may limit the ability of our subsidiaries to make payments or other distributions to us. Additionally, in the event of the liquidation, dissolution or winding up of any of our subsidiaries, creditors of that subsidiary (including trade creditors) will generally be entitled to payment from the assets of that subsidiary before those assets can be distributed to us.
We may not be able to effectively manage our growth and operations, which could materially and adversely affect our business.
We may experience rapid growth and development in a relatively short time span through our marketing efforts. The management of this growth will require, among other things, continued development of our financial and management controls and management information systems, stringent control of costs, increased marketing activities, the ability to attract and retain qualified management personnel, and the training of new personnel. We intend to hire additional personnel to manage our expected growth and expansion. Failure to successfully manage our possible growth and development could have a material adverse effect on our business and the value of our common stock.
Our business is capital intensive, requiring ongoing cash outlays that may strain or consume our available capital and force us to sell assets, incur debt, or sell equity on unfavorable terms.
Our ability to remain competitive, grow and maintain our operations largely depends on our cash flow from operations and access to capital. Maintaining our existing operations and expanding them through internal growth or acquisitions requires large capital expenditures. As we undertake more acquisitions and further expand our operations, the amount we expend on capital will increase. These increases in expenditures may result in lower levels of working capital or require us to finance working capital deficits. We intend to continue to fund our cash needs through cash flow from operations, equity and debt financings and borrowings under our credit facility, if necessary. However, we may require additional equity or debt financing to fund our growth.
We do not have complete control over our future performance because it is subject to general economic, political, financial, competitive, legislative, regulatory and other factors. It is possible that our business may not generate sufficient cash flow from operations, and we may not otherwise have the capital resources to allow us to make necessary capital expenditures. If this occurs, we may have to sell assets, restructure our debt or obtain additional equity capital, which could be dilutive to our stockholders. We may not be able to take any of the foregoing actions, and we may not be able to do so on terms favorable to us or our stockholders.
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Decreased availability or increased costs of key logistics and supply chain inputs, including third-party supplies of equipment and materials could impact our cost of operations and our profitability across business lines.
We depend on reliable access to third-party supplies of equipment and materials, including refrigeration, storage and electrical equipment. The supplier base providing cold chain and food processing and warehouse equipment and materials is relatively consolidated, which has resulted in a limited number of suppliers for certain types of equipment and supplies. Conversely, the market for third-party transportation services is fragmented with a large number of service providers, and it can be difficult to find reliable partners whose performance and reliability meet our standards at the scale our operations require. Any significant reduction in availability or increase in cost of any logistics and supply chain inputs could adversely affect our operations and increase our costs, which could adversely affect our operating results and cash flows.
Our business and rent-to-rent model require significant capital expenditure and inability to collect service fee from our customers in a timely manner or at all would materially and adversely affect our business, results of operations, financial condition and growth prospects.
We utilize a rent-to-rent model, under which we obtain the right to use of warehouses that are usually in bare-bones condition by way of operating lease, or service agreement, and then offer the right to use to our customers after renovation. Therefore, we are subject to the risks inherent in a rent-to-rent model, including:
| ● | upfront capital outlay for warehouse sourcing and renovation; | |
| ● | ongoing capital needs to maintain warehouses; | |
| ● | inability to collect service fee from our customers in a timely manner or at all; and | |
| ● | mismatch between our service agreement term with landlords or land occupiers, and our service agreement term with our customers. |
Any one or more of these factors could adversely affect our business, financial condition and results of operations.
We generally incur a substantial upfront capital outlay before we start to generate revenue on the relevant warehouses which we offer the right to use to our customers. These include capital outlay for market research and evaluation of the target geographic area for expansion, warehouse searching, prepayment of a few months’ service fee to the landlords or land occupiers, and renovation of the warehouse that are usually in bare-bone condition, including to add cold chain and food processing functions, and make them suitable for our customers’ needs. We follow a disciplined and systematic process to expand our warehouse network, involving comprehensive market research, site visits and other preparation work, during which period we may incur substantial operating costs and expenses. In addition, the period between when we sign the service agreement with the landlord or land occupier and when we receive service fee payments from our customers may be significantly longer than expected due to some factors that are beyond our control, including but not limited to, substantial delay during the renovation period due to third-party contractors’ default, and inability to attract and retain customers in a timely manner due to rental market condition. Inability to timely access financing on favorable terms or at all or to collect service fee from our customers in a timely manner or at all would materially and adversely affect our business, results of operations, financial condition and growth prospects.
We face risks and challenges associated with our cold chain logistics services, including environmental, health, safety and quality control issues and increasing costs in developing the business.
Our cold chain logistics services focus on a myriad of products, relying on our comprehensive cold chain logistics service capabilities in terms of storage network, transportation network and distribution network. Our extensive cold chain logistics network enables us to provide integrated cold chain logistics services to our customers.
We store frozen and perishable medical and other products. Product contamination, spoilage, other adulteration, product tampering or other quality control issues could occur at any of our temperature-controlled warehouses or during the transportation of these products, which could cause our customers to lose all or a portion of their inventory.
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We could be liable for the costs incurred by our customers as a result of the lost inventory, and we also may be subject to liability, which could be material, if any of the pharmaceutical products, frozen and other perishable products we stored or transported caused illness or death. The occurrence of any of the foregoing may negatively impact our brand and reputation and otherwise have a material adverse effect on us.
If we fail to comply with applicable environmental, health and safety laws and regulations in relation to our cold chain logistics services, we may face administrative, civil or criminal fines or penalties, including bans on making future shipments in particular geographic areas, and the suspension or revocation of necessary permits, licenses and authorizations, all of which may materially adversely affect our business, results of operations and financial condition. Further, current and future environmental, health and safety laws, regulations and permit requirements could require us to make changes to our operations or incur significant costs relating to compliance.
We may not be able to successfully identify, source and develop in a timely fashion additional warehouse properties.
Under our rent-to-rent model, we may not be successful in identifying and obtaining the right to use of additional warehouse properties at desirable locations and on commercially reasonable terms or at all. We may also incur costs in connection with evaluating warehouse properties and negotiating with property owners, including properties which we are subsequently unable to obtain the right to use. In addition, we may not be able to develop additional warehouse properties on a timely basis due to construction delays or equipment and material shortages. If we fail to successfully identify, secure or develop in a timely fashion additional warehouse properties, our ability to execute our growth strategy could be impaired and our business and prospects may be materially and adversely affected.
We are subject to concentration risk.
For the nine months ended September 30, 2024, three customers, the City of Chicago Public Health Department (48%), Grail, Inc. (20%) and BioBridge Global (13%), accounted for approximately 81% of total revenues generated. For the year ended December 31, 2023, three customers, the City of Chicago Public Health Department, (28%), Texas Department of Health (22%) and Johnson and Johnson (15%), accounted for approximately 65% of total revenues generated. We have long-term agreements with two City of Chicago entities, which expire under their existing terms in two years and five years, respectively.
Because we depend on these customers for a significant percentage of our revenue, a loss of one or more of these customers could materially adversely affect our business and financial condition. If these principal customers cease using our services, our business could be materially adversely affected.
We expect to base our equipment and inventory purchasing decisions on our forecasts of customers’ demand, and if our forecasts are inaccurate, our operating results could be materially harmed.
As our customer base increases, we expect to need to purchase additional equipment and inventory. Our forecasts will be based on multiple assumptions, each of which may cause our estimates to be inaccurate, affecting our ability to provide products to our customers. When demand for our products increases significantly, we may not be able to meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs in order to rush the manufacture and delivery of additional products. If we underestimate customers’ demand, we may forgo revenue opportunities, lose market share and damage our customer relationships. Conversely, if we overestimate customer demand, we may purchase more equipment and inventory than we are able to use or sell at any given time or at all. As a result of our failure properly to estimate demand for our products, we could have excess or obsolete equipment and/or inventory, resulting in a decline in the value of our equipment and/or inventory, which would increase our costs of revenues and reduce our liquidity. Our failure to accurately manage our equipment purchases and inventory relative to demand would adversely affect our operating results.
If we experience delays or interruptions in shipping due to factors outside of our control, such disruptions could lead to customer dissatisfaction and harm our reputation.
We rely on third party shipment and carrier services to transport our shippers containing biological material. These third party operations could be subject to natural disasters, adverse weather conditions, other business disruptions, and carrier error, which could cause delays in the delivery of our shippers, which in turn could cause serious harm to the biological material being shipped. As a result, any prolonged delay in shipment, whether due to technical difficulties, power failures, break-ins, destruction or damage to carrier facilities as a result of a natural disaster, fire, or any other reason, could result in damage to the contents of the shipper. If we are unable to cause the delivery of our shippers in a timely matter and without damage, this could also harm our operating results and our reputation, even if we are not at fault.
| 13 |
We may need to raise substantial additional capital in the future in order to execute our business plan and help us and our collaboration partners fund the development and commercialization of our products. If we are unable to raise capital when needed, we may be forced to delay, reduce or eliminate products, programs, commercial efforts, or sales efforts.
We may need to finance future cash needs through public or private equity offerings, debt financings, or strategic collaboration and licensing or royalty arrangements. Our stockholders may consequently experience additional dilution, and debt financing, if available, and such financing may involve restrictive covenants and/or high interest rates. Regarding accessing additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our products, processes, and technologies or to grant licenses on terms not necessarily favorable to us. If adequate funds are not available from the foregoing sources, we may consider additional strategic financing options, including sales of assets, or we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs, or curtail some of our commercialization efforts. We may seek to access the public or private equity markets whenever conditions are favorable, even if we do not have an immediate need for additional capital.
We depend on our executive team and other employees to manage the business and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could materially harm our business.
Our success depends largely upon the continued high performance of our executive team and other employees. We rely on our executive team for leadership in critical areas of our business, including product development, engineering, marketing, security, business development, and general and administrative functions. The loss of one or more of our executives or key employees would have an adverse effect on our business. From time to time, there may be changes in executives due to hiring or departures, which could disrupt our business. We do not have employment agreements with executives or other key personnel that require them to continue to work for us for any specified period and, therefore, they could terminate their employment at any time.
For example, we depend on our senior management, including Wayne Williams, our Founder and Chief Executive Officer. If we lose the services of one or more of our senior management and other key personnel, we may not be able to successfully manage our business, meet competitive challenges or achieve our growth objectives. Further, to the extent that our business grows, we will need to attract and retain additional qualified management personnel in a timely manner, and we may not be able to do so. Our future success depends on our continuing ability to identify, hire, develop, motivate, retain, and integrate highly skilled personnel in all areas of our organization.
Our management team has limited experience managing a public company.
Our management team has limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws pertaining to public companies. These new obligations and constituents require significant attention from our management team and may divert their attention away from the day-to-day management of our business, which could harm our business, results of operations, and financial condition.
The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could harm our business.
We depend on the leadership and experience of our relatively small number of key executive management personnel, particularly our Chief Executive Officer and President, Wayne Williams. The loss of the services of any of these key executives or any of our executive management members could have a material adverse effect on our business and prospects, as we may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs, or at all. Furthermore, if we lose or terminate the services of one or more of our key employees or if one or more of our current or former executives or key employees joins a competitor or otherwise competes with us, it could impair our business and our ability to successfully implement our business plan. Additionally, if we are unable to hire qualified replacements for our executive and other key positions in a timely fashion, our ability to execute our business plan would be harmed. Even if we can quickly hire qualified replacements, we would expect to experience operational disruptions and inefficiencies during any transition.
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We may acquire other businesses, products or technologies in order to remain competitive in our market and our business could be adversely affected as a result of any of these future acquisitions.
We may make acquisitions of complementary businesses, products or technologies. If we identify any appropriate acquisition candidates, we may not be successful in negotiating acceptable terms of the acquisition, financing the acquisition, or integrating the acquired business, products or technologies into our existing business and operations. Further, completing an acquisition and integrating an acquired business will significantly divert management time and resources. The diversion of management attention and any difficulties encountered in the transition and integration process could harm our business. If we consummate any significant acquisitions using stock or other securities as consideration, our shareholders’ equity could be significantly diluted. If we make any significant acquisitions using cash consideration, we may be required to use a substantial portion of our available cash. Acquisition financing may not be available on favorable terms, if at all. In addition, we may be required to amortize significant amounts of other intangible assets in connection with future acquisitions, which would harm our operating results and financial condition.
We may not be able to compete with our competitors in the industry because many of them have greater resources than we do.
We expect to continue to experience significant and increasing levels of competition in the future. In addition, there may be other companies which are currently developing competitive products and services, or which may in the future develop technologies and products that are comparable, superior or less costly than our own. For example, some cryogenic equipment manufacturers and shippers with greater resources currently have solutions for storing and transporting cryogenic liquid and gases and may develop storage solutions that compete with our services/products. Additionally, some specialty couriers with greater resources currently provide dry ice transportation and may develop other products in the future, both of which compete with our products. A competitor that has greater resources than us may be able to bring its product to market faster than we can and offer its product at a lower price than us to establish market share. We may not be able to successfully compete with a competitor that has greater resources, and such competition may adversely affect our business.
We do not have key man life insurance.
The Company is particularly dependent on Wayne Williams, our Chief Executive Officer and President. However, the Company has not purchased any insurance policies concerning Mr. Williams in the event of his death or disability. Therefore, if Mr. Williams dies or becomes disabled, the Company will not receive any compensation to assist with Mr. Williams’s absence. The loss of Mr. Williams would negatively affect the Company and its operations.
Our lack of adequate D&O insurance may also make it difficult for us to retain and attract talented and skilled directors and officers.
In the future, we may be subject to additional litigation, including potential class action and stockholder derivative actions. Risks associated with legal liability are difficult to assess and quantify, and their existence and magnitude can remain unknown for significant periods. To date, we have not obtained directors and officers liability (“D&O”) insurance. Without adequate D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action based on their service to the Company could have a material adverse effect on our financial condition, results of operations and liquidity. Furthermore, our lack of adequate D&O insurance may make it difficult for us to retain and attract talented and skilled directors and officers, which could further impact our ability to retain and attract talented and skilled directors and officers.
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Our failure to maintain effective internal controls over financial reporting could have an adverse impact on us.
We will be required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely impact our public disclosures regarding our business, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting, disclosure of management’s assessment of our internal controls over financial reporting or disclosure of our public accounting firm’s attestation to or report on management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. In addition, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the reality that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
At present, management has identified some material weaknesses in its internal controls. Management has taken initial steps to remedy this weakness by hiring a Chief Financial Officer, an accounting manager and a bookkeeper, and plans to continue to add additional resources, technology and headcount as warranted by the growth of the Company and our plans to become a public company. We are also in the process of putting proper policies and procedures in place to ensure proper documentation is established and maintained for transactions that the Company enters into. While we believe these efforts will improve our internal controls and address the underlying causes of the material weaknesses, such material weaknesses will not be remediated until our remediation plan has been fully implemented and we have concluded that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. While we are working to remediate the material weaknesses as timely and efficiently as possible, at this time we cannot provide an estimate of costs expected to be incurred in connection with the implementation of this remediation plan, nor can we provide an estimate of the time it will take to complete this remediation plan. Even if management does establish effective remedial measures, we cannot guarantee that those internal controls and disclosure controls that we put in place will prevent all possible errors, mistakes or all fraud.
We will be a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for an exemption from certain corporate governance requirements.
Mr. Williams and Dr. Croyle currently control collectively 100% of the voting power of our outstanding common stock. Following this offering and assuming the over-allotment option is not exercised, Mr. Williams will control approximately 52.6% of the voting power of our outstanding common stock and Dr. Croyle will control approximately 17.5% of such voting power, and as a result, we currently are, and will continue to be a “controlled company” within the meaning of the corporate governance standards. Under Nasdaq rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:
| ● | a majority of the board of directors consists of independent directors; | |
| ● | the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; | |
| ● | the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and | |
| ● | there be an annual performance evaluation of the nominating and corporate governance and compensation committees. |
Although we do not currently intend to avail ourselves of this exemption, these requirements will not apply to us as long as we remain a controlled company. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.
Any insurance coverage we have might not be sufficient and uninsured losses may occur.
We maintain minimum insurance coverage to protect us against a broad range of risks, at levels we believe are appropriate and consistent with current industry practice. Our objective is to exclude or minimize the risk of financial loss at a reasonable cost.
Nevertheless, we could still be subject to risks in the following areas, among others:
| ● | losses that might be beyond the limits, or outside the scope, of coverage of our insurance and that may limit or prevent indemnification under our insurance policies, | |
| ● | inability to maintain adequate insurance coverage on commercially reasonable terms in the future, | |
| ● | certain categories of risks are currently not insurable at a reasonable cost, and | |
| ● | no assurance of the financial ability of the insurance companies to meet their claim payment obligations. |
Any one or more of these events could have an adverse effect on our business, financial position, profit, and cash flow.
Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities incurred, will cover any indemnification claims against us relating to any incident, will be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition and results of operations.
Our customers could also become the target of litigation relating to the patent and other intellectual property rights of others.
Any litigation relating to the intellectual property rights of others could trigger technical support and indemnification obligations in licenses or customer agreements that we may enter into. These obligations could result in substantial expenses, including the payment by us of costs and damages relating to claims of intellectual property infringement. In addition to the time and expense required for us to provide support or indemnification to our customers, any such litigation could disrupt the businesses of our customers, which in turn could hurt our relationships with such customers and cause the sale of our products to decrease. No assurance can be given that claims for indemnification will not be made, or that if made, such claims would not have a material adverse effect on our business, operating results or financial conditions.
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Changes in government regulation could adversely affect our business.
The Company is subject to legislation and regulation at the federal and local levels and, in some instances, at the state level. We expect that court actions and regulatory proceedings will continue to refine our rights and obligations under applicable federal, state, and local laws, which cannot be predicted. Modifications to existing requirements or imposition of new requirements or limitations could adversely impact our business.
We are subject to regulation by the U.S. Food and Drug Administration (“FDA”) and various state regulatory agencies, and failure to comply with such regulations could harm our reputation, business, financial condition and results of operations.
Certain of our operations are subject to regulation and licensing by the FDA and similar state regulatory agencies. In addition, we may in the future develop products, services, and procedures that may be subject to regulation by the FDA and similar state regulatory agencies. For example, we are VAWD Accredited by the National Association Boards of Pharmacy to provide specialized services including receipt, holding, consolidation, distribution, and recovery of your critical products internationally and domestically. We are compliant with regulation USP 1079/1083, FDA 21 CFR Part 11/210/211 & 820, ICHQ8/Q10.
The regulations enforced by the FDA and similar state regulatory agencies govern a wide variety of product-related activities, including the research, development, testing, manufacture, quality control, approval, clearance, labeling, packaging, storage, record-keeping, promotion, advertising, distribution, marketing, post-approval monitoring and reporting, pricing, and export and import of pharmaceutical products. If we or any of our customers, suppliers or distributors fail to comply with applicable regulatory requirements or are perceived to potentially have failed to comply, we may face, among other things, warning letters; adverse publicity affecting both us and our customers; investigations or notices of non-compliance, fines, injunctions, and civil penalties; import or export restrictions; partial suspensions or total shutdown of facilities; loss of licenses or the imposition of operating restrictions; increased difficulty in obtaining required FDA clearances or approvals or foreign equivalents; seizures or recalls of our products or those of our customers; or the inability to sell our services. Any such regulatory agency actions could disrupt our business and operations, lead to significant remedial costs and have a material adverse impact on our financial position and results of operations.
Complying with certain regulations that apply to shipments using our solutions can limit our activities and increase our cost of operations.
Shipments using our solutions and services are subject to various regulations in the countries to which our customers require our products and service to be delivered. For example, shipments using our solutions may be required to comply with the shipping requirements promulgated by the Centers for Disease Control (“CDC”), the Occupational Safety and Health Organization (“OSHA”), the Department of Transportation (“DOT”) as well as rules established by the International Air Transport Association (“IATA”) and the International Civil Aviation Organization (“ICAO”). Additionally, our data logger may be subject to regulation and certification by the FDA, Federal Communications Commission (“FCC”), and the Federal Aviation Administration (“FAA”). We will need to ensure that our solutions and services comply with relevant rules and regulations to make our solutions and services marketable, and in some cases compliance is difficult to determine. Significant changes in such regulations could require costly changes to our solutions and services or prevent use of our shippers for an extended period of time while we seek to comply with changed regulations. If we are unable to comply with any of these rules or regulations or fail to obtain any required approvals, our ability to market our solutions and services may be adversely affected. In addition, even if we are able to comply with these rules and regulations, compliance can result in increased costs. In either event, our financial results and condition may be adversely affected. We depend on our business partners and unrelated and frequently unknown third party agents in foreign countries to act on our behalf to complete the importation process and to make delivery of our shippers to the final user. The failure of these third parties to perform their duties could result in damage to the contents of the shipper resulting in customer dissatisfaction or liability to us, even if we are not at fault.
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We, along with our customers, are subject to various governmental regulations and international standards. Compliance with or changes in such regulations may cause us to incur significant expenses, and if we fail to maintain satisfactory compliance with certain regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.
We, along with our customers, are subject to various significant federal, state and local regulations, including but not limited to regulations in the areas of health and safety, packaging, product content, employment, labor and immigration, foreign and domestic import/export controls, trade restrictions and anti-competition. In addition, as a global operator, we are subject to the International Organization for Standardization. We do not have contracts with any foreign customers. We do, however, contract with domestic entities that, from time to time, use our products and services when shipping to foreign locations.
We must also comply with complex foreign and U.S. laws and regulations, such as the U.S. Foreign Corrupt Practices Act, and other local laws prohibiting corrupt payments to governmental officials, anti-competition regulations and sanctions imposed by the U.S. Office of Foreign Assets Control and other similar laws and regulations. Violations of these laws and regulations could result in fines and penalties, criminal sanctions, restrictions on our business conduct and on our ability to offer our products in one or more countries, and could also materially affect our brand, our ability to attract and retain employees, our international operations, our business and our operating results. Although we will implement policies and procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our employees, contractors, or agents will not violate our policies.
These regulations are complex, change frequently and have tended to become more stringent over time. We may be required to incur significant expenses to comply with these regulations or to remedy any violations of these regulations. Any failure by us to comply with applicable government regulations could also result in the cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to carry on or expand our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our services. Any significant change in these regulations could reduce demand for our services or products, force us to modify our services to comply with new regulations or increase our costs of producing these products. If demand for our products is adversely affected or our costs increase, our operating results and business would suffer.
We rely upon certain critical information systems, including our Sentry platform, for the operation of our business; the failure of any critical information system could adversely impact our reputation and future revenues, and we may be required to increase our spending on data and system security.
We rely upon certain critical information systems, including our Sentry platform which is used by us for our customers and business partners to automate the entry of orders, prepare customs documentation and facilitate status and location monitoring of shipped orders while in transit. In addition, the provision of services to our customers and the operation of our networks and systems involve the storage and transmission of significant amounts of proprietary information and sensitive or confidential data, including personal information of customers, employees and others. Our technology infrastructure and critical information systems are subject to damage or interruption from a number of potential sources, including unauthorized intrusions, cyberattacks, software viruses or other malware, natural disasters, power failures, employee error or malfeasances and other events. Despite our best efforts, no cybersecurity or emergency recovery process is failsafe, and if our safeguards fail or our technology infrastructure or critical information systems are compromised, the safety and efficiency of our operations could be materially harmed, our reputation could suffer, and we could face additional costs, liabilities, costly legal challenges.
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Cyberattacks, data incidents and breaches in the security of our information systems and networks and of the electronic and confidential information in our possession could materially adversely impact our business, financial condition and results of operations, in addition to our reputation and relationships with our employees, customers, suppliers and business partners.
As part of our normal business activities, we collect and store or have access to certain proprietary confidential, and personal information, including information about our employees, customers, suppliers and business partners, which may be entitled to protection under a number of regulatory regimes. The protection and security of our network systems and our own information, as well as information relating to our employees, customers, suppliers, business partners and others, is vitally important to us. Any failure of us to maintain the security of our network systems and the proprietary, confidential, and personal data in our possession, including via the penetration of our network security and the misappropriation of proprietary, confidential and personal information, could result in costly investigations and remediation, business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in our employees’, customers’, suppliers’ and business partners’ confidence in us and other competitive disadvantages, and thus could have a material adverse effect on our business, financial condition and results of operations.
The frequency, intensity, and sophistication of cyberattacks and data security incidents has significantly increased in recent years and is constant. As with many other businesses, we are continually subject to cyberattacks and the risk of data security incidents. Due to the increased risk of these types of attacks and incidents, we have implemented information technology and data security tools, measures, and processes designed to protect our networks systems, services, and the personal, confidential or proprietary information in our possession, and to ensure an effective response to any cyberattack or data security incident. We also have privacy and data security policies in place that are designed to detect, prevent, and/or mitigate cyberattacks and data security incidents. Whether or not these policies, tools, and measures are ultimately successful, the expenditures could have an adverse impact on our financial condition and results of operations and divert management’s attention from pursuing our strategic objectives. As newer technologies evolve, we could be exposed to increased risks from cyberattacks, data security events, and data breaches, including those from human error, negligence or mismanagement or from illegal or fraudulent acts.
Although we take the security of our network systems and information seriously, there can be no assurance that the security measures we employ will effectively prevent unauthorized persons from obtaining unauthorized access to our systems and information due to the evolving nature and intensity of cyberattacks and threats to data security, in light of new and sophisticated tools and methods used by criminals and cyberterrorists to penetrate and compromise systems, including computer viruses, malware, ransomware, phishing, misrepresentation, social engineering and forgery, which make it increasingly challenging to anticipate, harder to detect, and more difficult to adequately mitigate these risks. While we have cyber security insurance, we may incur significant costs in the event of a successful cyber incident against us or in responding to and recovering from a cyber incident that are not covered by, or exceed the limits of, such insurance. Additionally, the cost and operational consequences of implementing, maintaining and enhancing further data or system protection measures could increase significantly to overcome increasingly intense, complex and sophisticated global cyber threats.
Expenses or liabilities resulting from litigation could materially adversely affect our results of operations and financial condition.
We may become party to various legal proceedings and other claims that arise in the ordinary course of business, or otherwise in the future. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. In addition, any such claims or litigation may be time-consuming and costly, divert management resources, require us to change our platform, or have other adverse effects on our business. While we cannot assure the outcome of any legal proceeding or contingency in which we are or may become involved, we do not believe that any pending legal claim or proceeding arising in the ordinary course will be resolved in a manner that would have a material adverse effect on our business. However, if one or more of these legal matters resulted in an adverse monetary judgment against us, such a judgment could harm our results of operations and financial condition.
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We operate in a competitive industry and if we cannot compete effectively, we will lose business.
We expect to continue to experience significant and increasing levels of competition in the future. While there are technological and marketing barriers to entry, we cannot guarantee that these barriers will be sufficient to defend our market share against current and future competitors. Our principal competitive considerations in our market include:
| ● | financial resources to allocate to proper marketing and an appropriate sales effort; | |
| ● | acceptance of our solutions model; | |
| ● | acceptance of our solutions including per use fee structures and other charges for services; | |
| ● | keeping up technologically with ongoing development of enhanced features and benefits; | |
| ● | the ability to develop and maintain and expand strategic alliances; | |
| ● | establishing our brand name; | |
| ● | our ability to deliver our solutions to our customers when requested; and | |
| ● | our timing of introductions of new solutions and services. |
Our future revenue stream depends to a large degree on our ability to bring new solutions and services to market on a timely basis. We generally sell our products in industries that are characterized by increased competition through frequent innovation, rapid technological changes and changing industry standards. Without the timely introduction of new products, services and enhancements, our products and services may become obsolete over time, in which case our revenue and operating results could suffer.
There may also be other companies which are currently developing competitive products and services or which may in the future develop technologies and products that are comparable, superior or less costly than our own. For example, some specialty couriers and packaging manufacturers with greater resources currently provide temperature-controlled packaging solutions and may develop other products or solutions in the future, both of which compete with our products. A competitor that has greater resources than us may be able to develop and expand their networks and product offerings more quickly, devote greater resources to the marketing and sale of their solutions and adopt more aggressive pricing policies. We may not be able to successfully compete with a competitor that has greater resources, which may adversely affect our business.
We will have difficulty increasing our revenues if we experience delays, difficulties or unanticipated costs in establishing the sales, marketing and distribution capabilities necessary to successfully commercialize our solutions.
We plan to further enhance our sales, marketing and distribution capabilities in the Americas. It will be expensive and time-consuming for us to develop and integrate our global marketing and sales network and thus we intend to further broaden our strategic alliances with domestic and international providers of shipping services and other solutions providers to the life sciences industry to incorporate use of our platform of solutions in their service offerings. We may not be able to provide adequate incentive to our sales force or to establish and maintain favorable distribution and marketing collaborations with others to promote our solutions. In addition, any third party with whom we have established a marketing and distribution relationship may not devote sufficient time to the marketing and sales of our solutions, thereby exposing us to potential expenses in exiting such distribution agreements. We, and any of our alliance partners, must also market our services in compliance with federal, state, local and international laws relating to the provision of incentives and inducements. Violation of these laws can result in substantial penalties. Therefore, if we are unable to successfully motivate and expand our marketing and sales force and further develop our sales and marketing capabilities, or if our alliance partners fail to promote our solutions, we will have difficulty increasing our revenues and the revenue may not offset the additional expense of expansion.
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Our agreements with global providers of shipping services may not result in a significant increase in our revenues or cash flow, soon or in the future.
We believe that establishing strategic alliances with global providers (integrators) of logistics and of shipping services, such as our agreements with FedEx, DHL, and UPS can drive growth in our revenues, but there is no certainty to this view. We are seeking to establish similar arrangements with other providers of international shipping services. We anticipate all such alliances will enable us to provide seamless, end-to-end shipping solutions to customers of our respective alliance partners and allow us to leverage the established relationships with those customers, but there is no guarantee this will happen.
Because our agreements with FedEx, DHL, and UPS do not contain any requirement that they use a minimum level of our services, there can be no assurance of any significant increase in our revenues or cash flows as a result of these strategic alliances.
If we use biological and hazardous materials in a manner that causes injury, we could be liable for damages.
Our customers may ship potentially harmful biological materials in our packages. We cannot eliminate the risk of accidental contamination or injury to employees or third parties from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have. Additionally, we are subject to, on an ongoing basis, federal, state and local laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. In the event of an accident, we could be held liable for damages.
Our products and services may contain errors or defects, which could result in damage to our reputation, lost revenues, diverted development resources and increased service costs, litigation and product recalls. These risks may be heightened when our products or services are used in connection with human reproductive medicine.
Our products and services must meet stringent requirements and we must develop our products and services solutions quickly to keep pace with the rapidly changing market. Products and services as sophisticated as ours could contain undetected errors or defects, especially when first introduced or when new equipment or versions of our software are released. If our products and services are not free from errors or defects, we may incur an injury to our reputation, lost revenues, diverted development resources, increased customer service and support costs, product recalls and litigation. The costs incurred in correcting any product errors or defects may be substantial and could adversely affect our business, results of operations and financial condition.
Due to the low temperatures at which some of our products are used and the fact that some of our products are relied upon by our customers or end users in their facilities or operations or are manufactured for relatively broad medical, transportation, or consumer use, we face an inherent risk of exposure to claims in the event that the failure, use, or misuse of our products results, or is alleged to result, in death, bodily injury, property or sample damage, or economic loss. The amount of damages for which we are potentially held liable for may be higher when our products or services are used in connection with human reproductive medicine than when they are used for other purposes. For example, in some states, damage to an embryo may be deemed wrongful death for which punitive or other damages may be awarded, which would not otherwise be available. In addition, we specialize in the secure storage of biological specimens, materials and samples covering the full range of temperatures from cryogenic through controlled room temperature. Any damage to these specimens, materials and samples may be attributed to a failure of our storage systems or services, which could lead to claims for damages made by customers and could also harm our relationship with customers and damage our reputation in the life sciences industry, resulting in material harm to our business.
Although we currently maintain product liability coverage, which we believe is adequate for product liability claims and for the continued operation of our business, it includes customary exclusions and conditions, may not cover certain specialized applications and generally does not cover warranty claims. Additionally, such insurance may become difficult to obtain or be unobtainable in the future on terms acceptable to us. A successful product liability claim or series of claims against us, including one or more consumer claims purporting to constitute class actions or claims resulting from extraordinary loss events, in excess of or outside our insurance coverage, or a significant warranty claim or series of claims against us, could materially decrease our liquidity, impair our financial condition, and adversely affect our results of operations.
In addition, regardless of merit or eventual outcome, product liability claims may result in, among other things, costs of litigation, distraction of management’s attention from our primary business, the inability to commercialize our existing or new products, decreased demand for our products or, if cleared or approved, products in development, damage to our business reputation, product recalls or withdrawals from the market, withdrawal of clinical trial participants, substantial monetary awards to patients or other claimants, or loss of revenue.
While we may attempt to manage our product liability exposure by proactively recalling or withdrawing from the market any defective products, any recall or market withdrawal of our products may delay the supply of those products to our customers and may impact our reputation. We can provide no assurance that we will be successful in initiating appropriate market recall or market withdrawal efforts that may be required in the future or that these efforts will have the intended effect of preventing product malfunctions and the accompanying product liability that may result.
Damage to our reputation could negatively impact our business, financial condition, and results of operations.
Our reputation and the quality of our brand are critical to our business and success in existing markets and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. The information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.
Our sales force is limited.
To date, our principal marketing officer has been Wayne Williams, our CEO. Given all his other responsibilities within the Company, he can only dedicate a limited amount of time to marketing the Company’s services. The continued lack of dedicated marketing support may negatively affect our growth and ability to generate increased revenue. We intend to use part of the proceeds of this offering to hire additional marketing personnel and support a sales force for the Company’s services.
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RISKS RELATED TO REGULATORY ENVIRONMENT AND TAXATION
We are subject to income taxes as well as non-income-based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes.
Significant judgment is required in determining our provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable: a) there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our income tax provisions, expense amounts for non-income-based taxes and accruals, and b) any material differences could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.
We have made significant estimates and judgments in calculating our income tax provision and other tax assets and liabilities. If these estimates or judgments are incorrect, our operating results and financial condition may be materially affected.
We are subject to regular review and audit by tax authorities. Any adverse outcome of such a review or audit could negatively affect our operating results and financial condition. In addition, the determination of our provision for income taxes and other tax assets and liabilities requires significant judgment, and there are many transactions and calculations where the ultimate tax determination is uncertain at the present time. Although we believe our estimates and judgments are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may have a material effect on our operating results and financial condition.
Changes in tax laws could have a material adverse effect on our business, financial condition and results of operations.
Changes in tax laws could have a material adverse effect on our business, financial condition and results of operations. For example, the Tax Cuts and Jobs Act passed in 2017 contained significant changes to U.S. tax law, including a reduction in the corporate tax rate and a moved towards a new territorial system of taxation. The primary impact of the Tax Act on our provision for income taxes was a reduction of the future tax benefits of our deferred tax assets as a result of the reduction in the corporate tax rate. The impact of the Tax Act may be subject to ongoing technical guidance and accounting interpretation, which we will continue to monitor and assess. As we expand the scale of our business activities, any changes in the U.S. taxation of such activities may increase our effective tax rate and harm our business, financial condition and results of operations.
We are subject to taxes in the United States under federal, state and local jurisdictions in which we operate. The governing tax laws and applicable tax rates vary by jurisdiction and are subject to interpretation and macroeconomic, political or other factors. We may be subject to examination in the future by federal, state and local authorities on income, employment, sales and other tax matters. While we regularly assess the likelihood of adverse outcomes from such examinations and the adequacy of our provision for taxes, there can be no assurance that such provision is sufficient and that a determination by a tax authority would not have an adverse effect on our business, financial condition and results of operations. Various tax authorities may disagree with tax positions we take and if any such tax authorities were to successfully challenge one or more of our tax positions, the results could adversely affect our financial condition. Further, the ultimate amount of tax payable in a given financial statement period may be impacted by sudden or unforeseen changes in tax laws, changes in the mix and level of earnings by taxing jurisdictions, or changes to existing accounting rules or regulations. The determination of our overall provision for income and other taxes is inherently uncertain as it requires significant judgment around complex transactions and calculations. As a result, fluctuations in our ultimate tax obligations may differ materially from amounts recorded in our financial statements and could adversely affect our business, financial condition and results of operations in the periods for which such determination is made.
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Taxing authorities may successfully assert that we should have collected or in the future should collect sales and use, gross receipts, value-added or similar taxes and may successfully impose additional obligations on us, and any such assessments or obligations could adversely affect our business, financial condition and results of operations.
The application of indirect taxes, such as sales and use tax, value-added tax, goods and services tax, business tax and gross receipts tax, to platform businesses is a complex and evolving issue. Many of the fundamental statutes and regulations that impose these taxes were established before the adoption and growth of the internet and e-commerce. Significant judgment is required on an ongoing basis to evaluate applicable tax obligations and as a result, amounts recorded are estimates and are subject to adjustments. In many cases, the ultimate tax determination is uncertain because it is not clear how new and existing statutes might apply to our business. In addition, governments are increasingly looking for ways to increase revenue, which has resulted in discussions about tax reform and other legislative actions to increase tax revenue, including through indirect taxes. Such taxes could adversely affect our financial condition and results of operations.
We may face various indirect tax audits in various U.S. jurisdictions. In certain jurisdictions, we collect and remit indirect taxes. However, tax authorities may raise questions about or challenge or disagree with our calculation, reporting or collection of taxes and may require us to collect taxes in jurisdictions in which we do not currently do so or to remit additional taxes and interest, and could impose associated penalties and fees. A successful assertion by one or more tax authorities requiring us to collect taxes in jurisdictions in which we do not currently do so or to collect additional taxes in a jurisdiction in which we currently collect taxes, could result in substantial tax liabilities, including taxes on past sales, as well as penalties and interest, could harm our business, financial condition and results of operations. Although we have reserved for potential payments of possible past tax liabilities in our financial statements, if these liabilities exceed such reserves, our financial condition will be harmed.
As a result of these and other factors, the ultimate amount of tax obligations owed may differ from the amounts recorded in our financial statements and any such difference may adversely impact our results of operations in future periods in which we change our estimates of our tax obligations or in which the ultimate tax outcome is determined.
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR SECURITIES
Our Chief Executive Officer and President will have control over key decision-making as a result of his control of a majority of our voting shares.
Wayne Williams, the Company’s Chief Executive Officer and President, currently owns 2,250,000 shares (75%) of our common stock, which, upon closing of this offering, will represent approximately 52.6% of the voting power of our common stock. As a result, Mr. Williams will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, Mr. Williams will have the ability to control the management and affairs of the Company as a result of his position as our CEO and President, and his ability to control the election of our directors. Additionally, in the event that Mr. Williams controls the Company at the time of his death, control may be transferred to a person or entity that he designates as his successor. Mr. Williams also serves on the Company’s board of directors. As a board member and officer, Mr. Williams owes a fiduciary duty to the Company and must act in good faith in a manner he reasonably believes to be in the best interests of the Company. As a beneficial stockholder, even a controlling beneficial stockholder, Mr. Williams is entitled to vote his shares, and shares over which he has voting control in his interests, which may not always be in the interests of our stockholders generally. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control, could deprive you of an opportunity to receive a premium for your common stock as part of a sale, and might ultimately affect the trading price of our common stock.
While we are seeking to list our common stock on Nasdaq, there is no assurance that such securities will be listed on Nasdaq. Even if we meet the initial listing requirements of Nasdaq, there can be no assurance that we will be able to comply with the continued listing standards of Nasdaq, a failure of which could result in a delisting of our common stock.
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While we are seeking to list our common shares on Nasdaq, we cannot ensure that such securities will be accepted for listing on Nasdaq. Even if our common stock is listed on Nasdaq, Nasdaq requires that the trading price of its listed stocks remain above $1.00 for the stock to remain listed. If a listed stock trades below $1.00 for more than 30 consecutive trading days, then it is subject to delisting from Nasdaq. In addition, to maintain a listing on Nasdaq, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, and certain corporate governance requirements. If we are unable to satisfy these requirements or standards, we could be subject to delisting, which would have a negative effect on the price of our securities and would impair your ability to sell or purchase your securities when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with the listing requirements, but we cannot assure that any such action taken by us would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our shares from dropping below the minimum bid price requirement, or prevent future non-compliance with the listing requirements.
Certain recent initial public offerings of companies with relatively small public floats have experienced extreme volatility that was seemingly unrelated to the underlying performance of the company. Our common stock may potentially experience rapid and substantial price volatility, and price decline, which may make it difficult for prospective investors to assess what we believe to be the value of our common stock.
In addition to the general volatility risks discussed in this Prospectus, our common stock may be subject to rapid and substantial price volatility and/or a decline in the market price. We may experience extreme stock price volatility unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the rapidly changing value of our common stock. Recently, there have been instances of extreme stock price run-ups followed by rapid price declines and strong stock price volatility with a number of recent initial public offerings, especially among companies with relatively small public floats. As we anticipate having a relatively small public float, the common stock may experience greater stock price volatility, extreme price run-ups, rapid declines in the price, lower trading volume, large spreads in bid and asked prices, and less liquidity than large-capitalization companies. The aspects of the trading in the common stock may be unrelated to our actual or expected operating performance, financial condition or prospects, making it difficult for prospective investors to assess the value of our common stock. Because of the low public float and the absence of any significant trading volume, the reported prices may not reflect the price at which an investor would be able to sell shares if it wants to sell any shares or buy shares if it wishes to buy share.
If the trading volumes of our common stock is low, persons buying or selling in relatively small quantities may easily influence the prices of the common stock. A low volume of trades could also cause the price of the common stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session. Broad market fluctuations and general economic and political conditions may also adversely affect the market price of the common stock. The volatility also could adversely affect the ability of the Company to issue additional shares of common stock or any other securities and the ability to obtain stock market based financing in the future. No assurance can be given that an active market in our common stock will develop or be sustained.
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The market price, trading volume and marketability of our securities may, from time to time, be significantly affected by numerous factors beyond our control, which may materially adversely affect the market price of your securities, the marketability of your securities and our ability to raise capital through future equity financings.
The market price and trading volume of our securities may fluctuate significantly. Many factors that are beyond our control may materially adversely affect the market price of your securities, the marketability of your securities and our ability to raise capital through equity financings. These factors include the following:
| ● | actual or anticipated variations in our periodic operating results, | |
| ● | increases in market interest rates that lead investors of our securities to demand a higher investment return, | |
| ● | changes in earnings estimates, | |
| ● | changes in market valuations of similar companies, | |
| ● | actions or announcements by our competitors, | |
| ● | adverse market reaction to any increased indebtedness we may incur in the future, | |
| ● | additions or departures of key personnel, | |
| ● | actions by stockholders, | |
| ● | speculation in the media, online forums, or investment community, and | |
| ● | our intentions and ability to list our securities on Nasdaq and our subsequent ability to maintain such listing (if approved). |
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, especially once we are no longer an “emerging growth company.” The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. In addition, we expect that our management and other personnel will need to divert their attention from operational and other business matters to devote substantial time to these public company requirements. 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.
We also expect that being a public company will make it more expensive for us to maintain director and officer liability insurance, and we may be required to accept reduced coverage, incur substantially higher costs to obtain coverage or only obtain coverage with a significant deductible. These factors could also make it more difficult for us to attract and retain qualified executive officers and qualified members of our board of directors, particularly to serve on our audit committee and compensation committee.
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In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and, as a result, their application in practice may evolve as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If notwithstanding our efforts, we fail to comply with new laws, regulations and standards or our efforts differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us, and our business may be adversely affected.
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company” as defined under the Section 2(a) of the Securities Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, emerging growth companies can delay the adoption of certain new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make a comparison of our financial statements with those of other public companies more difficult. We may take advantage of these exemptions for so long as we are an “emerging growth company.” We cannot predict if investors will find our common stock less attractive to the extent that we rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and the price of our common stock may be more volatile.
An active, liquid trading market for our securities may not be sustained, which may cause our common stock to trade at a discount from the initial public offering price and make it difficult for you to sell the securities you purchase.
We cannot predict the extent to which investor interest in us will sustain a trading market or how active and liquid that market may remain. If an active and liquid trading market is not sustained, you may have difficulty selling any of our securities that you purchase at a price above the price you purchase it or at all. The failure of an active and liquid trading market to continue would likely have a material adverse effect on the value of our securities. The market price of our securities may decline below the initial public offering price, and you may not be able to sell your securities at or above the price you paid or at all. An inactive market may also impair our ability to raise capital to continue to fund operations by selling securities and may impair our ability to acquire other companies or technologies by using our securities as consideration.
Our management has broad discretion as to the use of the net proceeds from this offering.
Our management will have broad discretion in the application of the net proceeds of this offering. Accordingly, you will have to rely upon the judgment of our management with respect to the use of these proceeds. We intend to use the proceeds of this offering for general corporate purposes, which could include capital expenditure and working capital. Our management may spend a portion or all of the net proceeds from this offering in ways that holders of our securities may not desire or that may not yield a significant return or any return at all. Our management not applying these funds effectively could harm our business. Pending their use, we may also invest the net proceeds from this offering in a manner that does not produce income or that loses value. See “Use of Proceeds” for more information.
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You will experience immediate and substantial dilution as a result of this offering.
As of September 30, 2024, our net cash book value was approximately $4,307,000 or approximately $1.44 per share. Since the price per share being offered in this offering is substantially higher than the as adjusted net tangible book value per common stock, you will suffer substantial dilution concerning the net tangible book value of the shares you purchase in this offering. Based on the assumed initial public offering price of $5.00 per share being sold in this offering, and our as adjusted net tangible book value per share as of September 30, 2024 if you purchase shares in this offering, you will suffer immediate and substantial dilution of $2.80 per share (or $2.30 per share if the underwriters exercise their over-allotment option in full) of our common stock. See “Dilution” for a more detailed discussion of the dilution you will incur if you purchase securities in this offering.
We may need to raise additional capital in the future for acquisitions or other purposes. Future financings may involve the issuance of debt, equity and/or securities convertible into or exercisable or exchangeable for our equity securities. These financings may not be available to us on reasonable terms or at all when and as we require funding. If we are able to consummate such financings, the trading price of our common stock could be adversely affected and/or the terms of such financings may adversely affect the interests of our existing stockholders. Any failure to obtain additional working capital when required would have a material adverse effect on our business and financial condition and may result in a decline in our stock price. Any issuances of our common stock, preferred stock, or securities such as warrants or notes that are convertible into, exercisable or exchangeable for, our capital stock, would have a dilutive effect on the voting and economic interest of our existing stockholders.
We may issue additional debt and equity securities, which are senior to our common stock as to distributions and in liquidation, which could materially adversely affect the market price of our securities.
In the future, we may attempt to increase our capital resources by entering into additional debt or debt-like financing that is secured by all or up to all of our assets, or issuing debt or equity securities, which could include issuances of commercial paper, medium-term notes, senior notes, subordinated notes or shares. In the event of our liquidation, our lenders and holders of our debt securities would receive a distribution of our available assets before distributions to our stockholders.
Any additional preferred securities, if issued by our company, may have a preference with respect to distributions and upon liquidation, which could further limit our ability to make distributions to our common stockholders. Because our decision to incur debt and issue securities in our future offerings will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financing.
Further, market conditions could require us to accept less favorable terms for the issuance of our securities in the future. Thus, you will bear the risk of our future offerings reducing the value of your securities and diluting your interest in us. In addition, we can change our leverage strategy from time to time without the approval of holders of our common stock, which could materially adversely affect the market share price of our securities.
We do not intend to pay dividends for the foreseeable future.
Since our inception, we have not declared or paid any cash dividends on our capital stock. We intend to continue with the same policy, and currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future. In addition, the terms of our existing corporate debt agreements, or any future debt agreements may preclude us from paying dividends. As a result, capital appreciation of our common stock, if any, will be the only way for stockholders to realize any future gains on their investment in the foreseeable future.
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Were our securities to be considered a penny stock, and therefore become subject to the penny stock rules, U.S. broker-dealers may be discouraged from effecting transactions in our securities.
Our securities may be subject to the penny stock rules under the Exchange Act. The SEC rules define a “penny stock,” generally as any equity security not listed on a national securities exchange and that has not maintained that listing and that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, broker-dealers that derive more than 5% of their customer transaction revenues from transactions in penny stocks are required to deliver a standardized risk disclosure document that provides information about penny stocks, and the nature and level of risks in the penny stock market, to any non-institutional customer to whom the broker-dealer recommends a penny stock transaction. The broker-dealer must also provide the customer with the current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing before completing the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that before a transaction, the broker and/or dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. The transaction costs associated with penny stocks are high, reducing the number of broker-dealers who may be willing to engage in the trading of our securities. These additional penny stock disclosure requirements are burdensome and may reduce all the trading activity in the market for our securities. As long as our securities are subject to the penny stock rules, the holders of our securities may find it more difficult to sell their securities and cause a decline in the market value of our stock.
Our officers and directors are entitled to indemnification from us for liabilities under our articles of incorporation, which could be costly to us and may discourage the exercise of stockholder rights.
Our articles of incorporation provide that we possess and may exercise all powers of indemnification of our officers, directors, employees, agents and other persons and our bylaws also require us to indemnify our officers and directors as permitted under the provisions of the Nevada Revised Statutes (“NRS”). We will also have contractual indemnification obligations under our agreements with our directors and officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors, officers and employees for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors, officers and employees even though such actions, if successful, might otherwise benefit our company and stockholders.
Our bylaws and Nevada law may discourage, delay or prevent a change of control of our company or changes in our management, which could have the result of lowering the trading price of our common stock.
Certain anti-takeover provisions of Nevada law could have the effect of delaying or preventing a third party from acquiring us, even if the acquisition arguably could benefit our stockholders.
Nevada’s “combinations with interested stockholders” statutes, NRS 78.411 through 78.444, inclusive, prohibit specified types of business “combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” for two years after such person first becomes an “interested stockholder” unless the corporation’s board of directors approves the combination, or the transaction by which such person becomes an “interested stockholder”, in advance, or unless the combination is approved by the board of directors and sixty percent of the corporation’s voting power not beneficially owned by the interested stockholder, its affiliates and associates. Further, in the absence of prior approval certain restrictions may apply even after such two-year period. However, these statutes do not apply to any combination of a corporation and an interested stockholder after the expiration of four years after the person first became an interested stockholder. For purposes of these statutes, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation and at any time within the two previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most significant transactions between a corporation and an “interested stockholder.” These statutes generally apply to Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation’s original articles of incorporation, the amendment (1) must be approved by the affirmative vote of the holders of stock representing a majority of the outstanding voting power of the corporation not beneficially owned by interested stockholders or their affiliates and associates, and (2) is not effective until 18 months after the vote approving the amendment and does not apply to any combination with a person who first became an interested stockholder on or before the effective date of the amendment. We did not make such an election in our articles of incorporation and have not amended our articles of incorporation to so elect.
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Nevada’s “acquisition of controlling interest” statutes, NRS 78.378 through 78.3793, inclusive, contain provisions governing the acquisition of a controlling interest in certain Nevada corporations. These “control share” laws provide generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied voting rights, unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. Our bylaws provide that these statutes do not apply to us or any acquisition of our common stock. Absent such provision in our bylaws, these laws would apply to us as of a particular date if we were to have 200 or more stockholders of record (at least 100 of whom have addresses in Nevada appearing on our stock ledger at all times during the 90 days immediately preceding that date) and do business in the State of Nevada directly or through an affiliated corporation, unless our articles of incorporation or bylaws in effect on the tenth day after the acquisition of a controlling interest provide otherwise. These laws provide that a person acquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the application of these provisions of the NRS, would enable that person to exercise (1) one fifth or more, but less than one third, (2) one third or more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors. Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control shares” to which the voting restrictions described above apply.
Various provisions of our bylaws may delay, defer or prevent a tender offer or takeover attempt of us that a stockholder might consider in his or her best interest. Our bylaws may be adopted, amended or repealed by the affirmative vote of the holders of at least a majority of our outstanding shares of capital stock entitled to vote for the election of directors, and except as provided by Nevada law, our board of directors shall have the power to adopt, amend or repeal the bylaws by a vote of not less than a majority of our directors. The interests of these stockholders and directors may not be consistent with your interests, and they may make changes to the bylaws that are not in line with your concerns.
Nevada law also provides that directors may resist a change or potential change in control if the directors determine that the change is opposed to, or not in the best interests of, the corporation. The existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Our common stock market price and trading volume could decline if equity or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.
The trading market for our common stock will depend in part on the research and reports that equity or industry analysts publish about us or our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our common stock to decline.
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After deducting the estimated underwriters’ commissions and estimated offering expenses payable by us, we expect to receive net proceeds of approximately $5,100,000 from this offering (or approximately $5,934,000 if the underwriters exercise their over-allotment option in full), based on an assumed initial public offering price of $5.00 per share and assuming no exercise of any Representative’s Warrants.
We currently anticipate an approximate allocation of the net proceeds from this offering as follows:
| Offering Costs and expenses | $ | 1,300,000 | ||
| Sales Support/Marketing Expenses | 1,000,000 | |||
| Customer Expansion | 2,300,000 | |||
| Working capital and general corporate purposes | 500,000 | |||
| TOTAL | $ | 5,100,000 |
We may change the amount of net proceeds to be used specifically for any of the foregoing purposes. We presently intend to utilize a portion of the proceeds to hire additional marketing personnel and retain a sales force for generating sales of the Company’s services. The amounts and timing of our actual expenditures will depend upon numerous factors, including our general business conditions, demand for our services, our operating costs and the other factors described under “Risk Factors” in this prospectus. Accordingly, our management will have significant discretion and flexibility in applying the net proceeds from this offering. Pending any use, as described above, we intend to invest the net proceeds in high-quality, short-term, interest-bearing securities.
We do not currently have any intention to use the net proceeds of this offering for any acquisitions nor do we have any verbal or written agreements with any third parties. However, the board might decide to use some of the net proceeds for an acquisition if the Company becomes aware of a suitable target company.
Each $1.00 increase (decrease) in the assumed initial public offering price of $5.00 per share would increase (decrease) the net proceeds to us from this offering by approximately $1,158,400, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each increase (decrease) of 100,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, by $452,500, assuming the assumed initial public offering price stays the same.
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We do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. Any future determination related to our dividend policy will be made at the discretion of our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects, the requirements of current or then-existing debt instruments and other factors our board of directors may deem relevant.
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The following table sets forth our capitalization as of September 30, 2024, but gives effect to the Share Exchange:
| ● | on an actual basis; and |
| ● | on a pro forma adjusted basis to reflect, as if they had occurred on September 30, 2024, the sale by us of 1,280,000 shares of common stock in this offering, based on an assumed initial public offering price of $5.00, the midpoint of the price range set forth on the cover page of this prospectus, after deducting deferred offering costs and the underwriting discounts and commissions and estimated offering costs payable by us of approximately $1,300,000, assuming no exercise of the underwriter’s option to cover over-allotments and assuming no exercise of the Representative’s Warrants issued in this offering. |
You should read this table together with our financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
| As of September 30, 2024 | As of September 30, 2024 | |||||||
Actual (unaudited) | Proforma As
Adjusted (unaudited) | |||||||
| Cash and cash equivalents | $ | 2,809,303 | $ | 7,909,303 | ||||
| Related party loans | 17,134 | 17,134 | ||||||
| Total Liabilities | $ | 1,966,749 | $ | 1,966,749 | ||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.001 par value per share - 10,000,000 shares authorized; 0 shares issued and outstanding – actual and as adjusted | - | |||||||
| Common stock, $0.001 par value per share -190,000,000 shares authorized; 3,000,000 shares issued and outstanding – actual; 4,280,000 shares issued and outstanding – as adjusted | 3,000 | 4,280 | ||||||
| Additional Paid in Capital | 5,410,007 | 10,401,052 | ||||||
| Retained earnings (deficit) | (998,596 | ) | (998,596 | ) | ||||
| Total stockholders’ equity | 4,414,411 | 9,406,736 | ||||||
| Total capitalization | $ | 4,431,545 | $ | 9,423,870 | ||||
A $1.00 increase or decrease in the assumed initial public offering price of $5.00 per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $1,158,400, assuming the number of shares offered by us, as stated on the cover page of this prospectus, remains unchanged, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us and assuming no exercise of the Representative’s Warrants. Similarly, each increase or decrease of 100,000 in the number of shares of common stock we are offering would increase or decrease, as applicable, each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $452,500, assuming the assumed initial public offering price of $5.00 per share remains the same and no exercise of the Representative’s Warrants, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The preceding table is based on shares of common stock outstanding as of September 30, 2024 but gives effect to the Share Exchange, and excludes as of such date:
| ● | 192,000 shares of common stock issuable upon the exercise of the underwriter’s over-allotment option and any shares issuable upon exercise of the Representative’s Warrants, based on the assumed initial offering price of $5.00 per share. | |
| ● | New Stock Options (excluded from this Capitalization section) | |
| Upon the completion of this offering, we plan to issue options to purchase up to a maximum of 1,500,000 shares of our common stock under our Equity Incentive Plan. These options will be granted at an exercise price equal to the public offering price and will vest according to the vesting schedule set forth in “Executive Compensation – 2024 Equity Incentive Plan.”. These options are not included in the proforma capitalization or dilution tables above because they will be issued upon the closing of this offering. If these options are exercised in the future, they may have a dilutive effect on the ownership of our stockholders at that time. |
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If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the assumed initial public offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after this offering.
Our historical net tangible book value is the amount of our total assets (less intangible assets and goodwill) less our liabilities. Our historical net tangible book value (deficit) per share is our historical net tangible book value (deficit) divided by the number of shares of common stock outstanding as of September 30, 2024. Our historical net tangible book value (deficit) as of September 30, 2024, was $4,306,736, or $1.44 per share of common stock.
As adjusted net tangible book value is our historical net tangible book value (deficit), after giving effect to the sale of 1,280,000 shares of common stock in this offering at an assumed initial public offering price of $5.00 per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, but assuming no exercise of the Representative’s Warrants.
The following table illustrates this dilution on a per share basis to new investors:
| Assumed initial public offering price per share | $ | 5.00 | ||||||
| Historical net tangible book value (deficit) per share as of September 30, 2024 | $ | 1.44 | ||||||
| Increase in net tangible book value per share attributable to new investors participating in this offering | $ | 0.76 | ||||||
| As adjusted net tangible book value per share after this offering | $ | 2.20 | ||||||
| Dilution in as adjusted net tangible book value per share to new investors participating in this offering | $ | 2.80 |
A $1.00 increase or decrease in the assumed initial public offering price of $5.00 per share of common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, the as adjusted net tangible book value (deficit) per share after this offering by approximately $0.27 per share and decrease or increase, as appropriate, the dilution in as adjusted net tangible book value (deficit) per share to investors participating in this offering by approximately $0.27 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 no exercise of the over-allotment option by the underwriters or exercise of any Representative’s Warrants and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
Similarly, a 100,000 share increase or decrease in the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, would increase or decrease, as appropriate, the as adjusted net tangible book value (deficit) after this offering by approximately $452,500 and increase or decrease, as appropriate, the dilution in as adjusted net tangible book value (deficit) per share to investors participating in this offering by approximately $0.05, assuming the assumed initial public offering price of $5.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and no exercise of the over-allotment option by the underwriters or exercise of any Representative’ Warrants, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price, number of shares and other terms of this offering determined at pricing.
If the underwriters exercise in full their option to purchase additional shares of our common stock in this offering, the as adjusted net tangible book value will increase to $2.30 per share, representing an increase in as adjusted net tangible book value to existing stockholders of $868,800 and a dilution of $2.70 per share to new investors participating in this offering, based on the same assumptions set forth above.
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The following table sets forth as of September 30, 2024, the differences between our existing stockholders and the purchasers of shares of common stock in this offering with respect to the number of shares of common stock purchased from us, the total consideration paid to us and the weighted average price paid per share paid to us, based on an assumed initial public offering price of $5.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting underwriting discounts and commissions and estimated offering expenses payable by us.
| Shares Purchased | Total Consideration | Weighted Average Price | ||||||||||||||||||
| Number | Percent | Amount | Percent | per Share | ||||||||||||||||
| Existing stockholders | 3,000,000 | 70 | % | $ | 5,508,971 | 46 | % | $ | 1.84 | |||||||||||
| New investors | 1,280,000 | 30 | % | $ | 6,400,000 | 54 | % | $ | 5.00 | |||||||||||
| Total | 4,280,000 | 100.0 | % | $ | 11,908,971 | 100.0 | % | $ | 2.78 | |||||||||||
If the underwriters exercise in full their option to purchase additional shares of our common stock in this offering, the number of shares held by existing stockholders will be reduced by 3% of the total number of shares of common stock that will be outstanding upon completion of this offering, and the number of shares of common stock held by new investors participating in this offering will be further increased by 3% of the total number of shares of common stock that will be outstanding upon completion of the offering.
We may choose to raise additional capital through the sale of equity or equity-linked securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that any options are issued under our equity incentive plan or we issue additional shares of common stock or equity-linked securities in the future, there will be further dilution to investors purchasing in this offering.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our financial statements are prepared in accordance with generally accepted accounting principles GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this prospectus.
Overview
Callan JMB is a vertically integrated logistics and fulfillment company which provides thermal management logistics solutions to the life sciences industry through a combination of proprietary packaging, information technology and specialized cold chain logistics knowhow. We provide a system that utilizes advanced predictive technology to revolutionize the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time-sensitive industries while ensuring environmental responsibility.
Corporate Structure
We originally formed as Coldchain Technology Services, LLC, a Texas limited liability company. We reorganized as a holding company to Callan JMB Inc., a Nevada corporation, on January 24, 2024. We are headquartered at 244 Flightline Dr., Spring Branch, TX 78070.
The following diagram illustrates our corporate structure as of the date of this prospectus:
Strategy
Our strategy involves leveraging our core competitive strengths to develop and maintain ongoing relationships with a diversified group of customers while continuing to grow our service lines, ensuring that we can meet our customers’ changing needs. We strive to be recognized as the premier provider of logistics and fulfillment of a broad range of value-added services based upon the breadth of those services, quality, responsiveness, customer service, information technologies, safety, and cost effectiveness.
We view our solutions as disruptive to the “older technologies” of dry ice and liquid nitrogen, in that our solutions are comprehensive and combine our competencies in configurations that are customized to our client’s requirements. We provide comprehensive, reliable, economic alternatives to all existing logistics solutions and services utilized for frozen shipping in the life sciences industry (e.g., personalized medicine, cell therapies, stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, organs, bio-pharmaceuticals, infectious substances, and other commodities that require continuous exposure to cryogenic or frozen temperatures). As part of our services, we provide the ability to monitor, record and archive crucial information for each shipment that can be used for scientific and regulatory purposes.
Seasonality
Based on our industry and our historic trends, we expect our operations to vary seasonally. Typically, revenue will be highest in the third and fourth calendar quarters and lowest in the first and second calendar quarters. These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity. We also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.
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Results of Operations
Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023
The following table provides certain selected financial information for the periods presented:
| (unaudited) | ||||||||||||||||
| Nine Months Ended | ||||||||||||||||
| September 30, | ||||||||||||||||
| 2024 | 2023 | Change | % Change | |||||||||||||
| Revenue | $ | 5,211,665 | $ | 11,529,341 | $ | (6,317,676 | ) | -55 | % | |||||||
| Cost of Revenue | 3,067,421 | 6,293,520 | (3,226,099 | ) | -51 | % | ||||||||||
| Gross Profit | 2,144,244 | 5,235,821 | (3,091,577 | ) | -59 | % | ||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling, General and administrative expenses | 3,146,109 | 2,295,897 | 850,212 | 37 | % | |||||||||||
| Total operating expenses | 3,146,109 | 2,295,897 | 850,212 | 37 | % | |||||||||||
| Income (loss) from operations | (1,001,865 | ) | 2,939,924 | (3,941,789 | ) | -134 | % | |||||||||
| Other income (expense) | 3,269 | (550 | ) | 3,819 | 694 | % | ||||||||||
| Income (loss) before income taxes | (998,596 | ) | 2,939,374 | (3,937,970 | ) | -134 | % | |||||||||
| Provision(benefit) for income taxes | 0 | 23,000 | (23,000 | ) | -100 | % | ||||||||||
| Net income (loss) | $ | (998,596 | ) | $ | 2,916,374 | $ | (3,914,970 | ) | -134 | % | ||||||
Revenue
Revenue for the nine ended September 30, 2024 was $5,211,665 as compared to $11,529,341 for the nine months ended September 30, 2023, a decrease of $6,317,676. This decrease is a result of the end of the COVID 19 pandemic, and the need for our emergency preparedness services was no longer needed with certain state and local governments. Further, in 2023, a customer that represented approximately $4,000,000 of our 2023 revenue chose not to use our services.
Cost of revenue
Cost of revenue for the nine months ended September 30, 2024, was $3,067,421 as compared to $6,293,520 for the nine months ended September 30, 2023, a decrease of $3,226,099. This decrease was primarily due to a decrease in revenue.
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Selling, General and Administrative Expenses
Our selling, general and administrative costs include personnel costs, accounting, legal, rent, and other overhead expenses. General and administrative expenses for the nine months ended September 30, 2024, were $3,146,109, compared to $2,295,897 for the nine months ended September 30, 2023, an increase of $850,212. Selling expenses for the nine months ended September 30, 2024, were $253,591, compared to $10,974 for the nine months ended September 30, 2023, an increase of $242,617. The increase in selling expenses is a result of the hiring of a marketing firm that specializes in pharma based businesses and the need to re-do our website. In the nine months ended September 30, 2024, personnel costs increased by $428,357 from the nine months ended September 30, 2023. The increase in personnel expenses is a result of our change from a limited liability company to a corporation that required us to put our CEO on payroll for the first time and hire additional staff in anticipation of our proposed initial public offering. In the nine months ended September 30, 2024, professional fees increased by $489,434 from the nine months ended September 30, 2023. This increase in consulting and professional fees is related to our proposed initial public offering. The Company’s information technology support increased by $23,581 for the nine months ended September 30, 2024, from the nine months ended September 30, 2023, which was a result of the of the purchase of additional equipment and the added cost of hosting software. The Company’s office expenses decreased by $11,724 for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, which was the result of when the company entered certain services contracts. The Company’s other expenses decreased by $322,054 for the nine months ended September 30, 2024 from the nine months ended September 30, 2023, which was the result of an increase in depreciation expense of $37,933, increase in local and state taxes of $2,067 offset by a decrease in travel of $18,494, decrease in rent expense of $59,976, decrease in reduction allowance by release of reserves for credit losses of $163,000, and a decrease in other expenses of $120,584.
Other income (expense)
Other income (expense) for the nine months ended September 30, 2024 was income of $3,819, compared to an expense of $(550) for the nine months ended September 30, 2023, an increase in other income of $3,819. This increased income was the result of an increase in interest income of $3,832, offset by an increase in interest expense of $13.
Cash Flows
The following table summarizes our cash flows provided by operating, investing, and financing activities:
| (unaudited) | ||||||||||||
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2024 | 2023 | Change | ||||||||||
| Cash provided by (used in) operating activities | $ | 1,263,526 | $ | 7,041,812 | $ | (5,778,286 | ) | |||||
| Cash provided by (used in) investing activities | $ | (46,167 | ) | $ | (363,743 | ) | $ | 317,576 | ||||
| Cash provided by (used in) financing activities | $ | (3,563,676 | ) | $ | (6,455,246 | ) | $ | 2,891,570 | ||||
Cash provided by (used in) operating activities
For the nine months ended September 30, 2024, cash provided by operating activities was $1,263,526 compared to cash provided from $7,041,812 for the nine months ended September 30, 2023, a decrease of $5,778,286. This decrease was primarily due to a decrease in net income of $3,914,969, a decrease in deferred income of $32,301 a decrease in accounts receivable of $2,341,154, a decrease in reduction allowance by release of reserves for credit losses of $163,000, a decrease in other current assets of $42,793, and a decrease in right of use asset – net of $117,054, offset by an increase in inventory of $128,471 an increase in depreciation and amortization of $37,932, an increase in accounts payable and accrued expenses of $589,128 and an increase in corporate taxes payable of $77,454.
Cash provided by (used in) investing activities
For the nine months ended September 30, 2024, cash used in investing activities was $46,167 compared to $363,743 for the nine months ended September 30, 2023, a decrease of $317,576. This decrease is a result of smaller amount of purchased assets.
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Cash provided by (used in) financing activities
For the nine months ended September 30, 2024, cash used in financing activities was $3,563,676 compared to $6,455,246 for the nine months ended September 30, 2023, a decrease of $2,891,570. Our financing activities for the nine months ended September 30, 2024, compared to September 30, 2023 included an increase in deferred offering costs of $82,675, and an increase in related party loans of $34,041, offset by a decrease in partner distributions of $2,992,643, a decrease in related party receivable of $4,161 and a decrease in notes payable of $11,482.
Results of Operations
Year Ended December 31, 2023, Compared to the Year Ended December 31, 2022
The following table provides certain selected financial information for the periods presented:
Year Ended December 31, | 2023 | 2022 | Change | % Change | ||||||||||||
| Revenue | $ | 13,202,459 | $ | 22,767,198 | $ | (9,564,739 | ) | -42 | % | |||||||
| Cost of Revenue | 7,553,338 | 13,315,551 | (5,762,213 | ) | -43 | % | ||||||||||
| Gross Profit | 5,649,121 | 9,451,647 | (3,802,526 | ) | -40 | % | ||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling, General and administrative expenses | 3,447,058 | 3,154,013 | 293,045 | 9 | % | |||||||||||
| Total operating expenses | 3,447,058 | 3,154,013 | 293,045 | 9 | % | |||||||||||
| Income (loss) from operations | 2,202,063 | 6,297,634 | (4,095,571 | ) | -65 | % | ||||||||||
| Other income (expense) | 2,045 | (1,618 | ) | 3,663 | 226 | % | ||||||||||
| Income before income taxes | 2,204,108 | 6,296,016 | (4,091,908 | ) | -65 | % | ||||||||||
| Provision for income taxes | 23,000 | 75,000 | (52,000 | ) | -69 | % | ||||||||||
| Net income (loss) | $ | 2,181,108 | $ | 6,221,016 | $ | (4,039,908 | ) | -65 | % | |||||||
Revenue
Revenue for the year ended December 31, 2023, was $13,202,459 as compared to $22,767,198 for the year ended December 31, 2022, a decrease of $9,564,739. This decrease was primarily due to the tapering off of the COVID-19 pandemic and the decreased need for our emergency preparedness services.
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Cost of revenue
Cost of revenue for the year ended December 31, 2023, was $7,553,338 as compared to $13,315,551 for the year ended December 31, 2022, a decrease of $5,762,213. This decrease was primarily due to a decrease in revenue.
Operating Expenses
Selling, General and Administrative Expenses
Our selling, general and administrative costs include personnel costs, accounting, legal, rent, and other overhead expenses. Selling, general and administrative expenses for the year ended December 31, 2023, were $3,447,058, compared to $3,154,013 for the year ended December 31, 2022, an increase of $293,045. Included in selling, general and administrative costs for the year ended December 31, 2023, was $686,062 related to consulting and professional fees with $351,621 for the year ended December 31, 2022, an increase of $334,441. This increase in consulting and professional fees was to support our capital raising process for this offering. During the year ended December 31, 2023, personnel costs decreased by $283,824 from the year ended December 31, 2022. This decrease is a result of the reduction of head count after COVID-19 ended. The Company’s office expenses increased by $1,309 for the year ended December 31, 2023, compared to the same period in 2022 as the result of increased cost of certain supplies. The Company’s information technology support increased by $32,247 for the year ended December 31, 2023, compared to the same period in 2022 as the result of the replacement of two computer servers. The Company’s other expenses increased by $208,872 for the year ended December 31, 2023, compared to the same period in 2022 as the result of the increase in costs of meals and travel of $114,546, increase in cost of attending conventions of $3,202, an increase in depreciation expense of $34,311, increase in local and state taxes of $12,964, increases in allowance for credit losses of $175,305 as a result adoption of current expected credit loss model in 2023, and increases of other expenses of $32,779, offset by decreases in charitable expenses of $98,677.
Other income (expense)
Other income (expense) for the year ended December 31, 2023, was income of $2,045, compared to expense of $1,618 for the year ended December 31, 2022, an increase in net income of $3,663. This increased income was the result of an increase in interest income of $10,176, offset by decreases in other income of $4,500 and an increase in interest expense of $2,013.
Liquidity and Capital Resources
Our principal liquidity requirements are for working capital to fund our operations and growth. To date, we have funded our liquidity requirements primarily through cash on hand, and cash flows from operations. As of December 31, 2023, and 2022, we had $5,155,620 and $6,193,719 of cash and cash equivalents, respectively. In their audit report for the fiscal year ended December 31, 2023, included in this prospectus, our independent auditors expressed an unqualified opinion.
| Year Ended | ||||||||||||
| December 31, | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| Cash provided by (used in) operating activities | $ | 6,995,646 | $ | 9,363,616 | $ | (2,367,970 | ) | |||||
| Cash provided by (used in) investing activities | $ | (490,020 | ) | $ | (422,491 | ) | $ | (67,529 | ) | |||
| Cash provided by (used in) financing activities | $ | (7,543,725 | ) | $ | (4,566,861 | ) | $ | (2,976,864 | ) | |||
| Increase (decrease) in cash | $ | (1,038,099 | ) | $ | 4,374,264 | $ | (5,412,363 | ) | ||||
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Cash provided by (used in) operating activities
For the year ended December 31, 2023, cash provided by operating activities was $6,995,646 compared to cash provided by operating activities of $9,363,616 during the year ended December 31, 2022, a decrease of $2,367,970. This decrease was primarily due to a decrease in net income of $4,039,908, a decrease in accounts receivable of $2,208,321, a decrease in inventory of $100,293, a decrease in right of use asset of $173, a decrease in corporate taxes payable of $114,000 and a decrease in deferred income taxes payable of $9,000, offset by an increase in provision for credit losses of $175,305, a decrease in depreciation of $34,312, an increase in other current assets of $22,276, an increase in deferred revenue of $3,020,200, and an increase in accounts payable and accrued expenses of $851,632.
Cash provided by (used in) investing activities
For the year ended December 31, 2023, cash used in investing activities was $490,020 compared to $422,491 for the year ended December 31, 2022, an increase of $67,529. This increase is a result of the purchase of various fixed assets.
Cash provided by (used in) financing activities
During the year ended December 31, 2023, cash provided by (used in) financing activities was $7,543,725 compared to $4,566,861 during the year ended December 31, 2022, an increase of $2,976,864. Our financing activities for the year ended December 31, 2023 compared to December 31, 2022 included an increase in deferred offering costs of $25,000, increase in partner distributions of $2,951,741, increase in related partner loans of $56,762 and an increase in notes payable of $32,046, offset by a decrease in related party loans of $88,685.
Following this offering, we may seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute investors and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit our ability to pay dividends or make other distributions to stockholders. If we are unable to obtain such additional financing when needed, on favorable terms or at all, future operations may have to be scale back or discontinued.
Off-Balance Sheet Arrangements
We have no off-balance sheet financing arrangements.
Critical Accounting Policies and Significant Judgments and Estimates
This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this prospectus, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
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We believe our most critical accounting policies and estimates relate to the following:
Revenue Recognition
The Company accounts for revenue under ASC 606, Revenue from Contracts with Customers. The Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.
Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and the promised services have been transferred to the customer. The Company’s services are generally transferred to the customer at an agreed upon point in time.
Fair Value Measurements
ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value under GAAP and expands disclosure about fair value measurements.
The following provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which fair value is observable:
| ● | Level 1- fair value measurements are those derived from quoted prices (unadjusted in active markets for identical assets or liabilities); | |
| ● | Level 2- fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e. derived from prices); and | |
| ● | Level 3- fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). |
Financial instruments classified as Level 1 quoted prices in active markets include cash and cash equivalents.
These consolidated financial instruments are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment to estimation. Valuations based on unobservable inputs are highly subjective and require significant judgments. Changes in such judgments could have a material impact on fair value estimates.
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In addition, since estimates are as of a specific point in time, they are susceptible to material near-term changes. Changes in economic conditions may also dramatically affect the estimated fair values.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management for the respective periods. The respective carrying value of certain financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, short-term notes payable, accounts payable and accrued expenses. The carrying value of long-term debt approximates fair value, as the variable interest rates approximate current market rates.
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 is intended to enhance the decision usefulness of income tax disclosures and requires the disclosure of various disaggregated information, including an entity’s effective tax rate reconciliation as well as additional information on taxes paid. This ASU is effective on a prospective basis for annual periods beginning after December 15, 2024 with early adoption allowed. The Company is in the process of evaluating the effect of ASU 2023-09 on the financial statements.
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our consolidated financial statements.
Recently Adopted Accounting Standards
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and require a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company adopted this pronouncement as of January 1, 2023.
Internal Control Over Financial Reporting
We are not currently required to comply with the SEC’s rules implementing Section 404 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 SEC’s rules implementing Section 302 of the Sarbanes-Oxley Act, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. We will be required to make our first assessment of our internal control over financial reporting and to comply with the management certification requirements of Section 404 in our annual report on Form 10-K for the year following our first annual report that is filed with the SEC (subject to any change in applicable SEC rules).
Further, our independent registered public accounting firm is not yet required to formally attest to the effectiveness of our internal controls over financial reporting and will not be required to do so for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act. See “Summary—Implications of Being an Emerging Growth Company and Smaller Reporting Company.”
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Currently, we do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our management has deemed certain conditions to be material weaknesses and significant deficiencies in our internal controls. For example, we failed to employ a sufficient number of staff to maintain optimal segregation of duties and to provide optimal levels of oversight and we rely upon a third-party accounting firm to assist us with GAAP compliance. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. It is management’s intention to use a portion of the proceeds of this offering to hire additional staff to remediate deficiencies in our financial reporting and to develop appropriate financial control procedures. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate risks and inflation risks. Periodically, we maintain deposits in accredited financial institutions in excess of federally insured limits. We deposit our cash in financial institutions that we believe have high credit quality and have not experienced any losses on such accounts and do not believe we are exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Interest Rate Risk
Our cash consists of cash in readily available checking accounts. We may also invest in short-term money market fund investments. Such interest-earning instruments carry a degree of interest rate risk. However, historical fluctuations in interest income have not been significant.
Inflation Risk
Inflation generally affects us by increasing our cost of facilitating business. We do not believe inflation has had a material effect on our results of operations during the periods presented.
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Overview
Callan JMB Inc. was incorporated under the laws of the State of Nevada in 2024, and currently operates through our principal operating subsidiary, Coldchain Technology Services, LLC, a Texas limited liability company, which is based in Spring Branch, Texas. We are a vertically integrated logistics and fulfillment company which provides cryogenic logistics solutions to the life sciences industry through a combination of proprietary packaging, information technology and specialized cold chain logistics know-how. We provide a system that utilizes advanced predictive technology to revolutionize the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time-sensitive industries while ensuring environmental responsibility. We view our solutions as disruptive to the “older technologies” of dry ice and liquid nitrogen, in that our solutions are comprehensive and combine our competencies in configurations that are customized to our client’s requirements. We provide comprehensive, reliable, and economic alternatives to all existing logistics solutions and services utilized for frozen shipping in the life sciences industry (e.g., personalized medicine, cell therapies, stem cells, cell lines, vaccines, diagnostic materials, semen, eggs, embryos, cord blood, organs, biopharmaceuticals, infectious substances, and other commodities that require continuous exposure to cryogenic or frozen temperatures). As part of our services, we provide the ability to monitor, record and archive crucial information for each shipment that can be used for scientific and regulatory purposes.
Our Ship2Q® process (Safe Hygienic Irradiation Performance Process & Qualification) ensures fitness, thermal reliability, and cleanliness of the system components within the manufacturer specifications equal to new “off-the-shelf” shipper systems. Our systematic Ship2Q® process meets all cGMP and cGDP compliance standards and generates shipper specific track & trace documentation key to any deployment and reuse. Ship2Q® applies a system of control over the recovery and reuse phase of the logistics loop. We are able to recover and reuse the Greenbox shipper, amortizing its total cost across numerous shipments, making it cost-neutral in the first few cycles. Additionally, our Sentry system integrates GPS and precise temperature diagnostics throughout a package’s journey, maintaining the efficacy, safety, and quality of temperature-sensitive goods throughout transit—with zero bench time required. Our sophisticated cloud-based logistics operating platform, which is branded as the Sentry platform, supports the management of the entire shipment and logistics process through a single interface, including initial order input, document preparation, customs clearance, courier management, shipment tracking, issue resolution, and delivery. In addition, it provides unique and incisive information dashboards and validation documentation for every shipment. The Sentry records and retains a fully documented “chain-of-custody” and, at the client’s option, “chain-of- condition” for every shipment, helping ensure that quality, safety, efficacy, and stability of shipped commodities are maintained throughout the process. This recorded and archived information allows our clients to meet exacting requirements necessary for scientific work and for proof of regulatory compliance during the logistics phase.
With extensive experience in quality assurance and quality control, Callan JMB delivers reliability by anticipating, responding, and overcoming the most complex situations with unparalleled precision and compassion, providing peace of mind and a comprehensive solution for its customers, which empowers the healthcare and emergency response industries with solutions to ensure temperature-sensitive goods remain within specified parameters throughout transit through tracking mechanisms and predictive technology to ensure its integrity for patients, providers, and their communities.
Our Strategy and Value Proposition
Our strategy involves leveraging our core competitive strengths to develop and maintain ongoing relationships with a diversified group of customers while continuing to grow our service lines, ensuring that we can meet our customers’ changing needs. We strive to be recognized as the premier provider of logistics and fulfillment of a broad range of value-added services based upon the breadth of those services, quality, responsiveness, customer service, information technologies, safety, and cost effectiveness.
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The principal elements of our business strategy are:
Cross-Sell Our Solutions: The breadth of our service offerings allows us the opportunity to provide various services and products to meet our customers’ objectives. Our significant North American footprint allows us to quickly respond to customer needs, especially in emergency response situations. We can assist with remediation needs for small-and-large-scale efforts, either planned or unplanned, by providing remediation contractors and project managers with support services, particularly in emergency situations. We look for opportunities to be a one-stop-shop service provider, expanding the range of services we traditionally provide to a customer. Our team is committed to identifying opportunities to cross-sell among and across our divisions which we expect will continue to drive additional revenue for our Company.
Expand into Additional Market Opportunities: Industries such as pharmaceuticals require the ability to ensure the integrity of packages as they reach their destination, which is paramount to maintaining safety and quality. With Sentry monitoring, we provide a comprehensive solution to address this critical aspect of the thermal management of temperature sensitive packages. Sentry ensures that packages remain within specified parameters throughout transit by tracking factors such as temperature, humidity, and location. In the future, we hope to expand our business to include support for high-end food packaging. Our system can help preserve the freshness and quality of the package contents but also minimize the risk of spoilage, contamination, and other issues that can compromise food safety. With Sentry monitoring, customers can have confidence that their food shipments will arrive in the same pristine condition as when they were dispatched, safeguarding consumer health and satisfaction.
We also aspire to enter into the GLP-1 drug transport market. The proliferating and expanding market for such diabetes and weight control drugs (such as Ozempic, Trulicity and Victoza) may present opportunities for the Company since such drugs require strict transport and storage temperature control for maximum effectiveness. In addition, we intend to explore relationships with 503A and 503B compounding pharmacies. The FDA has designated 503A compounding pharmacies as those that compound prescriptions specific to particular patients and that ship those prescriptions directly to such patients. The FDA has designated 503B compounding pharmacies as those with outsourcing facilities that may manufacture large batches of drugs with or without prescription to be sold to healthcare facilities for office use only.
Execute on Cost, Pricing and Productivity Initiatives: We continually seek to increase efficiency and reduce costs through enhanced technology, process improvements and strategic expense management. We seek to identify areas in our business where strategic investments in automation, process improvements and employees can serve to increase productivity, efficiency, and safety compliance. We continuously focus on the operating leverage of our support functions, including expanding globally to achieve profitability and productivity benefits. We aim to price our services and products competitively, understanding the demands of our customers, the inherent value of our network of assets and operations and our ability to quickly to respond to market and macroeconomic changes. We also understand the value our customers place on our products and services in a global market continuously focusing on sustainability, environmental compliance, and safety.
Foster Innovation through Technology: Remote temperature monitoring technology has always been part of our core operations, influencing our strategy from increasing throughput at our facilities to automation, including artificial intelligence and predictive technology, to enhance productivity. We aim to utilize advanced technologies in our operations while also integrating technology-based solutions for our customers to use, which promotes the safety, efficiency, and profitability of these operations. With such technology, and our proprietary inventory management software, Ship2Q® and Sentry monitoring we are able to centrally manage our transportation network, deploying, monitoring, and adjusting our transportation operations as needs change. We believe that making technological investments that increase the value of our services delivered to our customers pays off in a variety of ways including growth, retention, profitability, and overall customer experience.
Product and Service Offerings
We continuously expand our service offerings across the supply chain with innovative, technology-centric solutions to support the development and distribution of life sciences products and therapies and other thermal sensitive products.
Emergency Preparedness and Response. Our crews and equipment are dispatched on a planned or emergency basis and perform services such as emergency preparedness and readiness plans, 12-hour or less U.S. deployment, surge capacity, product integrity and compliance, efficient response implementation, and system of record. Revenue attributable to emergency preparedness services for the nine-month period ended September 30, 2024 was $2,918,435 as compared to $6,537,157 for the nine months ended September 30, 2023.
Specialty Packaging. The specialty temperature-regulating packaging we obtain for our clients from other sources provides a better thermal system to maintain and protect products and ensure peak customer experience. In utilizing this packaging, customers yield the benefits of lower costs and overhead while improving process, agility, velocity, accuracy, and repeatability of complex fulfillment networks. Integrating Callan JMB’s technology with such packaging allows for scalable ordering, inventory, pick, pack, fulfillment, tracking and recovery. Revenue attributable to specialty packaging for the nine-month period ended September 30, 2024 was $2,293,230 as compared to $4,992,184 for the nine-month period ended September 30, 2023.
We remain committed to environmental sustainability. Our reusable packaging systems and leasing model help reduce waste and costs, offering an effective alternative to traditional, single-use packaging.
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Fulfillment Services. We are the rare integrator that optimizes your business “toolbox” and then applies those tools with the proven force of a master technician to meet and exceed customers’ goals. Plans are better when the planner is accountable for the execution and completion of said plan. We put the logic back into logistics by providing a simple, cost-effective, zero-residue fulfillment network. The job is done according to plan, leaving no trace other than a record of completion. Our technical services and technological offerings are bundled with our emergency response services and perishable packaging offerings and are not deemed to be separate revenue streams and have not been disaggregated.
As part of our service capabilities offered to our customers, we provide technical services through a service center from which a fleet of crew and equipment can be dispatched to emergency response locations. This timely response is built on safety, quality, efficiency, and integrity, and has been offered by Callan JMB for more than 17 years. By leveraging our expertise and capabilities, we provide our customers with the safest, most cost-effective, and sustainable solutions to service their needs.
Advanced Monitoring Sentry Technology. Our customers have the ability to use the Sentry system which helps ensure that their temperature-sensitive goods will remain within specified parameters throughout transit by tracking factors such as temperature, humidity, and location to ensure the physical material integrity of packages for governments and organizations that are preparing emergency responses and for patients, providers, and their communities.
Customers
As of December 31, 2023, our top three customers, the City of Chicago Public Health Department (28%), Texas Department of Health (22%), and Johnson and Johnson (15%), collectively accounted for approximately 65% of our revenue. As of September 30, 2024, our top three customers are the City of Chicago Public Health Department (48%), Grail, Inc. (20%) and BioBridge Global (13%), collectively approximately 81% of our revenue.
The City of Chicago has awarded us two separate contracts. The pallet storage contract is a seven-year contract awarded on January 1, 2019, with a minimum value of $6 million and a maximum value of $15 million. The Supervisory Control Data Acquisition (referred as “ SCADA”) contract is a seven-year contract awarded December 3, 2022, with a minimum value of $17 million and a maximum value of $27 million. The SCADA contracts request the Company to provide emergency platform maintenance/sustainment, monitoring systems, quality assurance/quality control. pharmaceutical storage facilities/inventory and hosting of inventory management systems/data.
Competition and Competitive Advantages
As noted above, we have extensive experience in thermal management quality assurance and control, delivering reliability by anticipating, responding, and overcoming the most complex situations with precision and compassion. We provide peace of mind and a competitive solution for our customers.
We believe that we have attained a significant market position in emergency response despite facing robust competition from local, regional, and national firms. However, no one competitor directly competes with our full suite of offerings as a result of the breadth of our service offerings. Sources of competition vary by locality and by type of service rendered, with competition coming from national and regional services companies and hundreds of privately-owned firms. We believe that we offer a more comprehensive range of services and products than our competitors in major portions of the United States and Canada.
We believe the following are our core competitive strengths developed over our 17+ years of operations, which have facilitated our position in the marketplace:
Provider of Logistics and Fulfillment in the Emergency Response Industry: Callan JMB has a long history and well recognized reputation for delivering swift, decisive, and reliable emergency response support for Fortune 500 firms, the City of Chicago, NATO, the UN, and government agencies at all levels. Our vertically-integrated logistics and fulfillment system that utilizes advanced predictive technology allows us to plan for and respond to emergencies. Our system provides our customers enhanced safety, effectiveness, and potency for every shipment handled, ensuring product integrity, environmental responsibility, and immediate response in time-sensitive events.
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Specialty Temperature-Regulating Reusable Packaging: Many of our customers operate in time-sensitive industries. This specialty temperature-regulated packaging we obtain for our customers is critical to ensuring the quality of the delivered product. The Company is committed to environmental sustainability, as the packaging we provide is reusable which reduces waste and cost as compared to traditional, single-use packaging.
End Market Value Propositions and Flexibility: We provide our customers with a variety of services that allow for immediate flexibility. Our emergency response offering includes emergency preparedness and readiness plans, 12-hour or less domestic US deployment, surge capacity, product integrity and compliance, and efficient response implementation.
Experience in Highly Regulated Industries: Many of our target customers are in highly regulated industries where thermal monitoring and compliance are crucial. To address their needs, we developed an inventory management system for customers that handles regulated, sensitive products and ensures that such products arrive safely. Our long-standing relationship with Fortune 500 firms, the City of Chicago, NATO, the UN, and government agencies at all levels provide examples of and opportunities for our expertise.
Highly Trained and Experienced Team: Our well-trained workforce safely responds to customer needs across a variety of service lines, including emergency response services. We provide multi-faceted, high-quality services to a broad mix of customers and our vast capabilities, valuable and unique assets, skilled workforce, safety profile and breadth of services as well as our overall size, scale and geographic footprint help us attract customers and provide them with environmentally responsible solutions.
Successful History Provides Growth Opportunity: Leveraging its experience in emergency response, there are other large market industries that we are exploring as part of our growth strategy, including but not limited to GLP-1 drug transport, compounding pharmacies and the high-end food packaging industry. We aspire to enter into each of these markets. Our systems can ensure the integrity of specialty drug and food packages, such as diabetes/weight loss drugs and caviar, as they reach their destination in order to maintain safety and quality. With Sentry monitoring, we could provide a comprehensive solution to address this critical aspect of the specialty drug and food supply chain. Sentry could help ensure that drug and food packages remain within specified parameters throughout transit by tracking factors such as temperature, humidity, and location. This would not only preserve the potency of the drug and the freshness and quality of the food but also minimize the risk of spoilage, contamination, and other issues that could compromise drug effectiveness and food safety. With Sentry monitoring, customers can have confidence that their drug and food shipments will arrive in the same pristine condition as when they were dispatched, safeguarding patient and consumer health and satisfaction.
Industry
Our services are sold into a rapidly growing segment of the logistics industry focused on the temperature-sensitive packaging and shipping of biological materials. Expenditures for “value added” packaging for frozen transport have been increasing for the past several years and, due in part to continued globalization, are expected to continue to increase even more in the future as more domestic and international biotechnology firms introduce pharmaceutical products that require continuous refrigeration at cryogenic temperatures. We believe this will require a greater dependence on passively controlled temperature transport systems (i.e., systems having no external power source). In addition, we expect that industry standards and regulations will be introduced globally, requiring more comprehensive tracking and validation of shipping temperatures.
We believe that growth in the following markets has resulted in the need for increased reliability, efficiencies and greater flexibility in the temperature-sensitive segment of the logistics market:
| ● | cell-based therapies | |
| ● | gene and stem cell biotechnology | |
| ● | cell lines | |
| ● | vaccine production |
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| ● | commercial and specialty drug product distribution | |
| ● | clinical trials, including transport of tissue culture samples | |
| ● | diagnostic specimens | |
| ● | infectious sample materials | |
| ● | inter/intra-laboratory diagnostic testing | |
| ● | temperature-sensitive specimens | |
| ● | biological samples, in general | |
| ● | environmental sampling | |
| ● | IVF | |
| ● | GLP-1 drug transport | |
| ● | animal husbandry |
Many of the biological products in these above markets require transport in a frozen state as well as the need for shipping containers which have the ability to maintain a frozen, cryogenic environment (e.g., minus 150° Celsius) for a period ranging from two to ten days (depending on the distance and mode of shipment). These products include stem cells, semen, embryo, tissue, tissue cultures, cultures of viruses and bacteria, enzymes, DNA materials, vaccines and certain pharmaceutical products.
Intellectual Property
Trademarks
We have rights in certain trade names we use in connection with the operation of our business. On December 7, 2010, the Company received a trademark registration for “Ship2Q®”, our proprietary ultraviolet sanitization technology. This trademark expires on February 22, 2030. We are in the process of filing for trademark protection on Sentry, Callan JMB, Coldchain and certain other branded products. We intend to pursue additional trademark registrations to the extent we believe it will be beneficial. We also have a registered domain name for a website that we use in our business.
Governmental/Regulatory Approval and Compliance
Food Safety, Product Identity, Branding and Labeling
We are subject to extensive regulation, including, among others, the Food, Drug and Cosmetic Act of 1938, the Nutrition Labeling and Education Act of 1990, the USDA HACCP Mega-Reg of 1996, the Public Health Security and Bioterrorism Preparedness & Response Act of 2002, the Food Safety Modernization Act of 2011 and other rules and regulations promulgated by the FDA, the United States Department of Agriculture and the sub-branches of these regulatory bodies. In addition to complying with federal laws and regulations pertaining to storage and production, we are also required to comply with local municipality (city and county) as well as state regulations, including the registration and licensing of our warehouses, enforcement by state health agencies of various state standards and inspection of our facilities. The Company has obtained a variety of licenses from multiple states in which it does business including Wholesale Drug Distributor, DEV (device distributor) and 3PL (third party logistics) licenses.
Compliance with federal, state and local regulations is costly and time-consuming, but one of our top priorities. Regulatory enforcement actions for violations of federal, state and local regulations may include seizure and condemnation of products, mandatory or voluntary product recalls, cease and desist orders, injunctions and monetary-civil-criminal penalties. We believe that our practices are sufficient to maintain compliance with applicable government regulations, although there can be no assurances in this regard. It is also possible that new laws or regulations, or changes in the enforcement of existing requirements, might require us to change our compliance programs, incur additional costs or result in unexpected liabilities that could be significant.
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Employee Safety Regulations
We are subject to certain health and safety regulations, including regulations issued pursuant to the Occupational Safety and Health Act. These regulations require us to comply with certain manufacturing, health and safety standards to protect our employees from accidents.
Environmental Regulations
We are subject to federal, state and local environmental regulations and requirements, including those governing discharges to air and water, the management of hazardous substances, the disposal of solid and hazardous wastes and the remediation of contamination. Failure to comply with these regulations can have serious consequences for us, including criminal as well as civil and administrative penalties, limitations on our operations, claims for remediation costs, as well as alleged personal injury or property damages and negative publicity. We are involved from time to time in administrative or legal proceedings relating to environmental and health and safety matters, and have incurred and will continue to incur capital and operating expenditures to avoid violations of these laws and regulations.
Based on current information, we do not believe that any costs we may incur relating to environmental matters will have a material adverse effect on our business, financial position or results of operations. However, there can be no guarantee that newly discovered information, more stringent enforcement of or changes in environmental requirements, or other unanticipated events will not result in significant costs.
Insurance
We maintain general liability and product liability, property, worker’s compensation, in amounts and on terms that we believe are customary for companies similarly situated. In addition, we maintain excess insurance where we reasonably believe it is cost effective.
Seasonality
Based on our industry and our historic trends, we expect our operations to vary seasonally. Typically, revenue will be highest in the third and fourth calendar quarters and lowest in the first and second calendar quarters. These seasonal variations result in fluctuations in waste volumes due to weather conditions and general economic activity. We also expect that our operating expenses may be higher during the winter months due to periodic adverse weather conditions that can slow the collection of waste, resulting in higher labor and operational costs.
Litigation
From time to time, we may be party to litigation that arises in the ordinary course of our business. While it is not feasible to predict or determine the ultimate outcome of these matters, we believe that any ultimate liability with respect to any pending litigation will not adversely affect our business, financial condition and operating results.
In May 2024, the Company received a demand letter alleging that the Company breached the terms of a customer service agreement with one of its vendors that it did business within a prior year. The vendor alleged that the Company improperly terminated the agreement without proper notice and owes that vendor $507,573 in damages. The Company responded to the vendor’s demand letter and asserts that it only owes the vendor the sum of $85,000, which is included in the Company’s accounts payable as of September 30, 2024.
Management is not aware of any other pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
Employees
As of the date of this prospectus, we have 35 employees, of which ten are full-time employees, and 25 are part-time or contractual/seasonal employees engaged on a seasonal and as-needed basis. We also engage independent contractors to provide services to the Company on an as-needed basis.
The safety of our employees and customers is extremely important to us. We periodically review and assess our policies, practices and procedures to create a safer work environment for our employees.
Property
We do not own any real property. Our executive offices are located at 244 Flightline Drive, Spring Branch, Texas 78070. We lease our office space from a related party under a lease agreement that commenced on April 1, 2024, and expires on December 31, 2029, with a monthly base rent of $15,425. We also lease additional two warehouse spaces from related parties under lease agreements that expire on September 30, 2025 and December 31, 2025, with respective monthly base rents of $3,150 and $7,500. In addition, we lease two other properties for warehousing and distribution purposes. Our aggregate current monthly rental expense is $32,052.
| Leased Properties | ||||
| Address | Gross floor area (square feet) | Use of the property | ||
| 244 Flightline Drive, Spring Branch, Texas 78070 | 10,000 sq. ft. | Warehouse/Office | ||
| 10130 SW North Dakota St., Tigard, Oregon 97223 | 4,800 sq. ft | Warehouse | ||
| 1500 4th St., Unit #6, Blanco, Texas 78606 | 1,000 sq. ft. | Warehouse/Office | ||
| 210 Kestral Drive, Spring Branch, Texas 78070 | 7,872sq. ft. | Warehouse | ||
| 16025 Farm to Market 32, Blanco, Texas 78606 | 6,500 sq. ft. | Warehouse | ||
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Directors and Executive Officers
The following sets forth information on our executive officers, directors, and director nominees as of the date of this prospectus.
Name |
Age | Position | ||
| Wayne Williams | 61 | Chief Executive Officer, President and Director | ||
| Eric L. Kash | 67 | Executive Vice President, and Chairman of the Board | ||
| Jeffrey Appleman | 67 | Chief Financial Officer | ||
| Dr. David J. Croyle | 66 | Chief Medical Officer | ||
| Liberty Duke | 51 | Independent Director Nominee (1) | ||
| Mark Meller | 65 | Independent Director Nominee (1) | ||
| Gerald Dial | 86 | Independent Director Nominee (1) |
| (1) | To be appointed to our board of directors effective automatically upon the effectiveness of the registration statement of which this prospectus forms a part. |
Executive Officers and Directors
Wayne Williams is the founder, Chief Executive Officer and President of Callan JMB Inc. Mr. Williams is one of the nation’s leading experts on temperature control cold chain management and has lectured and written several key documents describing this process, and brings all his expertise as the leader of Callan JMB Inc. Mr. Williams’s vast experience qualifies him to serve as the Chief Executive Officer and also as a member of the Board.
Eric L. Kash has served as Executive Vice President and will serve as Chairman of the Board upon the closing of this offering. Prior to joining Callan JMB, since 2015, Mr. Kash has been operating as the President of Alpha Kash, LLC, a business consultancy service. In this capacity, Mr. Kash has assisted companies in business development, corporate strategy, and capital formation. The industries included technology, consumer goods, medical devices and an e- prescription company.
Prior to Alpha Kash, LLC, between January 2008 to March 2013, Mr. Kash was the CEO/CFO of Coupon Express Inc., a publicly traded company that was engaged in advertising and couponing with national supermarket chains and worked as an investment banker in the microcap sector for over 10 years. Mr. Kash completed his B.S. in Accounting and graduated magna cum laude from Bentley College, received an MBA from the University of Virginia’s Darden School in 1983 and received a CPA accreditation in 1981. We believe that Mr. Kash’s prior work experience, expertise in running a public company, and business acumen will be critical in our operations and be of great assistance to us in their capacity as the Chairman of the Board.
Jeffrey Appleman has served as our Interim Chief Financial Officer (“CFO”) since February 2024. Prior to joining Callan, since March 2019, Mr. Appleman has served as the Director of CFO Consulting Partners LLC’s manufacturing, distribution and business services practice. During his time at CFO Consulting Partners LLC, he has advised C-Suite level and management of several publicly traded companies. Mr. Appleman has over 40 years of experience, both in public accounting and the private sector. During his career in public accounting, primarily at Marks Paneth LLP between 1979 to 1991, he serviced small-and-medium sized entities and primarily privately held companies. In the private sector, he has served as the Chief Financial Officer at Love and Quiches between 2005 to 2010, a domestic and international frozen food desert company, and at Standard Folding Cartons, a paper converting company in New York and Louisville between 1993 and 2002. Having served as the Chief Financial Officer of several entities in the past, Mr. Appleman has been and will be a key member of the senior leadership team at Callan JMB.
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Dr. David J. Croyle has served as the Company’s Chief Medical Officer since March of 2007. Dr. Croyle has been a practicing physician for more than 36 years. He received his B.S. from Gannon University and his M.D. from the Uniformed Services University of the Health Sciences. He completed his internship and diagnostic radiology residency at the Brooke Army Medical Center. Dr. Croyle also served as an instructor of radiology at the Tripler Army Medical Center. He was board certified by the National Board of Medical Examiners in 1989 and by the American Board of Radiology in 1993.
Director Nominees
Liberty Smith Duke is a director nominee. Ms. Duke currently serves as president of ERIS Inc. where she has worked since 1998. ERIS is a firm that offers an expansive range of management, consulting, and lobbying services for a broad spectrum of businesses and associations. Ms. Duke also serves as president of Health Heroes Inc., a mass vaccinator. During her tenure at Health Heroes she has built a large network of school located vaccination clinics throughout multiple states. She also serves as president of HNH Immunizations Inc., another mass vaccinator. Ms. Duke studied business administration at the Wallace School
The Company believes Ms. Duke is qualified to serve as a member of the Company’s board of directors because of her years of experience in consulting for and working with entities in the public and private sectors. We believe her background will help us in our emergency response business and assist in expanding the market for our services into new areas.
Mr. Mark Meller is a director nominee. He has been the President and Director of SilverSun Technologies, Inc.(“SilverSun”) since September 15, 2003, and was further appointed Chief Executive Officer on September 1, 2004. He became Chairman of the Board on May 10, 2009. Mr. Meller is currently the President, Chief Executive Officer and Chairman of the Board of Directors. From September 2003 through January 2015, he was Chief Financial Officer of SilverSun. From October 2004 until February 2007, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of Deep Field Technologies, Inc. From December 15, 2004 until September 2009, Mr. Meller was the President, Chief Executive Officer, Chief Financial Officer and Director of MM2 Group, Inc. From August 29, 2005 until August 2006, Mr. Meller was the President, Chief Executive Officer and Chief Financial Officer of iVoice Technology, Inc. From 1988 until 2003, Mr. Meller was Chief Executive Officer of Bristol Townsend and Co., Inc., a New Jersey based consulting firm providing merger and acquisition advisory services to middle market companies. From 1986 to 1988, Mr. Meller was Vice President of Corporate Finance and General Counsel of Crown Capital Group, Inc, a New Jersey based consulting firm providing advisory services for middle market leveraged buy-outs. Prior to 1986, Mr. Meller was a financial consultant and practiced law in New York City. He is a member of the New York State Bar.
Mr. Meller has a B.A. from the State University of New York at Binghamton and a J.D. from the Boston University School of Law.
The Company believes Mr. Meller is qualified to serve as a member of the Company’s board of directors because of his extensive years of experience in financial management and reporting, mergers and acquisitions and management of exchange listed companies. We believe his background and demonstrated business acumen will aid in our transition to a public company and enhance our opportunities.
Senator Gerald Dial is a director nominee. Senator Dial served as an Alabama State Representative and later State Senator representing six counties in East Alabama. Senator Dial was a member of the Alabama National Guard for over 36 years. He served the Guard in a number of capacities and retired in 1997 from the position of Assistant Adjutant General. He has over 25 years experience in the real estate development business. He was the Director of the Alabama Rural Action Commission from 2006 to 2010 where he focused on rural health improvement and job, infrastructure and broadband development. Senator Dial has a B.S. from Livingston University and has taken advanced education courses at Auburn University.
The Company believes Senator Dial is qualified to serve as a member of the Company’s board of directors because of his extensive public service and his years of experience in logistics support. We believe his experience and reputation will enhance our ability to work in both the public and private sectors.
Family Relationships
Our Chief Executive Officer and President, Mr. Wayne Williams, and our Chief Medical Officer, Mr. David J. Croyle, M.D., are brothers-in-law.
Involvement in Certain Legal Proceedings
To the best of our knowledge none of our directors, director nominees or executive officers has, during the past ten years:
| ● | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); | |
| ● | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
| ● | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
| ● | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
| ● | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
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| ● | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Corporate Governance
Governance Structure
Our corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance with its determination that utilizing one or the other structure is in the best interests of our company. Wayne Williams currently serves as our Chief Executive Officer and President, with Mr. Kash serving as the Chairman of the Board.
As Chairman of the Board, Mr. Kash’s key responsibilities include facilitating communication between our board of directors and management, assessing management’s performance, managing board members, preparing the agenda for each board meeting, acting as chair of board meetings and meetings of our company’s stockholders and managing relations with stockholders, other stakeholders and the public.
We will take steps to ensure that adequate structures and processes are in place to permit our board of directors to function independently of management. The directors will be able to request at any time a meeting restricted to independent directors for the purpose of discussing matters independently of management and are encouraged to do so should they feel that such a meeting is required.
The Board’s Role in Risk Oversight
Our board of directors oversees that the assets of our Company are properly safeguarded, that the appropriate financial and other controls are maintained, and that our business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the board’s oversight of the various risks facing our Company. In this regard, our board seeks to understand and oversee critical business risks. Our board does not view risk in isolation. Risks are considered in virtually every business decision and as part of our business strategy. Our board recognizes that it is neither possible nor prudent to eliminate all risks. Indeed, purposeful and appropriate risk-taking is essential for our company to be competitive on a global basis and to achieve its objectives.
While the board oversees risk management, company management is charged with managing risk. Management communicates routinely with the board and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.
Our board administers its risk oversight function as a whole by making risk oversight a matter of collective consideration. Once the board establishes committees, it is anticipated that much of the work will be delegated to such committees, which will meet regularly and report back to the full board. It is anticipated that the audit committee will oversee risks related to our financial statements, the financial reporting process, accounting and legal matters, that the compensation committee will evaluate the risks and rewards associated with our compensation philosophy and programs, and that the nominating and corporate governance committee will evaluate the risk associated with management decisions and strategic direction.
Independent Directors
Under the listing requirements and rules of Nasdaq, independent directors must comprise a majority of our board of directors as a listed company within one year of the closing of this offering.
Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director and director nominee. Based upon information requested from and provided by each director and director nominee concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that each of Messrs. Meller and Dial and Ms. Duke do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these director nominees is “independent” as that term is defined under the applicable rules and regulations of the SEC, and the listing requirements and rules of Nasdaq. In making this determination, our board of directors considered the current and prior relationships that each non-employee director nominee has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director nominee.
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Committees of the Board of Directors
Prior to listing our common stock on Nasdaq, our board intends to establish an audit committee, compensation committee, and a nominating and corporate governance committee, each with a charter to be approved by the board. Upon completion of this offering, we intend to make each committee’s charter available on our website at www.coldchain-tech.com. Until such committees are established, our entire board of directors will undertake the functions that would otherwise be undertaken by the committees. In addition, our board of directors may, from time to time, designate one or more additional committees, which shall have the duties and powers granted to them by our board of directors.
Audit Committee
We expect that Mark Meller, Liberty Duke and Gerald Dial, each of whom will satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and Nasdaq listing standards, will serve on our audit committee, with Mark Meller serving as the chairman. We expect that Mr. Meller will qualify as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our Company. The primary purpose of the audit committee is to discharge the responsibilities of our board of directors with respect to our corporate accounting and financial reporting processes, systems of internal control and financial statement audits, and to oversee our independent registered public accounting firm. Specific responsibilities of our audit committee include:
| ● | helping our board of directors oversee our corporate accounting and financial reporting processes, | |
| ● | reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures, | |
| ● | assisting with the design and implementation of our risk assessment functions, | |
| ● | managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit our financial statements, | |
| ● | discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our interim and year-end operating results, | |
| ● | developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters, | |
| ● | reviewing related person transactions, | |
| ● | obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes our internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law, and | |
| ● | approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm. |
Our audit committee will operate under a written charter, to be effective upon the closing of this offering, which satisfies the applicable listing standards of Nasdaq.
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Compensation Committee
We expect that Mark Meller, Liberty Duke and Gerald Dial, each of whom will satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and Nasdaq listing standards, will serve on our compensation committee, with Ms. Duke serving as the chairman. The members of the compensation committee will also be “non-employee directors” within the meaning of Section 16 of the Exchange Act. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation relating to our directors and executive officers.
The primary purpose of our compensation committee is to discharge the responsibilities of our board of directors in overseeing our compensation policies, plans and programs and to review and determine the compensation to be paid to our executive officers, directors and other senior management, as appropriate. Specific responsibilities of our compensation committee include:
| ● | reviewing and recommending to our board of directors the compensation of our chief executive officer and other executive officers, | |
| ● | reviewing and recommending to our board of directors the compensation of our directors, | |
| ● | administering our equity incentive plans and other benefit programs, | |
| ● | reviewing, adopting, amending, and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections, and any other compensatory arrangements for our executive officers and other senior management, | |
| ● | reviewing and establishing general policies relating to compensation and benefits of our employees, including our overall compensation philosophy, and | |
| ● | reviewing and evaluating with the chief executive officer the succession plans for our executive officers. |
Our compensation committee will operate under a written charter, to be effective upon the closing of this offering, which satisfies the applicable listing standards of Nasdaq.
Nominating and Corporate Governance Committee
We expect that Mark Meller, Liberty Duke and Gerald Dial, each of whom will satisfy the “independence” requirements of Rule 10A-3 under the Exchange Act and Nasdaq listing standards, will serve on our nominating and corporate governance committee, with Senator Dial serving as the chairman. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees.
Specific responsibilities of our nominating and corporate governance committee include:
| ● | identifying and evaluating candidates, including the nomination of incumbent directors for re-election and nominees recommended by stockholders, to serve on our board of directors, | |
| ● | considering and making recommendations to our board of directors regarding the composition and chairmanship of the committees of our board of directors, | |
| ● | reviewing with our chief executive officer the plans for succession to the offices of our executive officers and making recommendations to our board of directors concerning the selection of appropriate individuals to succeed in these positions, | |
| ● | developing and making recommendations to our board of directors regarding corporate governance guidelines and matters, and | |
| ● | overseeing periodic evaluations of the board of directors’ performance, including committees of the board of directors. |
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Our nominating and corporate governance committee will operate under a written charter, to be effective upon the closing of this offering, which satisfies the applicable listing standards of Nasdaq.
Other Committees
Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
Director Compensation
In the 2022 and 2023 fiscal years, we did not provide compensation to our directors for their service.
Independent Director Agreements
On October 1, 2024, the Company entered into a director agreement (the “Director Agreement”) with each of Messrs. Dial and Meller and Ms. Duke. Pursuant to the Director Agreement, each director will be appointed as a member of the board of directors of the Company commencing at the closing of this offering until the next annual meeting of the Company’s stockholders or until his earlier resignation, removal or death.
In consideration for serving as a member of the Company’s board of directors, each director shall be paid a cash fee of $6,250 per fiscal quarter In addition, each director will be awarded 6,250 shares of the Company’s common stock each fiscal quarter and will be entitled to participate in an equity incentive plan after its approval by the Board.
The Company has also agreed to reimburse the directors for reasonable business-related expenses approved by the Company in advance, such approval not to be unreasonably withheld.
A director’s Director Agreement will automatically terminate upon the death of the director or upon his resignation or removal from, or failure to win election or reelection to, the board. In the event of expiration or termination of a director’s Director Agreement, the director has agreed to return or destroy any materials transferred to the director under the Agreement except as may be necessary to fulfill any outstanding obligations hereunder.
In connection with each Director Agreement, each director has agreed to enter into a Proprietary Information Agreement (the “Proprietary Information Agreement”) pursuant to which the director shall maintain in trust and confidence and not disclose to any third party or use for any unauthorized purpose any proprietary information received from the Company and only in connection with providing services as a member of the Company’s board of directors. However, a director’s disclosure of proprietary information shall not be precluded if such disclosure is (i) in response to a valid order, including a subpoena, of a court or other governmental body of the United States or any political subdivision thereof; provided, however, that to the extent reasonably feasible, the director shall first have given the Company notice of the director’s receipt of such order and the Company shall have had an opportunity to obtain a protective order requiring that the proprietary information so disclosed be used only for the purpose for which the order was issued; (ii) otherwise required by law; or (iii) otherwise necessary to establish rights or enforce obligations under the Proprietary Information Agreement, but only to the extent that any such disclosure is necessary.
The Proprietary Information Agreement shall continue in full force and effect during the term of the Director Agreement. The Proprietary Information Agreement may be terminated at any time thereafter upon thirty (30) days written notice to the other party. The director’s confidentiality obligations under the Proprietary Information Agreement with respect to proprietary information disclosed prior to the effective date of such termination shall survive 18 months after the termination of the agreement; provided, however, the director’s obligations under the Proprietary Information Agreement for proprietary information constituting “trade secrets” survive the termination of the Proprietary Information Agreement indefinitely.
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Director Term Limits
Our board of directors has not adopted policies imposing an arbitrary term or retirement age limit in connection with individuals serving as directors as it does not believe that such a limit is in the best interests of our company. Our nominating and corporate governance committee will annually review the composition of our board of directors, including the age and tenure of individual directors. Our board of directors will strive to achieve a balance between the desirability of its members having a depth of relevant experience, on the one hand, and the need for renewal and new perspectives, on the other hand.
Risk Oversight
Our board of directors oversees the risk management activities designed and implemented by our management. Our board of directors executes its oversight responsibility for risk management both directly and through its committees. The full board of directors also considers specific risk topics, including risks associated with our strategic plan, business operations and capital structure. In addition, our board of directors regularly receives detailed reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.
Our board of directors has delegated to the audit committee oversight of our risk management process. Our other board committees also consider and address risk as they perform their respective committee responsibilities. All committees report to the full board of directors as appropriate, including when a matter rises to the level of a material or enterprise level risk.
Code of Ethics
Our board of directors has adopted a Code of Ethics that applies to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics will be available on our website at www.coldchain-tech.com by clicking on “Investor Relations.” If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, financial and accounting officers by posting the required information on our website at the above address within four business days of such amendment or waiver. The information on our website is not part of this prospectus.
Our board of directors, management and all employees of our company are committed to implementing and adhering to the Code of Ethics. Therefore, it is up to each individual to comply with the Code of Ethics and to be in compliance of the Code of Ethics. If an individual is concerned that there has been a violation of the Code of Ethics, he or she will be able to report in good faith to his or her superior. While a record of such reports will be kept confidential by our company for the purposes of investigation, the report may be made anonymously and no individual making such a report will be subject to any form of retribution.
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Summary Compensation Table
Summary Compensation Table - Years Ended December 31, 2023 and 2022
The following table sets forth information concerning all cash and LLC distributions earned by or paid to our directors and executive officers.
| Name and Principal Position | Year | Guaranteed Payments | Bonus | LLC Distributions(1) | Total | ||||||||||||||
| Wayne Williams, Chief Executive Officer | 2023 | $ | 300,000 | $ | - | $ | 5,596,896 | $ | 5,896,896 | ||||||||||
| and President | 2022 | $ | 314,571 | $ | - | $ | 3,442,155 | $ | 3,756,726 | ||||||||||
| David J. Croyle, M.D., Chief Medical Officer | 2023 | $ | - | $ | - | $ | 1,800,000 | $ | 1,800,000 | ||||||||||
| 2022 | $ | - | $ | - | $ | 1,000,000 | $ | 1,000,000 | |||||||||||
| (1) | Compensation calculated for the reorganization of Coldchain Technology Services, LLC, and any/all earlier compensations and proceeds received by the then members of the limited liability entity. |
Employment Agreements
Wayne Williams, Chief Executive Officer
On October 15, 2024, (the “Effective Date”) we entered into an employment agreement (as amended as of October 24, 2024, the “CEO Agreement”) with Wayne Williams pursuant to which Mr. Williams has agreed to serve as the Chief Executive Officer of the Company. The term of the CEO Agreement (the “Term”) commenced on the Effective Date and shall continue until the second (2nd) anniversary thereof (the “Initial Term”), unless terminated earlier pursuant to the terms of the CEO Agreement; provided that, on such second (2nd) anniversary of the Effective Date and each one (1) year annual anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the CEO Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one (1) year (each “Renewal Term”), unless either party provides written notice of its intention not to extend the term of the CEO Agreement at least 90 days prior to the applicable Renewal Date.
For services performed by Mr. Williams under the CEO Agreement, the Company has agreed to pay Mr. Williams an annual base salary during the Initial Term of $500,000, subject to the recommendation of the Compensation Committee and approval of the Board (with Mr. Williams recusing himself from such vote) (the “Base Salary”). During the remainder of the Term, the Base Salary shall be reviewed by the Compensation Committee and/or the Board each year, and the Board may, from time to time, increase such Base Salary.
For each fiscal year of the Company during the Term, the Company shall afford Mr. Williams the opportunity to earn an incentive bonus equal to forty percent (40%) of the Base Salary for such fiscal year and shall be payable to the extent the applicable performance goals are achieved (which goals and payment matrices shall be set by the Compensation Committee of the Board in its discretion). Also, during the Term, Mr. Williams shall be entitled to receive 200,000 options to purchase the Company’s common stock with an exercise price equal to the price of our common stock for this offering. Such options shall vest quarterly over a 24- month period starting 3 months after the closing of this offering.
In addition to the foregoing, Mr. Williams is entitled to receive the following equity awards if the specified milestones are achieved:
50,000 shares of the Company’s common stock upon the closing of each acquisition after the closing of this offering;
125,000 shares of the Company’s common stock upon the Company achieving a first-time market valuation of $75 million or more;
125,000 shares of the Company’s common stock upon the Company achieving a first-time market valuation of $150 million or more;
50,000 shares of the Company’s common stock upon the Company achieving a positive EBITDA for the first time in any full calendar year; and
125,000 shares of the Company’s common stock upon the Company achieving an EBITDA of $10 million for the first time in a full calendar year.
The amount and terms of any other long-term incentive awards awarded to Mr. Williams shall be set by the Compensation Committee in its discretion.
During the Term, if (i) a Change in Control has occurred, Mr. Williams shall be paid a bonus (the “Change in Control Transaction Bonus”), in cash, equal to two (2) times the Base Salary as in effect immediately before such Change in Control. If applicable, the Change in Control Transaction Bonus shall be paid in a lump sum within fifteen (15) days after the consummation of such Change in Control and the following certification by the Board of the occurrence of such Change in Control.
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“Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
| (i) | A transaction or series of transactions (other than an offering of common stock to the general public through a registration statement filed by the Company 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) (other than the Company, any of its subsidiaries, any benefit plan maintained by the Company or any of its subsidiaries or a “Person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule 13(d)(3) under the Exchange Act) of securities of the Company possessing more than fifty percent (50%) of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; |
| (ii) | 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, or (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: |
| (A) | 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, and |
| (B) | after which no Person or group beneficially owns voting securities representing fifty percent (50%) or more of the combined voting power of the Successor Entity; provided, however, that no Person or group shall be treated as beneficially owning fifty percent (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. |
The Agreement is automatically terminated upon the death of Mr. Williams. The Company may also terminate the Agreement due to the disability of Mr. Williams or with or without “Cause.” Mr. Williams may also terminate the Agreement with or without “Good Reason.”
“Cause” means the occurrence of one or more of the following events:
| (i) | Mr. Williams’ continued refusal or failure to perform (other than by reason of disability) his material duties and responsibilities to Company if such refusal or failure is not cured within thirty (30) days following written notice of such refusal or failure by Company to Mr. Williams, or his continued refusal or failure to follow any reasonable lawful direction of the Board if such refusal or failure is not cured within thirty (30) days following written notice of such refusal or failure by Company to Mr. Williams; |
| (ii) | willful, grossly negligent or unlawful misconduct by Mr. Williams which causes material harm to Company or its reputation; |
| (iii) | the Company is directed in writing by regulatory or governmental authorities to terminate the employment of Mr. Williams or Mr. William engages in activities that: (i) are not approved or authorized by the Board, and (ii) cause actions to be taken by regulatory or governmental authorities that have a material adverse effect on Company; or |
| (iv) | a conviction, plea of guilty, or plea of nolo contendere by Mr. Williams, of or with respect to a criminal offense which is a felony or other crime involving dishonesty, disloyalty, fraud, embezzlement, theft, or similar action(s) (including, without limitation, acceptance of bribes, kickbacks or self-dealing), or the material breach of Mr. Williams fiduciary duties with respect to Company. |
“Good Reason” means, without Mr. Williams’ express written consent: (i) a material reduction in the Base Salary, then in effect, except a material diminution generally affecting all of the members of the Company’s management, (ii) a material reduction in job title, position or responsibility, (iii) a material breach of any term or condition contained in the CEO Agreement, or (iv) a relocation of Mr. Williams’ principal worksite that is more than fifty (50) miles from Mr. Williams’ principal worksite as of the Effective Date. However, none of the foregoing events or conditions will constitute “Good Reason” unless (i) Mr. Williams provides Company with written notice of the existence of Good Reason within ninety (90) days following the occurrence thereof, (ii) Company does not reverse or otherwise cure the event or condition within thirty (30) days of receiving that written notice, and (iii) Mr. Williams resigns Mr. Williams’ employment within thirty (30) days following the expiration of that cure period.
If the Company terminates the CEO Agreement for Cause, Mr. Williams will receive Mr. Williams’ earned but unpaid Base Salary and unreimbursed expenses. Except as provided herein, the Company will have no further obligation to Mr. Williams upon the termination of Mr. Williams’ employment.
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In the event of a termination of Mr. Williams’ employment without Cause, in addition to the Final Compensation, Mr. Williams shall receive:
| (1) | continuation of the Base Salary, at the rate in effect as of the date immediately preceding the date of termination, until the earlier of: (x) the Term end date and (y) the first anniversary of the date of termination (provided, however, if the date of termination is after the first anniversary of the Effective Date, the period pursuant to this subsection shall be eighteen (18) months after the date of termination); |
| (2) | if the date of termination occurs after the end of a calendar year but prior to the date on which a Bonus under the Agreement, the Bonus; and |
| (3) | payment of a pro-rata portion of the amount of the Bonus for the year in which termination occurs that would have been payable based on actual performance determined under the terms of the Bonus as then in effect for such year. |
If Mr. Williams terminates the CEO Agreement other than for Good Reason, Mr. Williams will receive Mr. Williams’ earned but unpaid Base Salary and unreimbursed expenses.
Eric Kash, Executive Vice President and Chairman
On October 1, 2024, we entered into an employment agreement (as amended on October 24, 2024, the “EVP Agreement”) with Eric Kash pursuant to which Mr. Kash agreed to serve as the Executive Vice President and Chairman of the Board of the Company. The term of the EVP Agreement (the “Term”) will commence as of the date hereof, but the compensation provisions described in the two following paragraphs shall be effective upon the closing of this offering and shall continue until the second (2nd) anniversary thereof (the “Initial Term”), unless terminated earlier pursuant to the terms of the EVP Agreement; provided that, on such second (2nd) anniversary and each one (1) year annual anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the EVP Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one (1) year (each “Renewal Term”), unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days prior to the applicable Renewal Date.
For services performed by Mr. Kash under the EVP Agreement, the Company has agreed to pay Mr. Kash an annual base salary of (i) $220,000 for the period from the closing of this offering through December 31, 2025, (ii) $250,000 for the period from January 1, 2026, through December 31, 2026 and (iii) $280,000 for the period from January 1, 2027 through December 31, 2027 (the “Base Salary”). During the remainder of the Term, the Base Salary shall be reviewed by the Compensation Committee and/or the Board each year, and the Board may, from time to time, increase such Base Salary.
For each fiscal year of the Company during the Term, the Company shall afford Mr. Kash the opportunity to earn an incentive bonus equal to thirty percent (30%) of the Base Salary for such fiscal year and shall be payable to the extent the applicable performance goals are achieved (which goals and payment matrices shall be set by the Compensation Committee of the Board in its discretion). Also, during the Term, Mr. Kash shall be entitled to receive 300,000 options to purchase the Company’s common stock with an exercise price equal to the price of our common stock for this offering. Such options shall vest quarterly over a 24- month period starting 3 months after the closing of this offering.
The amount and terms of any other long-term incentive awards awarded to Mr. Kash shall be set by the Compensation Committee in its discretion.
During the Term, if a Change in Control occurs, and on, or at any time during the 24-month period following such Change in Control (i) the Company terminates Mr. Kash’s employment for any reason other than Cause or disability or (ii) Mr. Kash terminates his employment for Good Reason, Mr. Kash will be entitled to receive as a severance payment an amount equal to two times the sum of his then effective Base Salary and full bonus calculated as if all performance goals had been achieved.
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The terms “Change in Control”, “Cause” and “Good Reason” have the same meanings as described above in the summary of Mr. Williams employment agreement. Terms otherwise relating to the termination of Mr. Kash’s employment are substantially the same as those described in the summary of Mr. Williams employment agreement.
Jeff Appleman, Chief Financial Officer
On October 1, 2024, we entered into an employment agreement (as amended on October 24, 2024, the “CFO Agreement”) with Jeff Appleman pursuant to which Mr. Appleman agreed to serve as the Chief Financial Officer of the Company. The term of the CFO Agreement (the “Term”) will commence on the date hereof except that the compensation provisions described in the following two paragraphs shall become effective upon the closing of this offering and shall continue until the second (2nd) anniversary thereof (the “Initial Term”), unless terminated earlier pursuant to the terms of the CFO Agreement; provided that, on such second (2nd) anniversary of the commencement of the Term and each one (1) year annual anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the CFO Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one (1) year (each “Renewal Term”), unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days prior to the applicable Renewal Date.
For services performed by Mr. Appleman under the CFO Agreement, the Company has agreed to pay Mr. Appleman an annual base salary of (i) $220,000 for the period from the closing of this offering through December 31, 2025, (ii) $250,000 for the period from January 1, 2026, through December 31, 2026 and (iii) $280,000 for the period from January 1, 2027 through December 31, 2027 (the “Base Salary”). During the remainder of the Term, the Base Salary shall be reviewed by the Compensation Committee and/or the Board each year, and the Board may, from time to time, increase such Base Salary.
For each fiscal year of the Company during the Term, the Company shall afford Mr. Appleman the opportunity to earn an incentive bonus equal to thirty percent (30%) of the Base Salary for such fiscal year and shall be payable to the extent the applicable performance goals are achieved (which goals and payment matrices shall be set by the Compensation Committee of the Board in its discretion). Also, during the Term, Mr. Appleman shall be entitled to receive 100,000 options to purchase the Company’s common stock with an exercise price equal to the price of our common stock for this offering. Such options shall vest quarterly over a 24- month period starting 3 months after the closing of this offering.
The amount and terms of any other long-term incentive awards awarded to Mr. Appleman shall be set by the Compensation Committee in its discretion.
Pursuant to his arrangements with CFO Consulting Partners LLC (“CCP”), with which Mr. Appleman was affiliated, Mr. Appleman is entitled to receive 60% of that number of options to purchase the Company’s common stock granted to CCP for its consulting services provided to the Company, such options having, in the aggregate, a value equivalent to $100,000.
During the Term, if a Change in Control occurs, and on, or at any time during the 24-month period following such Change in Control (i) the Company terminates Mr. Appleman’s employment for any reason other than Cause or disability or (ii) Mr. Appleman terminates his employment for Good Reason, Mr. Appleman will be entitled to receive as a severance payment an amount equal to two times the sum of his then effective Base Salary and full bonus calculated as if all performance goals had been achieved.
The terms “Change in Control”, “Cause” and “Good Reason” have the same meanings as described above in the summary of Mr. Williams employment agreement. Terms otherwise relating to the termination of Mr. Appleman’s employment are substantially the same as those described in the summary of Mr. Williams employment agreement.
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David J. Croyle, M.D., Chief Medical Officer
On October 1, 2024, we entered into an employment agreement (as amended on October 24, 2024, the “CMO Agreement”) with Dr. David Croyle pursuant to which Dr. Croyle has agreed to serve as the Chief Medical Officer of the Company. The term of the CMO Agreement (the “Term”) will commence on the closing of this offering and shall continue until the second (2nd) anniversary thereof (the “Initial Term”), unless terminated earlier pursuant to the terms of the CMO Agreement; provided that, on such second (2nd) anniversary of the Effective Date and each one (1) year annual anniversary thereafter (such date and each annual anniversary thereof, a “Renewal Date”), the CMO Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one (1) year (each “Renewal Term”), unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days prior to the applicable Renewal Date.
For services performed by Dr. Croyle under the CMO Agreement, the Company has agreed to pay Dr. Croyle an annual base salary of (i) $100,000 for the period from the closing of this offering through December 31, 2025, (ii) $130,000 for the period from January 1, 2026, through December 31, 2026, and (iii) $160,000 for the period from January 1, 2027 through December 31, 2027 (the “Base Salary”). During the remainder of the Term, the Base Salary shall be reviewed by the Compensation Committee and/or the Board each year, and the Board may, from time to time, increase such Base Salary.
For each fiscal year of the Company during the Term, the Company shall afford Dr. Croyle the opportunity to earn an incentive bonus equal to thirty percent (30%) of the Base Salary for such fiscal year and shall be payable to the extent the applicable performance goals are achieved (which goals and payment matrices shall be set by the Compensation Committee of the Board in its discretion). The amount and terms of any other long-term incentive awards awarded to Dr. Croyle shall be set by the Compensation Committee in its discretion.
During the Term, if a Change in Control occurs, and on, or at any time during the 24-month period following such Change in Control (i) the Company terminates Dr. Croyle’s employment for any reason other than Cause or disability or (ii) Dr. Croyle terminates his employment for Good Reason, Dr. Croyle will be entitled to receive as a severance payment an amount equal to two times the sum of his then effective Base Salary and full bonus calculated as if all performance goals had been achieved.
The terms “Change in Control”, “Cause” and “Good Reason” have the same meanings as described above in the summary of Mr. Williams employment agreement. Terms otherwise relating to the termination of Dr. Croyle’s employment are substantially the same as those described in the summary of Mr. William’s employment agreement.
Retirement Benefits
We have not maintained, and do not currently maintain, a defined benefit pension plan, nonqualified deferred compensation plan or other retirement benefits.
Equity Awards
In addition to the option grants described in the executive employment agreements summarized above, we have granted options to the employees of the Company, and in the amounts, listed below. Such options provide the holder with the right to purchase the Company’s common stock with an exercise price equal to the price of our common stock for this offering. Such options shall vest quarterly over the first 24-month period starting three months after the closing of this offering. Scott Bullard, William McBride and Donna Williams were each granted 150,000 options.
2024 Equity Incentive Plan
Overview
On October 25, 2024, our Board and our stockholders approved our Callan JMB Inc. 2024 Equity Incentive Plan (the “2024 Plan”). The 2024 Plan governs equity awards to our employees, directors, officers, consultants, and other eligible participants. Initially, the maximum number of shares of our common stock that may be subject to awards under the 2024 Plan is 1,500,000. The maximum number of shares that are subject to awards under the 2024 is subject to an annual increase equal to the lesser of (i) 500,000 shares of our common stock; (ii) a number of shares of our common stock equal to 4% of the prior year’s maximum number or (iii) such number of shares of our common stock as determined by the 2024 Plan administrator. The 2024 Plan will not be effective until the day prior to the effective date of the registration statement related to this initial public offering.
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The purpose of the 2024 Plan is to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to employees, directors and consultants, and to promote the success of the Company’s business. The administrator of the 2024 Plan may, in its sole discretion, amend, alter, suspend or terminate the 2024 Plan, or any part thereof, at any time and for any reason. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with legal and regulatory requirements relating to the administration of equity-based awards. Unless earlier terminated by the administrator, the 2024 Plan will terminate ten years from the date it is adopted by our Board.
Authorized Shares
Initially, the maximum number of shares of our common stock that may be subject to awards under the 2024 Plan is 1,500,000. The maximum number of shares that are subject to awards under the 2024 Plan is subject to an annual increase equal to the lesser of (i) 500,000 shares of our common stock; (ii) a number of shares of our common stock equal to 4% of the prior year’s maximum number or (iii) such number of shares of our common stock as determined by the 2024 Plan administrator.
Additionally, if any award issued pursuant to the 2024 Plan expires or becomes un-exercisable without having been exercised in full, is surrendered pursuant to an exchange program, as provided in the 2024 Plan, or, with respect to restricted stock, restricted stock units (“RSUs”), performance units or performance shares, is forfeited to or repurchased by the Company due to the failure to vest, the unpurchased shares (or for awards other than stock options or stock appreciation rights the forfeited or repurchased shares) which were subject thereto will become available for future grant or sale under the 2024 Plan (unless the 2024 Plan has terminated). With respect to stock appreciation rights, only shares actually issued pursuant to a stock appreciation right will cease to be available under the 2024 Plan; all remaining shares under stock appreciation rights will remain available for future grant or sale under the 2024 Plan (unless the 2024 Plan has terminated). Shares that have actually been issued under the 2024 Plan under any award will not be returned to the 2024 Plan and will not become available for future distribution under the 2024 Plan; provided, however, that if shares issued pursuant to awards of restricted stock, restricted stock units, performance shares or performance units are repurchased by the Company or are forfeited to the Company due to the failure to vest, such shares will become available for future grant under the 2024 Plan. Shares used to pay the exercise price of an award or to satisfy the tax withholdings related to an award will become available for future grant or sale under the 2024 Plan. To the extent an award under the 2024 Plan is paid out in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2024 Plan. Notwithstanding the foregoing and, subject to adjustment as provided in the 2024 Plan, the maximum number of shares that may be issued upon the exercise of incentive stock options will equal the aggregate share number stated above, plus, to the extent allowable under Section 422 of the Code and regulations promulgated thereunder, any shares that become available for issuance under the 2024 Plan in accordance with the foregoing.
Plan Administration
One or more committees appointed by our Board will administer the 2024 Plan. Initially, the Compensation Committee shall administer the 2024 Plan. In addition, if the Company determines it is desirable to qualify transactions under the 2024 Plan as exempt under Rule 16b-3 of the Exchange Act, such transactions will be structured with the intent that they satisfy the requirements for exemption under Rule 16b-3. Subject to the provisions of the 2024 Plan, the administrator has the power to administer the 2024 Plan and make all determinations deemed necessary or advisable for administering the 2024 Plan, including the power to determine the fair market value of the Company’s common stock, select the service providers to whom awards may be granted, determine the number of shares covered by each award, approve forms of award agreements for use under the 2024 Plan, determine the terms and conditions of awards (including the exercise price, the time or times at which the awards may be exercised, any vesting acceleration or waiver or forfeiture restrictions and any restriction or limitation regarding any award or the shares relating thereto), construe and interpret the terms of the 2024 Plan and awards granted under it, prescribe, amend and rescind rules relating to the 2024 Plan, rules and regulations relating to sub-plans established for the purpose of facilitating compliance with applicable non-U.S. laws, easing the administration of the 2024 Plan and/or for qualifying for favorable tax treatment under applicable non-U.S. laws, in each case as the administrator may deem necessary or advisable and modify or amend each award (subject to the provisions of the 2024 Plan), including the discretionary authority to extend the post-termination exercisability period of awards and to extend the maximum term of an option or stock appreciation right (subject to the provisions of the 2024 Plan), to allow participants to satisfy withholding tax obligations in a manner permissible under the 2024 Plan, to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an award previously granted by the administrator and to allow a participant to defer the receipt of payment of cash or the delivery of shares that would otherwise be due to such participant under an award. The administrator also has the authority to allow participants the opportunity to transfer outstanding awards to a financial institution or other person or entity selected by the administrator and to institute an exchange program by which outstanding awards may be surrendered or cancelled in exchange for awards of the same type which may have a higher or lower exercise price or different terms, awards of a different type or cash, or by which the exercise price of an outstanding award is increased or reduced. The administrator’s decisions, interpretations and other actions are final and binding on all participants.
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Eligibility
Awards under the 2024 Plan, other than incentive stock options, may be granted to employees (including officers and directors) of the Company or a parent or subsidiary, members of our Board, or consultants engaged to render bona fide services to the Company or a parent or subsidiary. Incentive stock options may be granted only to employees of the Company or a subsidiary, provided the services (a) are not in connection with the offer or sale of securities in a capital-raising transaction, and (b) do not directly promote or maintain a market for the Company’s securities, in each case, within the meaning of Form S-8 promulgated under the Securities Act, and provided further, that a Consultant will include only those persons to whom the issuance of Shares may be registered under Form S-8 promulgated under the Securities Act.
Stock Options
Stock options may be granted under the 2024 Plan. The exercise price of options granted under the 2024 Plan generally must at least be equal to the fair market value of the Company’s common stock on the date of grant. The term of each option will be as stated in the applicable award agreement; provided, however, that the term may be no more than 10 years from the date of grant. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. After the termination of service of an employee, director, or consultant, they may exercise their option for the period of time stated in their option agreement. In the absence of a specified time in an award agreement, if termination is due to death or disability, the option will remain exercisable for six months. In all other cases, in the absence of a specified time in an award agreement, the option will remain exercisable for three months following the termination of service. An option may not be exercised later than the expiration of its term. Subject to the provisions of the 2024 Plan, the administrator determines the other terms of options.
Stock Appreciation Rights
Stock appreciation rights may be granted under the 2024 Plan. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of the Company’s common stock between the exercise date and the date of grant. Stock appreciation rights may not have a term exceeding 10 years. After the termination of the service of an employee, director or consultant, they may exercise their stock appreciation right for the period of time stated in their stock appreciation right agreement. In the absence of a specified time in an award agreement, if termination is due to death or disability, the stock appreciation rights will remain exercisable for six months. In all other cases, in the absence of a specified time in an award agreement, the stock appreciation rights will remain exercisable for three months following the termination of service. However, in no event may a stock appreciation right be exercised later than the expiration of its term. Subject to the provisions of the 2024 Plan, the administrator determines the other terms of stock appreciation rights, including when such rights become exercisable and whether to pay any increased appreciation in cash or with shares of the Company’s common stock, or a combination thereof, except that the per share exercise price for the shares to be issued pursuant to the exercise of a stock appreciation right will be no less than 100% of the fair market value per share on the date of grant.
Restricted Stock
Restricted stock may be granted under the 2024 Plan. Restricted stock awards are grants of shares of the Company’s common stock that vest in accordance with terms and conditions established by the administrator. The administrator will determine the number of shares of restricted stock granted to any employee, director, or consultant and, subject to the provisions of the 2024 Plan, will determine the terms and conditions of such awards. The administrator may impose whatever conditions to vesting it determines to be appropriate (for example, the administrator may set restrictions based on the achievement of specific performance goals or continued service to the Company); provided, however, that the administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have voting and dividend rights with respect to such shares upon grant without regard to vesting unless the administrator provides otherwise. Shares of restricted stock that do not vest are subject to the Company’s right of repurchase or forfeiture.
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Restricted Stock Units
RSUs may be granted under the 2024 Plan. RSUs are bookkeeping entries representing an amount equal to the fair market value of one share of the Company’s common stock. Subject to the provisions of the 2024 Plan, the administrator determines the terms and conditions of RSUs, including the vesting criteria and the form and timing of payment. The administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business unit or individual goals (including continued employment or service), applicable federal or state securities laws or any other basis determined by the administrator in its discretion. The administrator, in its sole discretion, may pay earned RSUs in the form of cash, in shares of the Company’s common stock or in some combination thereof. Notwithstanding the foregoing, the administrator, in its sole discretion, may accelerate the time at which any vesting requirements will be deemed satisfied.
Performance Awards
Performance awards may be granted under the 2024 Plan. Performance awards are awards that will result in a payment to a participant only if performance goals established by the administrator are achieved or the awards otherwise vest. The administrator will set objectives or vesting provisions, that, depending on the extent to which they are met, will determine the value of the payout for the performance awards. The administrator may set vesting criteria based on the achievement of company-wide, divisional, business unit, or individual goals (including, but not limited to, continued employment or service), or any other basis determined by the administrator in its discretion. Each performance award’s threshold, target, and maximum payout values are established by the administrator on or before the grant date. After the grant of a performance award, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance award. The administrator, in its sole discretion, may pay earned performance awards in the form of cash, in shares, or in some combination thereof.
Non-Employee Directors
The 2024 Plan provides that all non-employee directors will be eligible to receive all types of awards (except for incentive stock options) under the 2024 Plan. The 2024 Plan includes a maximum limit of $100,000 of equity awards that may be granted to a non-employee director in any fiscal year, increased to $200,000 in connection with his or her initial service. For purposes of this limitation, the value of equity awards is based on the grant date fair value (determined in accordance with GAAP). Any equity awards granted to a person for their services as an employee, or for their services as a consultant (other than as a non-employee director), will not count for purposes of the limitation. The maximum limit does not reflect the intended size of any potential compensation or equity awards to the Company’s non-employee directors.
Non-transferability of Awards
Unless the administrator provides otherwise, the 2024 Plan generally does not allow for the transfer of awards other than by will or by the laws of descent and distribution and only the recipient of an award may exercise an award during their lifetime. If the administrator makes an award transferable, such award will contain such additional terms and conditions as the administrator deems appropriate.
Certain Adjustments
In the event of certain changes in the Company’s capitalization, to prevent diminution or enlargement of the benefits or potential benefits available under the 2024 Plan, the administrator will adjust the number and class of shares that may be delivered under the 2024 Plan or the number, and price of shares covered by each outstanding award and the numerical share limits set forth in the 2024 Plan.
Dissolution or Liquidation
In the event of the Company’s proposed liquidation or dissolution, the administrator will notify participants as soon as practicable, and all awards will terminate immediately prior to the consummation of such proposed transaction.
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Merger or Change in Control
The 2024 Plan provides that in the event of the Company’s merger with or into another corporation or entity or a “change in control” (as defined in the 2024 Plan), each outstanding award will be treated as the administrator determines, including, without limitation, that (i) awards will be assumed, or substantially equivalent awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices; (ii) upon written notice to a participant, that the participant’s awards will terminate upon or immediately prior to the consummation of such merger or change in control; (iii) outstanding awards will vest and become exercisable, realizable or payable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon consummation of such merger or change in control and, to the extent the administrator determines, terminate upon or immediately prior to the effectiveness of such merger or change in control; (iv) (A) the termination of an award in exchange for an amount of cash or property, if any, equal to the amount that would have been attained upon the exercise of such award or realization of the participant’s rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the administrator determines in good faith that no amount would have been attained upon the exercise of such award or realization of the participant’s rights, then such award may be terminated by the Company without payment) or (B) the replacement of such award with other rights or property selected by the administrator in its sole discretion; or (v) any combination of the foregoing. The administrator will not be obligated to treat all awards, all awards a participant holds, or all awards of the same type, similarly. In the event that awards (or portion thereof) are not assumed or substituted for in the event of a merger or change in control, the participant will fully vest in and have the right to exercise all of their outstanding options and stock appreciation rights, including shares as to which such awards would not otherwise be vested or exercisable, all restrictions on restricted stock and RSUs or performance awards will lapse and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at 100% of target levels and all other terms and conditions met, in all cases, unless specifically provided otherwise under the applicable award agreement or other written agreement between the participant and the Company or any of the Company’s subsidiaries or parents, as applicable. If an option or stock appreciation right is not assumed or substituted in the event of a merger or change in control, the administrator will notify the participant in writing or electronically that the option or stock appreciation right will be exercisable for a period of time determined by the administrator in its sole discretion and the vested option or stock appreciation right will terminate upon the expiration of such period.
For awards granted to an outside director, the outside director will fully vest in and have the right to exercise options and/or stock appreciation rights as to all of the shares underlying such award, including those shares which would not be vested or exercisable, all restrictions on restricted stock and RSUs will lapse, and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met, unless specifically provided otherwise under the applicable award agreement or other written agreement between the participant and the Company or any of its subsidiaries or parents, as applicable.
Clawback
Awards will be subject to any Company clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable laws. The administrator also may specify in an award agreement that the participant’s rights, payments, or benefits with respect to an award will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events. The administrator may require a participant to forfeit, return or reimburse the Company all or a portion of the award or shares issued under the award, any amounts paid under the award and any payments or proceeds paid or provided upon disposition of the shares issued under the award in order to comply with such clawback policy or applicable laws.
Amendment and Termination
The administrator has the authority to amend, suspend or terminate the 2024 Plan provided such action does not impair the existing rights of any participant. The 2024 Plan automatically will terminate on October 25, 2034, unless it is terminated sooner.
Employee Benefits and Perquisites
Our executive officers are entitled to reimbursement for all expenses reasonably incurred in connection with the performance of their duties as executive officers of the Company.
Retirement Plans
We currently do not offer retirement plans to our executive officers.
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CURRENT RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
A “related party transaction” is any actual or proposed transaction, arrangement or relationship or series of similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved exceeded or exceeds the lesser of (i) $120,000 or (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years and in which any related party had or will have a direct or indirect material interest. A “related party” includes:
| ● | any person who is, or at any time during the applicable period was, one of our executive officers or one of our directors; | |
| ● | any person who beneficially owns more than 5% of our common stock; | |
| ● | any immediate family member of any of the foregoing; or | |
| ● | any entity in which any of the foregoing is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest. |
In October, 2024, our board of directors adopted a written related-party transactions policy. Pursuant to this policy, the Audit Committee of our board of directors will review all material facts of all related-party transactions and either approve or disapprove entry into the related-party transaction, subject to certain limited exceptions. In determining whether to approve or disapprove entry into a related-party transaction, our Audit Committee shall take into account, among other factors, the following: (i) whether the related-party transaction is on terms no less favorable to us than terms generally available from an unaffiliated third party under the same or similar circumstances; (ii) the extent of the related party’s interest in the transaction; and (iii) whether the transaction would impair the independence of a non-employee director.
Related Party Transactions:
Health Hero America is a related party by virtue of its being owned by Mr. Williams. In 2022, the Company’s predecessor entity received an advance of $110,736, from Health Hero America. The advance was due on demand, was non-interest bearing, and classified within related party loans payables in the balance sheet. As of September 30, 2024 and December 31, 2023, the Company has $0 owed to this related party.
Outlaw Run Ranch (“ORR”) is a related party by virtue of being owned by Mr. Williams. In 2023, the Company received rent receipts from a third-party vendor on behalf of ORR. The cash is due to ORR on demand, is non-interest bearing, and is classified within related party loans in the balance sheet. In addition, the Company pays $7,500 per month to ORR for rent expense. As of September 30, 2024 and December 31, 2023, the Company has $17,134, in accounts payable for these amounts due.
Warehouse Asset Management is a related party by virtue of being majority owned by Messrs. Williams and Croyle. The Company leases its headquarters, warehouse, other warehouse equipment and a box truck for $15,425 per month. As of September 30, 2024 and December 31, 2023, the Company has $52,350 and $0 owed to this related party.
Transactions with Significant Stockholders
Other than compensation arrangements for our named executive officers and directors, which we describe above, see Executive Compensation- Employment Agreements, the only related party transactions to which we were a party during the years ended December 31, 2022 and 2023, since December 31, 2023, or any currently proposed related party transaction, are as follows, each of which was entered into prior to the adoption of the approval procedures described above.
On February 14 2024, we entered into a reorganization agreement and plan of share exchange with Coldchain Technology Services, LLC (“CTS”) pursuant to which CTS exchanged 100% of the membership interest of CTS for a combined 5,000,000 shares of common stock, consisting of: (a) 3,750,000 shares of common stock to Wayne Williams, its Chief Executive Officer and President, and (b) 1,250,000 shares of common stock to David J. Croyle, M.D., its Chief Medical Officer. Pursuant to such transaction, CTS is now a wholly-owned subsidiary of the Company.
Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company and all the Company’s existing stockholders (Mr. Williams and Dr. Croyle), in order to give effect to the Company’s decision to effect a reduction in the number of shares of its common stock outstanding, Messrs. Williams and Croyle agreed to exchange their existing shares of the Company’s common stock for new shares of common stock at a ratio of 0.60 new shares to 1 for each share that each stockholder held prior to the exchange. As a result of the exchange, the Company’s total common stock outstanding was reduced from 5,000,000 shares to 3,000,000 shares, with Mr Williams holding 2,250,000 shares (75%) and Dr. Croyle holding 750,000 shares (25%).
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of November 18, 2024 for (i) each of our named executive officers and directors; (ii) all of our named executive officers and directors as a group; and (iii) each other shareholder known by us to be the beneficial owner of more than 5% of our outstanding common stock, assuming that we sell the maximum number of shares of common stock being offered.
Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person or any member of such group has the right to acquire within sixty (60) days. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares of common stock that such person or persons has the right to acquire within sixty (60) days of November 18, 2024 are deemed to be outstanding for such person, but not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares of common stock listed as beneficially owned does not constitute an admission of beneficial ownership by any person.
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Callan JMB Inc., 244 Flightline Drive, Spring Branch, Texas 78070-6241.
| Common Stock Beneficially | Common Stock Beneficially | |||||||||||||||
| Owned Prior to this Offering(1) | Owned After this Offering(2) | |||||||||||||||
| Name of Beneficial Owner | Shares | % | Shares | % | ||||||||||||
| Wayne Williams, Chief Executive Officer and President | 2,250,000 | 75 | % | 2,250,000 | 52 | % | ||||||||||
| David J. Croyle, M.D., Chief Medical Officer | 750,000 | 25 | % | 750,000 | 18 | % | ||||||||||
| All executive officers and directors (2 persons above) | 3,000,000 | 100 | % | 3,000,000 | 70 | % | ||||||||||
| (1) | Based on 3,000,000 shares of common stock issued and outstanding as of November 18, 2024. |
| (2) | Based on 4,280,000 shares of common stock issued and outstanding after this offering assuming an initial public offering price of $5.00 per share of common stock. |
Change In Control
We do not currently have any arrangements which if consummated may result in a change of control of the Company. However, Wayne Williams, the Company’s Chief Executive Officer, currently owns 2,250,000 shares of our common stock, representing approximately 75% of our outstanding common stock as of November 18, 2024. As a result, Mr. Williams will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of our assets. In addition, Mr. Williams will have the ability to control the management and affairs of the Company as a result of his position as our CEO and his ability to control the election of our directors. Additionally, in the event that Mr. Williams sells his common stock at any time or controls the Company at the time of his death, control would be transferred to the purchaser or group of purchasers or a person or entity that he designates as his successor. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control, could deprive stockholders of an opportunity to receive a premium for our common stock as part of a sale, and might ultimately affect the trading price of our common stock.
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The following is a summary of the rights of our common stock and preferred stock, certain provisions of our articles of incorporation and our bylaws as they will be in effect upon completion of this offering, and applicable law. This summary does not purport to be complete and is qualified in its entirety by the provisions of our articles of incorporation and bylaws, copies of which will be filed as exhibits to the registration statement of which this prospectus is a part.
Our authorized capital stock consists of 190,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share. As of the date of this prospectus, 3,000,000 shares of common stock are issued and outstanding, with no shares our preferred stock issued and outstanding.
Common Stock
Voting, Dividend and Other Rights. Each outstanding share of common stock entitles the holder to one vote on all matters presented to the shareholders for a vote. Holders of shares of common stock have no cumulative voting, pre-emptive, subscription or conversion rights. All shares of common stock to be issued pursuant to this registration statement will be duly authorized, fully paid and non-assessable. Our board of directors determines if and when distributions may be paid out of legally available funds to the holders. To date, we have not declared any dividends with respect to our common stock. Our declaration of any cash dividends in the future will depend on our board of directors’ determination as to whether, in light of our earnings, financial position, cash requirements and other relevant factors existing at the time, it appears advisable to do so. We do not anticipate paying cash dividends on the common stock in the foreseeable future.
Rights Upon Liquidation. Upon liquidation, subject to the right of any holders of the preferred stock to receive preferential distributions, each outstanding share of common stock may participate pro rata in the assets remaining after payment of, or adequate provision for, all our known debts and liabilities.
Majority Voting. The holders of 33 1/3% of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business at any meeting of the shareholders. A plurality of the votes cast at a meeting of shareholders elects our directors. The common stock does not have cumulative voting rights. Therefore, the holders of a majority of the outstanding shares of common stock can elect all of our directors. In general, a majority of the votes cast at a meeting of shareholders must authorize shareholder actions other than the election of directors. Most amendments to our articles of incorporation require the vote of the holders of a majority of all outstanding voting shares.
Preferred Stock
Authority of Board of Directors to Create Series and Fix Rights. Under our articles of incorporation, our board of directors can issue up to 10,000,000 shares of “blank check” preferred stock from time to time in one or more series. The board of directors is authorized to fix by resolution as to any series the designation and number of shares of the series, the voting rights, the dividend rights, the redemption price, the amount payable upon liquidation or dissolution, the conversion rights, and any other designations, preferences or special rights or restrictions as may be permitted by law. Unless the nature of a particular transaction and the rules of law applicable thereto require such approval, our board of directors has the authority to issue these shares of “blank check” preferred stock without shareholder approval.
Anti-Takeover Effects of Certain Provisions of Our Articles of Incorporation, as Amended, and Our Bylaws
Provisions of our articles of incorporation and our bylaws could make it more difficult to acquire us by means of a merger, tender offer, proxy contest, open market purchases, removal of incumbent directors and otherwise. These provisions, which are summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because negotiation of these proposals could result in an improvement of their terms.
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Calling of Special Meetings of Stockholders. Our bylaws provide that special meetings of the stockholders may be called only by (i) our Chairman, (ii) our chief executive officer, (iii) the board of directors pursuant to a resolution adopted by directors representing a quorum of the board of directors or (iv) by the holders of shares entitled to cast not less than 33 1/3% of the votes at the meeting.
Removal of Directors; Vacancies. Our bylaws provide that a director may be removed either for or without cause at any special meeting of stockholders by the affirmative vote of at least a majority of the voting power of the issued and outstanding stock entitled to vote; provided, however, that notice of intention to act upon such matter shall have been given in the notice calling such meeting.
Amendment of Bylaws. The bylaws provide that the bylaws may be altered, amended or repealed at any meeting of the board of directors at which a quorum is present, by the affirmative vote of a majority of the directors present at such meeting.
Preferred Stock. Our articles of incorporation authorize the issuance of up to 10,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our board of directors in their sole discretion. Our board of directors may, without stockholder approval, issue series of “blank check” preferred stock with dividends, liquidation, conversion, voting or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
Limitation of Liability and Indemnification Matters
NRS Section 78.7502 provides that a corporation shall indemnify any director, officer, employee or agent of a corporation against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with any the defense to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to Section 78.7502(1) or 78.7502(2), or in defense of any claim, issue or matter therein.
NRS 78.7502(1) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
Our articles of incorporation and bylaws provide that we shall indemnify our directors, officers, employees and agents to the full extent permitted by NRS, including in circumstances in which indemnification is otherwise discretionary under such law.
These indemnification provisions may be sufficiently broad to permit indemnification of our officers, directors and other corporate agents for liabilities (including reimbursement of expenses incurred) arising under the Securities Act of 1933.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of our company pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
We have the power to purchase and maintain insurance on behalf of any person who is or was one of our directors or officers, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other business against any liability asserted against the person or incurred by the person in any of these capacities, or arising out of the person’s fulfilling one of these capacities, and related expenses, whether or not we would have the power to indemnify the person against the claim under the provisions of the NRS. We do not currently maintain director and officer liability insurance on behalf of our director and officers; however, we intend to so purchase and maintain such insurance when economically feasible.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ClearTrust, LLC with its business address at 16540 Point Village Drive, Lutz, Florida 33558.
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SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock, including stocks issued upon the exercise of outstanding options, in the public market after this offering, or the possibility of these sales occurring, could cause the prevailing market price for our common stock to fall or impair our ability to raise equity capital in the future.
Immediately following the closing of this offering, we will have 4,280,000, shares common stock issued and outstanding. In the event the underwriters exercise the over-allotment option in full, we will have 4,472,000 common stock issued and outstanding. The common stock sold in this offering will be freely tradable without restriction or further registration or qualification under the Securities Act.
Previously issued shares that were not offered and sold in this offering, as well as shares of stock issuable upon the exercise of underlying employee stock options, are or will be upon issuance, “restricted securities,” as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if such public resale is registered under the Securities Act or if the resale qualifies for an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below.
Rule 144
In general, a person who has beneficially owned restricted stocks for at least twelve months, or at least six months in the event we have been a reporting company under the Exchange Act for at least ninety (90) days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the ninety (90) days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that do not exceed the greater of the following:
| ● | 1% of the number of common stocks then outstanding, or | |
| ● | 1% of the average weekly trading volume of our common stocks during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale, |
provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least ninety (90) days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.
Lock-Up Agreements
We intend to agree with the underwriters that we will not, without the prior written consent of the representatives, for a period of one (1) year after the date of the underwriting agreement: (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any classes of our stocks or any securities convertible into or exercisable or exchangeable for any classes of our stocks, (ii) file or caused to be filed any registration statement with the SEC, relating to the offering of any classes of our stocks or any securities convertible into or exercisable or exchangeable for any classes of our stocks, (iii) complete any offering of debt securities, other than entering into a line of credit with a traditional bank, or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any classes of our stocks, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of any classes of our stocks or such other securities, in cash or otherwise. See “Underwriting—No Sales of Similar Securities.”
Regulation S
Regulation S under the Securities Act provides that securities owned by any person may be sold without registration in the United States, provided that the sale is effected in an “offshore transaction” and no “directed selling efforts” are made in the United States (as these terms are defined in Regulation S) and subject to certain other conditions. In general, this means that our shares may be sold in some manner outside the United States without requiring registration in the United States.
Rule 701
In general, Rule 701 allows a stockholder who purchased shares of common stock pursuant to a written compensatory plan or contract and who is not deemed to have been an affiliate of ours during the immediately preceding ninety (90) days to sell those shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. All holders of Rule 701 shares, however, are required to wait until ninety (90) days after the Company becomes subject to the reporting requirement of the Exchange Act before selling shares of common stock pursuant to Rule 701.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
This section summarizes certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of our common stock. This summary does not provide a complete analysis of all potential tax considerations. The information provided below is based upon provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder and administrative rulings and judicial decisions, all as currently in effect. These authorities may change at any time, possibly on a retroactive basis, or the U.S. Internal Revenue Service (the “IRS”), might interpret the existing authorities differently. In either case, the tax considerations of purchasing, owning or disposing of common stock could differ from those described below.
This discussion is addressed only to U.S. holders (defined below) which hold our shares of common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax considerations that might be relevant to a beneficial owner in light of such beneficial owner’s particular circumstances or to beneficial owners subject to special treatment under the U.S. federal income tax laws, including:
| ● | a broker, dealer or trader in securities, currencies, commodities, or notional principal contracts; | |
| ● | a bank, financial institution or insurance company; | |
| ● | a regulated investment company, a real estate investment trust or grantor trust; | |
| ● | a tax-exempt entity or organization, including an individual retirement account or Roth IRA as defined in Section 408 or 408A of the Code, respectively; | |
| ● | a person holding the common stock as part of a hedging, integrated, or conversion transaction or a straddle, or a person deemed to sell common stock under the constructive sale provisions of the Code; | |
| ● | a trader in securities that has elected the mark-to-market method of tax accounting for securities; | |
| ● | an entity that is treated as a partnership or other pass-through entity for U.S. federal income tax purposes; | |
| ● | a person who is a partner or investor in a partnership or other pass-through entity that holds the common stock; | |
| ● | a U.S. person whose “functional currency” is not the U.S. dollar; | |
| ● | a controlled foreign corporation or passive foreign investment company; | |
| ● | a qualified foreign pension fund or an entity that is wholly-owned by one or more qualified foreign pension funds; or | |
| ● | a U.S. expatriate. |
For purposes of this discussion, a “U.S. holder” is a beneficial owner of a share of common stock that is, for U.S. federal income tax purposes:
| ● | an individual who is a citizen or resident of the United States; | |
| ● | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; | |
| ● | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or | |
| ● | a trust if (1) it is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of a share of common stock that is (i) a foreign corporation, (ii) a nonresident alien individual, or (iii) a foreign estate or trust that in each case is not subject to U.S. federal income tax on a net income basis on income or gain from a share of common stock.
If a partnership holds shares of common stock, the tax treatment of a partner will generally depend upon the status of the partner and the activities of the partnership. A partnership holding shares of common stock or a partner therein should consult its own tax advisors as to the tax consequences of holding and disposing of shares of common stock.
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You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any U.S. state or local or any non-U.S. or other taxing jurisdiction or under any applicable tax treaty.
Certain U.S. Federal Income Tax Considerations for U.S. Holders of Common Stock
Dividends on our Common Stock
We do not expect to declare or pay any distributions on our common stock in the foreseeable future. If we do make any distributions on shares of our common stock, however, such distributions will be includible in the gross income of a U.S. holder as ordinary dividend income to the extent paid out of current or accumulated earnings and profits, as determined for U.S. federal income tax purposes. Any portion of a distribution in excess of current or accumulated earnings and profits would be treated as a return of the holder’s tax basis in its common stock and then as gain from the sale or exchange of the common stock. Under current law, if certain requirements are met, a preferential U.S. federal income tax rate will apply to any dividends paid to a holder of common stock who is a U.S. individual.
Distributions to U.S. holders that are corporate stockholders, constituting dividends for U.S. federal income tax purposes, may qualify for the dividends received deduction, or DRD, which is generally available to corporate stockholders. No assurance can be given that we will have sufficient earnings and profits (as determined for U.S. federal income tax purposes) to cause any distributions to be eligible for a DRD. In addition, a DRD is available only if certain holding periods and other taxable income requirements are satisfied.
Sale of Common Stock
A U.S. holder of common stock will generally recognize gain or loss on the taxable sale, exchange, or other taxable disposition of such stock in an amount equal to the difference between such U.S. holder’s amount realized on the sale and its adjusted tax basis in the common stock sold. A U.S. holder’s amount realized should equal the amount of cash and the fair market value of any property received in consideration of its stock. The gain or loss should be capital gain or loss and should be long-term capital gain or loss if the common stock is held for more than one year at the time of disposition. The deductibility of capital losses for U.S. federal income tax purposes is subject to limitations under the Code. Under current law, long-term capital gain recognized by an individual U.S. holder is generally eligible for a preferential U.S. federal income tax rate.
Information Reporting and Backup Withholding
Information reporting requirements generally will apply to payments of dividends on shares of common stock and to the proceeds of a sale of common stock unless a U.S. holder is an exempt recipient, such as a corporation. Backup withholding will apply to those payments if a U.S. holder fails to provide its correct taxpayer identification number and certification of exempt status or fails to report in full dividend income. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
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We intend to enter into an underwriting agreement with Alexander Capital, L.P. (the “Underwriter” or the “Representative”), with respect to the shares of common stock offered pursuant to this prospectus. Subject to certain conditions, we have agreed to sell to the Underwriter the number of shares of our common stock listed next to its name in the below table at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus.
| Underwriter | Number of Shares | |||
| Alexander Capital, L.P. |
| |||
The underwriting agreement will provide that the obligations of the Underwriter to pay for and accept delivery of the shares of our common stock offered by this prospectus are subject to the approval of certain legal matters by its legal counsel and certain other conditions. The Underwriter is obligated to take and pay for all of our shares of common stock offered hereby if any of such shares are taken. The Underwriter is not, however, required to take or pay for the shares of our common stock covered by the over-allotment option described below.
Over-Allotment Option
We
have granted to the Underwriter an option, exercisable no later than 45 calendar days after the date of the closing of this offering,
to purchase up to an additional 192,000 shares of common stock (15% of shares sold in this offering).
Underwriting Discount, Commissions and Expenses
The following table summarizes the underwriting discounts and commissions and proceeds, before expenses, to us assuming both no exercise and full exercise by the Underwriter of the over-allotment option:
| Per Share | Total Without Option | Total With Over-Allotment Option | ||||||||||
| Assumed initial public offering price | $ | $ | $ | |||||||||
| Underwriting discounts and commissions (8.5%) | $ | $ | $ | |||||||||
| Non-accountable expense allowance (1.0%) (1) | $ | $ | $ | |||||||||
| Proceeds to us, before fees and expenses | $ | $ | $ | |||||||||
| (1) | We have also agreed to reimburse such Underwriter for certain out-of-pocket expenses, including, but not limited to, up to $150,000 solely for reasonable legal fees and disbursements for the Underwriter’s counsel and up to $200,000 for all actual accountable fees in connection with this offering (including such legal fees). |
We have also agreed to indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act or to contribute to payments that the Underwriters may be required to make in respect of those liabilities.
We will be also responsible for and will pay all expenses relating to the offering, including, without limitation, (a) all filing fees and expenses relating to the registration of the common stock with the SEC; (b) all fees and expenses relating to the listing of our common stock; (c) all FINRA filing fees related to this offering; (d) all fees, expenses and disbursements relating to the registration, qualification or exemption of the offering of our shares of common stock hereby under the “blue sky” securities laws of such states and other jurisdictions as the Underwriter may reasonably designate (including, without limitation, all filing and registration fees, and the reasonable fees and disbursements of the Company’s “blue sky” counsel) if applicable; (e) all fees, expenses and disbursements relating to the registration, qualification or exemption of the securities under the securities laws of such foreign jurisdictions as the Underwriter may reasonably designate; (f) the costs of all mailing and printing of the offering documents; (g) the costs of preparing, printing and delivering certificates representing the shares of common stock offered hereby, (h) transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriter; and (i) the fees and expenses of our transfer agent and accountants; up to $200,000, of which up to $150,000 will be reimbursed solely for reasonable legal fees and disbursements for the Underwriter’s counsel.
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We are responsible for the Underwriter’s external counsel legal costs irrespective of whether or not this offering is consummated. Additionally, one percent (1%) of the gross proceeds of this offering will be provided to the Underwriter as a non-accountable expense allowance. Additionally, we have provided the Underwriter an expense advance (the “Advance”) of $25,000. The Advance shall be applied towards out-of-pocket accountable expense set forth herein and any portion of the Advance shall be returned to us to the extent not actually incurred in accordance with FINRA Rule 5110(g)(5).
In addition to non-accountable expenses, we will reimburse the Underwriter for incurred expenses. All incurred expenses will be preapproved and prepaid by us, including expenses towards diligence. Non-accountable expenses will be disbursed at the closing of this offering. We have also agreed to pay up to $12,900 in closing costs associated with the clearing and settlement of the shares of common stock offered hereby.
We estimate the total expenses payable by us for this offering to be approximately $1,300,000 (assuming no exercise of the overallotment option), which amount includes (i) the underwriting discount of $544,000 (amounting to a total of 8.5%), (ii) a non-accountable expense of $64,000 (1.0%) (iii) reimbursement of the accountable expenses (including up to $200,000 in expenses, inclusive of up to $150,000 solely for legal fees for the Underwriter’s counsel and the $25,000 Advance), (iv) closing costs of up to $12,900 and (v) other estimated Company expenses of approximately $479,100, which includes legal, accounting, printing costs and various fees associated with the registration of our securities.
Representative’s Warrants
We intend to agree to issue to the Underwriter (or its designed affiliates) the Representative’s Warrants to purchase up to five percent (5.0%) of the number of shares of common stock sold in this offering, including all shares issuable upon exercise of the Underwriter’s over-allotment option. We are registering on the registration statement of which this prospectus forms a part the issuance of the Representative’s Warrants and the shares of common stock issuable upon exercise of such warrants. The Representative’s Warrants will not be exercisable for 180 days following the commencement of sales of this offering and will expire five (5) years following the commencement of such sales. The Representative’s Warrants will be exercisable at a price equal to 120% of the initial public offering price of the shares of common stock sold in this offering. The Representative’s Warrants will not be redeemable and may not be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of such securities by any person for a period of 180 days beginning on the date of commencement of sales of the offering, except as provided for in FINRA Rule 5110(e)(2). Notwithstanding the foregoing, the Representative’s Warrants may be assigned, in whole or in part, to any officer, manager or member of the Underwriter (or to officers, managers or members of any such successor or member), and to members of the underwriting syndicate or selling group. The Representative’s Warrants will also provide for cashless exercise in the event that there is no effective registration statement for such shares and unlimited “piggyback” registration rights at our expense not to exceed a term of seven (7) years in accordance with FINRA Rule 5110(g)(8)(D). The Underwriter has agreed that during the one (1)-year period following the closing date of this offering, it will not transfer the Representative’s Warrants or underlying shares of common stock, except to its officers, partners or members of the selling group.
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Tail Financing
We intend to agree that the Underwriter will be entitled to the same compensation paid to the Underwriter in connection with this initial public offering with respect to any public or private offering or other financing or capital raising transaction of any kind (“Tail Financing”) to the extent that such financing or capital is provided to us by investors whom the Underwriter had contacted about this offering, during our engagement period with the Underwriter or introduced to us during our engagement period with the Underwriter, if such Tail Financing is consummated at any time within the 12-month period following the expiration or termination of our engagement letter with the Underwriter for this offering, effective July 2, 2024, subject to FINRA Rule 5110 (g)(5)(B).
Executive Officer and Director Lock-Ups
All of our directors and executive officers intend to agree that, for a period of one (1) year after the date of this prospectus and subject to certain limited exceptions, we and they will not, directly or indirectly, without the prior written consent of the Representative: (i) offer pledge, sell, contract to sell, grant, lend or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock; (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of common stock or other securities, in cash or otherwise; (iii) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for common stock or any of our other securities; or (iv) publicly disclose the intention to do any of the foregoing, subject to certain exceptions.
Determination of Offering Price
In determining the initial public offering price of the shares of common stock offered hereby, we and the representatives have considered a number of factors, including:
| ● | the information set forth in this prospectus and otherwise available to the representatives; | |
| ● | our prospects and the history and prospects for the industry in which we compete; | |
| ● | an assessment of our management; | |
| ● | our prospects for future revenue and earnings; | |
| ● | the general condition of the securities markets at the time of this offering; | |
| ● | the recent prices of, and demand for, shares of our common stock sold by us prior to this offering; | |
| ● | the recent market prices of, and demand for, publicly traded securities of generally comparable companies; and | |
| ● | other factors deemed relevant by the representatives and us. |
The assumed initial public offering price set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions and other factors. Neither we nor the Underwriter can assure investors that an active trading market will develop for our shares of common stock, or that such shares will trade in the public market at or above the initial public offering price.
Company Standstill
We intend to agree that, for a period of one (1) year from the closing date of this offering, that without the prior written consent of the Underwriter, we will not (a) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our capital stock or any securities convertible into or exercisable or exchangeable for our shares of capital stock; (b) file or caused to be filed any registration statement with the SEC relating to the offering of any of our capital stock or any securities convertible into or exercisable or exchangeable for our shares of capital stock; (c) complete any offering of our debt securities, other than entering into a line of credit with a traditional bank, or (d) enter into any swap or arrangement that transfers to another, in whole or in part, any of the economic consequences or ownership of our capital stock, whether any such transactions described in subsections (a), (b), (c) or (d) above is to be settled by delivery of shares of our capital stock or such other securities, in cash or otherwise.
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Price Stabilization, Short Positions and Penalty Bids
In connection with this offering, the Underwriter may engage in transactions that stabilize, maintain or otherwise affect the price of our common stock. Specifically, the Underwriter may over-allot in connection with this offering by selling more shares of common stock than are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock over-allotted by the Underwriter is not greater than the number of shares of our common stock that they may purchase in the over-allotment option. In a naked short position, the number of shares of our common stock involved is greater than the number of shares of common stock in the over-allotment option. To close out a short position, the Underwriter may elect to exercise all or part of the over-allotment option. The Underwriter may also elect to stabilize the price of our common stock or reduce any short position by bidding for, and purchasing, our common stock in the open market.
The Underwriter may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing a security in this offering because the Underwriter repurchases that security in stabilizing or short covering transactions.
Finally, the Underwriter may bid for, and purchase, shares of our common stock in market making transactions, including “passive” market making transactions as described below.
These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The Underwriter is not required to engage in these activities and may discontinue any of these activities at any time without notice.
In connection with this offering, the Underwriter and selling group members, if any, or their affiliates may engage in passive market making transactions in our common stock immediately prior to the commencement of sales in this offering, in accordance with Rule 103 of Regulation M under the Exchange Act. Rule 103 generally provides that:
| ● | a passive market maker may not effect transactions or display bids for our common stock in excess of the highest independent bid price by persons who are not passive market makers; | |
| ● | net purchases by a passive market maker on each day are generally limited to 30% of the passive market maker’s average daily trading volume in our common stock during a specified two-month prior period or 200 shares, whichever is greater, and must be discontinued when that limit is reached; and | |
| ● | passive market making bids must be identified as such. |
Electronic Distribution
A prospectus in electronic format may be made available on a website maintained by the Underwriter. The Underwriter may agree to allocate a number of shares of common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the Underwriter to underwriters that may make internet distributions on the same basis as other allocations. In connection with the offering, the Underwriter 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.
Other than the prospectus in electronic format, the information on the Underwriter’s website and any information contained in any other website maintained by the Underwriter is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or the Underwriter in its capacity as underwriter and should not be relied upon by investors.
Affiliations
The Underwriter and its affiliates may provide, from time to time, investment banking and financial advisory services to us in the ordinary course of business, for which they may receive customary fees and commissions.
Foreign Regulatory Restrictions on Purchase of our Shares
We have not taken any action to permit this initial public offering of shares of our common stock outside the United States or to permit the possession or distribution of this prospectus outside the United States. People outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to this offering of our shares of common stock and the distribution of this prospectus outside the United States.
Indemnification
We intend to agree to indemnify the Underwriter against liabilities relating to the offering arising under the Securities Act and the Exchange Act and to contribute to payments that the Underwriter may be required to make for these liabilities.
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Selling Restrictions
Other than in the United States, no action has been or will be taken by us or the Underwriter that would permit a public offering of our common stock offered by this prospectus in any jurisdiction where action for that purpose is required. The common stock 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 common stock 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.
Australia. No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to the offering.
This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons (referred to as Exempt Investors) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Canada. The securities may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45 106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31 103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33 105 Underwriting Conflicts (NI 33 105), the Underwriter is not required to comply with the disclosure requirements of NI 33 105 regarding underwriter conflicts of interest in connection with this offering.
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European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or a Relevant Member State, an offer to the public of any of the securities may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any of the securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
| ● | to any legal entity which is a qualified investor as defined in the Prospectus Directive, | |
| ● | to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer, or | |
| ● | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of the securities shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive. |
For the purposes of this provision, the expression an “offer to the public” in relation to any of the securities in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any of the securities to be offered so as to enable an investor to decide to purchase the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.
Israel. In the State of Israel, this prospectus shall not be regarded as an offer to the public to purchase securities under the Israeli Securities Law, 5728 - 1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728 - 1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions, or the Addressed Investors, or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728 - 1968, subject to certain conditions, or the Qualified Investors. The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. Our company has not and will not take any action that would require it to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728 - 1968. We have not and will not distribute this prospectus or make, distribute or direct an offer to subscribe for our securities to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728 - 1968. In particular, we may request, as a condition to be offered securities, that Qualified Investors will each represent, warrant and certify to us or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968, (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728 - 1968 regarding Qualified Investors is applicable to it, (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728 - 1968 and the regulations promulgated thereunder in connection with the offer to be issued securities, (iv) that the securities that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728 - 1968: (a) for its own account, (b) for investment purposes only, and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728 - 1968, and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.
Switzerland. The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX listing rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the securities, or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of the securities will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of the securities has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of the securities.
United Kingdom. The Underwriters have represented and agreed that:
| ● | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, or the FSMA) received by it in connection with the issue or sale of the securities in circumstances in which Section 21(1) of the FSMA does not apply to us; and | |
| ● | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the securities in, from or otherwise involving the United Kingdom. |
| 78 |
The validity of the shares of common stock covered by this prospectus will be passed upon for us by Sichenzia Ross Ference Carmel LLP, New York, New York. Certain legal matters relating to the offering will be passed upon for the Underwriter by Sullivan & Worcester LLP, New York, New York.
Our financial statements included herein for the years ended December 31, 2022 and December 31, 2023 have been audited by Rosenberg Rich Baker Berman, P.A., an independent registered public accounting firm, as stated in their report, which is incorporated herein by reference. Such financial statements have been so incorporated in reliance upon the report of such firm given upon their authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement, of which this prospectus is a part, on Form S-1 with the SEC relating to this offering. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and the exhibits filed with the registration statement of which this prospectus is a part. For further information pertaining to us and our common stock to be sold in this offering, you should refer to the registration statement of which this prospectus is a part and its exhibits. References in this prospectus to any of our contracts, agreements or other documents are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contracts, agreements or documents.
Upon consummation of this initial public offering, we will be required to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available at the SEC’s website of the SEC, www.sec.gov. Additionally, we will make these filings available, free of charge, on our website at www.callanjmb.com as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC. The information on our website, other than these filings, is not, and should not be, considered part of this prospectus and is not incorporated by reference into this document.
| 79 |
CALLAN JMB INC.
(Formerly Coldchain Technology Services, LLC)
FINANCIAL STATEMENTS AS OF AND FOR
THE YEARS ENDED
December 31, 2023 and 2022
| Page | |
| Audited Financial Statements of Callan JMB Inc. for the Years Ended December 31, 2023 and 2022 | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID #089 ) | F-2 |
| Balance Sheets as of December 31, 2023 and 2022 | F-3 |
| Statements of Operations for the Years Ended December 31, 2023 and 2022 | F-4 |
| Statements of Stockholders’ / Members Equity (Deficit) for the Years Ended December 31, 2023 and 2022 | F-5 |
| Statements of Cash Flows for the Years Ended December 31, 2023 and 2022 | F-6 |
| Notes to Financial Statements | F-7 |
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Members of Callan JMB Inc. (formerly Coldchain Technology Services, LLC)
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Callan JMB Inc. (formerly Coldchain Technology Services, LLC) (the “Company”) as of December 31, 2023 and 2022, and the related statements of income, members’ capital, and cash flows for each of the years then ended, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
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. 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/ Rosenberg Rich Baker Berman, P.A.
We have served as the Company’s auditor since 2024.
Somerset, New Jersey
August 2, 2024, except for the effects of the reverse stock split as discussed in Note 2 to the financial statements, to which the date is November 18, 2024.
| F-2 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
BALANCE SHEETS AS OF DECEMBER 31, 2023 and 2022
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 5,155,620 | $ | 6,193,719 | ||||
| Accounts receivable, net of allowance for credit losses of $378,695 and $101,695, respectively | 2,899,150 | 7,849,722 | ||||||
| Inventory | 114,739 | 79,445 | ||||||
| Related party loan | 21,969 | 16,632 | ||||||
| Other current assets | 235,987 | 229,533 | ||||||
| Deferred offering costs | 25,000 | - | ||||||
| Total current assets | 8,452,465 | 14,369,051 | ||||||
| Right of use asset | 275,208 | 290,870 | ||||||
| Property and equipment, net | 974,206 | 586,987 | ||||||
| Security deposit | 3,650 | 3,650 | ||||||
| Total assets | $ | 9,705,529 | $ | 15,250,558 | ||||
| Liabilities and Members’ Capital | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 416,084 | $ | 667,625 | ||||
| Corporate taxes payable | 67,000 | 110,000 | ||||||
| Related party loans | 17,073 | - | ||||||
| Deferred revenue | 12,113 | - | ||||||
| Deferred tax liability | 7,000 | 51,000 | ||||||
| Note payable | 98,809 | 110,291 | ||||||
| Right of use liability – current | 151,627 | 171,339 | ||||||
| Total current liabilities | 769,706 | 1,110,255 | ||||||
| Deferred revenue, net of current portion | 8,075 | |||||||
| Right of use liability | 132,488 | 129,255 | ||||||
| Total long-term liabilities | 140,563 | 129,255 | ||||||
| Total liabilities | 910,269 | 1,239,510 | ||||||
| Commitments and contingencies (Note 6) | - | - | ||||||
| Members’ capital | ||||||||
| Total Members’ capital | 8,795,260 | 14,011,048 | ||||||
| Total liabilities and members’ capital | $ | 9,705,529 | $ | 15,250,558 | ||||
The accompanying notes are an integral part of these financial statements.
| F-3 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022
| 2023 | 2022 | |||||||
| Revenue | $ | 13,202,459 | $ | 22,767,198 | ||||
| Cost of revenue | 7,553,338 | 13,315,551 | ||||||
| Gross profit | 5,649,121 | 9,451,647 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | 3,447,058 | 3,154,013 | ||||||
| Operating Income | 2,202,063 | 6,297,634 | ||||||
| Other income (expenses) | ||||||||
| Other income | - | 4,500 | ||||||
| Interest income | 10,176 | - | ||||||
| Interest expense | (8,131 | ) | (6,118 | ) | ||||
| Total other income (expenses) | 2,045 | (1,618 | ) | |||||
| Income before income taxes | 2,204,108 | 6,296,016 | ||||||
| Provision for state income taxes | 23,000 | 75,000 | ||||||
| Net income | $ | 2,181,108 | $ | 6,221,016 | ||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
STATEMENTS OF MEMBERS’ CAPITAL FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022
| MEMBERS’ CAPITAL | ||||
| January 1, 2022 | $ | 12,232,187 | ||
| Net income | 6,221,016 | |||
| Distributions | (4,442,155 | ) | ||
| December 31, 2022 | 14,011,048 | |||
| Net income | 2,181,108 | |||
| Distributions | (7,396,896 | ) | ||
| December 31, 2023 | $ | 8,795,260 | ||
The accompanying notes are an integral part of these financial statements.
| F-5 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022
| 2023 | 2022 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 2,181,108 | $ | 6,221,016 | ||||
| Adjustment to reconcile net income to net cash provided from operating activities: | ||||||||
| Provision for credit losses | 277,000 | 101,695 | ||||||
| Depreciation | 102,801 | 68,489 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 4,673,572 | 6,881,893 | ||||||
| Inventory | (35,294 | ) | 64,999 | |||||
| Other current assets | 115,630 | 93,354 | ||||||
| Right of use asset – net | (817 | ) | (644 | ) | ||||
| Accounts payable and accrued expenses | (251,542 | ) | (1,103,174 | ) | ||||
| Deferred revenue | 20,188 | (3,000,012 | ) | |||||
| Corporate taxes payable | (43,000 | ) | 71,000 | |||||
| Deferred income taxes payable | (44,000 | ) | (35,000 | ) | ||||
| Net cash provided by operating activities | 6,995,646 | 9,363,616 | ||||||
| Cash flows used in investing activities | ||||||||
| Purchase of property and equipment | (490,020 | ) | (422,491 | ) | ||||
| Net cash used in investing activities | (490,020 | ) | (422,491 | ) | ||||
| Cash flows used in financing activities | ||||||||
| Related party receivable | (5,337 | ) | 51,425 | |||||
| Related party loans | 17,073 | (71,612 | ) | |||||
| Deferred offering costs | (25,000 | ) | - | |||||
| Partner distributions | (7,396,896 | ) | (4,445,155 | ) | ||||
| Net change in note payable | (133,565 | ) | (101,519 | ) | ||||
| Net cash used in financing activities | (7,543,725 | ) | (4,566,861 | ) | ||||
| Increase (decrease) in cash | (1,038,099 | ) | 4,374,264 | |||||
| Cash beginning of year | 6,193,719 | 1,819,455 | ||||||
| Cash end of year | $ | 5,155,620 | $ | 6,193,719 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 8,131 | $ | 6,118 | ||||
| Supplemental Schedule of Non-Cash Financing and Investing Activities: | ||||||||
| Issuance of Note Payable for payment of prepaid expense | $ | 122,083 | $ | 136,432 | ||||
| Recognition of right of use asset and corresponding liability | $ | 195,155 | - | |||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
NOTE 1 – NATURE OF OPERATIONS
Callan JMB Inc. was formed on January 24, 2024, in the State of Nevada for the purpose of reorganizing and becoming a holding company for Coldchain Technology Services LLC. Coldchain Technology Services, LLC (“CTS”) was formed on December 27, 2006, in the state of Texas. CTS is our main operating subsidiary engaged in a vertically integrated logistics and fulfillment ecosystem that utilizes advanced predictive technology for the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time sensitive industries while ensuring environmental responsibility. The financial statements of Callan JMB Inc. (which may be referred to as the “Callan” “Company”, “we,” “us,” or “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in Spring Branch, Texas.
NOTE 2 – REORGANIZATION
Pursuant to the Reorganization Agreement dated February 14, 2024, each member of CTS exchanged 100% of their membership interest for shares of the Company’s common stock. As a result, each member of CTS became a shareholder of the Company and CTS became a direct, wholly owned subsidiary of the Company. During the reorganization, the CTS members exchanged all their interest for 5,000,000 shares of Common Stock on a pro-rata basis.
Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company, and all the existing stockholders of the Company, such stockholders have exchanged all their existing shares for new shares at a ratio of 0.6 new share for 1 existing share. As a result of the exchange, the total number of shares of Company stock outstanding was reduced from 5,000,000 shares to 3,000,000 shares.
The following unaudited pro forma financial information has been prepared to reflect the effects of the reorganization of Coldchain Technology Services LLC (the “Company”) from a partnership to a C corporation on February 14, 2024. The pro forma financial information presents the financial results of the Company as if it had been taxed as a C corporation for the years ended December 31, 2023 and 2022.
| Unaudited Pro forma C Corp with tax accrual | Unaudited Pro forma C Corp with tax accrual | |||||||||||||||
| Actual LLC | Actual LLC | |||||||||||||||
| 2023 | 2023 | 2022 | 2022 | |||||||||||||
| Total assets | $ | 9,705,529 | $ | 9,705,529 | $ | 15,250,558 | $ | 15,250,558 | ||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Corporate taxes payable | 67,000 | 638,000 | 110,000 | 1,581,000 | ||||||||||||
| Related party loans | 17,073 | 1,488,073 | - | - | ||||||||||||
| Total current liabilities | 769,706 | 2,811,706 | 1,110,255 | 2,581,255 | ||||||||||||
| Total liabilities | 910,269 | 2,952,269 | 1,239,510 | 2,710,510 | ||||||||||||
| Total Retained Earnings/ Members’ Capital | 8,795,260 | 6,753,260 | 14,011,048 | 12,540,048 | ||||||||||||
| Total liabilities and stockholders’ equity/ members’ capital | $ | 9,705,529 | $ | 9,705,529 | $ | 15,250,558 | $ | 15,250,558 | ||||||||
Assumptions for each of the pro-forma balance sheets are below:
| a. | The Company was a C corporation as of January 1, 2022 |
| b. | The pro forma balance sheets include an accrual for federal tax and state corporate taxes at a “blended rate” of 23% and was paid in the subsequent fiscal year. |
| c. | Stockholders/Members loan the Company $1,471,000 to pay the assumed taxes, the loan will bear interest at the prime rate of interest. |
| d. | The pro forma adjustments do not include adjustments for deferred tax assets or liabilities due to the immateriality of the temporary differences at the date of the reorganization and are expected to reverse in the near term with minimal impact on the financial statements |
| F-7 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
| Unaudited Pro forma C Corp with tax accrual | Unaudited Pro forma C Corp with tax accrual | |||||||||||||||
| Actual LLC | Actual LLC | |||||||||||||||
| 2023 | 2023 | 2022 | 2022 | |||||||||||||
| Income before income taxes | 2,204,108 | 2,204,108 | 6,296,016 | 6,296,016 | ||||||||||||
| Provision for income taxes | 23,000 | 594,000 | 75,000 | 1,546,000 | ||||||||||||
| Net income | $ | 2,181,108 | $ | 1,610,108 | $ | 6,221,016 | $ | 4,750,016 | ||||||||
| Basic and diluted income per common share | $ | 0.54 | $ | 1.58 | ||||||||||||
| Weighted-average number of common shares outstanding | 3,000,000 | 3,000,000 | ||||||||||||||
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
The financial statements and related disclosures have been prepared in conformity with GAAP.
Use of Estimates
The preparation of financial statements in conformity with GAAP, requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management bases its estimates on historical experience and other assumptions that it believes to be reasonable at the time. Actual results could differ from those estimates, and any such differences may be material to the financial statements. Significant estimates are contained in the accompanying financial statements for the useful lives for depreciation and amortization of long-lived assets, allowance for credit losses, and the incremental borrowing rate used on right-of-use asset.
Cash and Cash Equivalent
Cash consists primarily of cash on deposit and money market accounts. The Company’s cash and cash equivalents are held at major financial institutions. There is a concentration of credit risk related to certain account balances in excess of the Federal Deposit Insurance Corporation limit of $250,000 per financial institution. The Company regularly monitors the financial stability of these financial institutions and believes there is no exposure to any significant credit risk for its cash and cash equivalents and restricted cash and restricted cash equivalents. At December 31, 2023 and 2022, the Company’s balances exceeded federally insured limits by approximately $4,850,000 and $5,872,000, respectively.
Accounts Receivable
Accounts receivables are recorded at the invoiced amount. which is the amount the Company expects to collect from its customers. Generally, payment is due from customers within 30- 90 days of the invoice date. On a regular basis, the Company evaluates its accounts receivable and establishes the allowance for credit losses based on an evaluation of certain criteria and evidence of collection uncertainty including historical collection trends, reasonable expectations of future collections, current economic trends and changes in customer payment patterns. Past-due receivable balances are written off when the Company’s collection efforts have been deemed unsuccessful in collecting the outstanding balance due. The Company maintains an allowance for credit losses to reserve for potential uncollectible receivables. The allowance for credit losses as of December 31, 2023, and 2022 was $378,695 and $101,695, respectively.
| F-8 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
Credit Concentration
The concentration of credit risks in accounts receivable is due to several large customers comprising the Company’s customer base throughout North America. The Company maintains policies over credit extension that include credit evaluations, credit limits and collection monitoring procedures on a customer-by-customer basis. However, the Company generally does not require collateral before services are performed.
The Company has several customers as of December 31, 2023 and 2022 that make up in excess of 10% of revenue as follows:
| Customer | 2023 | 2022 | ||||||||
| 1 | 28% | 20% | ||||||||
| 2 | 22% | 46% | ||||||||
| 3 | 15% | - | ||||||||
The Company has several customers as of December 31, 2023 and 2022 that make up in excess of 10% of accounts receivable as follows:
| Customer | 2023 | 2022 | ||||||||
| 1 | 0% | 56% | ||||||||
| 2 | 46% | 0% | ||||||||
| 3 | 11% | 0% | ||||||||
The Company has several vendors as of December 31, 2023 and 2022 that make up in excess of 10% of accounts payable as follows:
| Vendor | 2023 | 2022 | ||||||||
| 1 | 33% | 13% | ||||||||
| 2 | 0% | 34% | ||||||||
| 3 | 23% | 0% | ||||||||
The Company has several vendors as of December 31, 2023 and 2022 that make up more than 10% of services rendered to us as follows:
| Vendor | 2023 | 2022 | ||||||||
| 1 | 22% | 19% | ||||||||
| 2 | 10% | 0% | ||||||||
| 3 | 0% | 14% | ||||||||
| 4 | 0% | 10% | ||||||||
Inventory
Inventory is stated at the lower of cost (using the first-in, first-out method (“FIFO”)) or net realizable value. We continually analyze our slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we determined that establishing a reserve was not necessary at this time. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. The company’s inventory is comprised of raw materials for a customer’s packaging needs as follows:
| 2023 | 2022 | |||||||
| Raw materials | $ | 114,739 | $ | 79,445 | ||||
Property and Equipment
Property and equipment, net is stated at cost less accumulated depreciation. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred. During the construction and development period of an asset, the costs incurred, including interest expense, are classified as construction-in-progress. When the asset is ready for its intended use, the asset is reclassified to an appropriate asset classification and depreciation, or amortization commences.
| F-9 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
The Company depreciates and amortizes the capitalized cost of these assets, using the straight-line method as follows:
Asset Classification
Computer equipment 3-5 years
Furniture and fixtures 5-8 years
Leasehold Improvements 15 years
Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation until they are removed from service.
The Company tests for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment in the carrying value of long-lived assets is recognized if the expected future undiscounted cash flows derived from the assets, or group of assets, are less than their carrying value. The Company did not record any impairment charges related to long-lived assets in the periods presented.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Most of the Company’s revenues are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. Product revenues are recognized when the products are delivered and control transfers to the customer. The Company’s payment terms vary by the type of customers and the products or services offered. The periods between invoicing and when payments are due are not significant. Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in costs of revenues.
Disaggregation of Revenue
The following table present our disaggregated revenues by distribution channel:
| Sales | 2023 | 2022 | ||||||
| Emergency preparedness | $ | 7,492,175 | $ | 16,078,407 | ||||
| Specialty Packaging | 5,710,284 | 6,688,791 | ||||||
| Total | $ | 13,202,459 | $ | 22,767,198 | ||||
Emergency preparedness
Provides comprehensive services to mainly state and local governments, which includes managing their building sites, medical stockpiles of equipment, supplies and responding to state or local emergencies. We also provide Quality Control/Assurance to safeguard vaccines, medical supplies and equipment. Revenue is recognized when services are rendered, or medical supplies are shipped.
Perishable (non-pharma) Client Packaging.
Our specialty temperature-regulating packaging solutions provide a better thermal system to maintain and protect products and ensure peak customer experience. In utilizing this packaging, customers yield the benefits of lower costs and overhead while improving process, agility, velocity, accuracy, and repeatability of complex fulfillment networks. Revenue is recorded when products are delivered or services is rendered. The Company has a contract with a customer for cloud-based temperature monitoring software. The customer paid their contract in advance and therefore revenue is earned monthly over the term of the contract.
| F-10 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
Shipping and Handling Charges
The Company reports shipping and handling fees charged to customers as part of net sales and the associated expense as part of cost of sales. Shipping charges amounted to $1,044,749 and $2,555,635 for the years ended December 31, 2023 and 2022, respectively.
Advertising Expense
Advertising costs primarily consist of trade shows and other promotional expenses. Advertising costs are expensed as incurred. Advertising expense for the years ended December 31, 2023 and 2022 was $35,609 and $29,055, respectively,
Deferred Offering Costs
Deferred offering costs consist of investment banking fees incurred through the balance sheet date that are directly related to the IPO and that will be charged to Member’ Capital upon the completion of the IPO. As of December 31, 2023, the Company had deferred offering costs of $25,000.
Deferred Revenue
Deferred revenue represents customer billings for services that are not yet rendered and is primarily related to a customer invoice billed before service was rendered and for billings of annual or multi-year service contracts. As of December 31, 2023, and 2022, the Company has deferred revenue of $20,188 and $0, which will be recognized over one to two years. All deferred revenue was classified as current in 2023 and 2022. Revenue recognized under deferred billings and deferred contracts was $0 and $3,000,012 for the years ended December 31, 2023 and 2022, respectively.
Cost of Revenues
Our cost of revenue primarily includes the amounts paid to outside service providers, monitoring, direct and indirect labor, warehouse rent and other related expenses.
Income Tax
Prior to the reorganization as described in Note 1, the Company’ historical operations were contained within a limited liability company. Accordingly, under the Internal Revenue Code, all taxable income or loss flowed through to its members. Therefore, no provision for federal income tax had been recorded in the accompanying financial statements for 2022 and 2023. Income from the Company was reported and taxed to the members on their individual tax returns. However, the Company has provided a provision for taxes in certain states that require an entity level tax.
Leases
The Company’s leases predominately relate to real estate, equipment, such as vehicles and industrial equipment utilized in operations. Contracts are reviewed at inception to determine if the arrangement is a lease and, if so, whether it is an operating or finance lease. The Company generally enters into long-term real estate leases with one to ten-year terms. In the normal course of business, the Company also enters into short-term leases having terms of one year or less. These leases are generally equipment leases entered into for short periods of time (e.g., daily, weekly, or monthly) to satisfy immediate and/or short-term operational needs of the business which can arise based upon the nature of particular services performed. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for these short-term leases. Operating and finance leases with terms exceeding one year are recognized as ROU assets and lease liabilities and measured at commencement date based on the present value of the future lease payments over the lease term. Certain of the Company’s real estate leases contain escalating future lease payments. Escalating lease payments that are based upon explicit amounts contained in the lease or an index (e.g., consumer price index) are included in the Company’s determination of future lease payments to determine the ROU asset and lease liability recognized at the commencement date. Any differences in the future lease payments from initial recognition are not anticipated to be material and will be recorded as variable lease cost in the period incurred. The variable lease cost will also include the Company’s portion of property tax, utilities, and common area maintenance. A significant portion of the Company’s real estate lease agreements include renewal periods at the Company’s option. The Company includes these renewal periods in the lease term only when renewal is reasonably certain based upon facts and circumstances specific to the lease and known by the Company. The Company uses its incremental borrowing rate available at the lease commencement date in determining the present value of future lease payments as the implicit rate is typically not readily determinable. For operating leases, lease cost is recognized on a straight-line basis over the lease term and is included in cost of revenues or selling, general and administrative expenses depending on the use of the asset. For finance leases, ROU assets are amortized on a straight-line basis and interest expense is recognized based on the incremental borrowing rate. Finance lease amortization is recognized in depreciation and amortization and finance lease related interest expense is recognized in interest expense, net of interest income. As of December 31, 2023 and 2022 did not have any leases that were classified as finance leases.
Segment Reporting
Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief Executive Officer to make decisions with respect to resource allocation and assessment of performance. To date, the Company has viewed its operations and manages its business as one operating segment.
| F-11 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
Recent Accounting Pronouncements
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 is intended to enhance the decision usefulness of income tax disclosures and requires the disclosure of various disaggregated information, including an entity’s effective tax rate reconciliation as well as additional information on taxes paid. This ASU is effective on a prospective basis for annual periods beginning after December 15, 2024 with early adoption allowed. The Company is in the process of evaluating the effect of ASU 2023-09 on the financial statements.
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our consolidated financial statements.
Recently adopted accounting pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and require a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company adopted this pronouncement as of January 1, 2023.
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Machinery, Leasehold improvements and other equipment | $ | 1,440,438 | $ | 949,198 | ||||
| Less: Accumulated depreciation | (466,232 | ) | (362,211 | ) | ||||
| Equipment, net | $ | 974,206 | $ | 586,987 | ||||
Depreciation expenses was $102,801 and $68,489 for the years ended December 31, 2023, and 2022, respectively.
NOTE 5 – DEBT
The Company’s debt is comprised of the following:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Finance Agreement - insurance premiums | $ | 98,809 | $ | 110,291 | ||||
During the normal course of business, the Company enters into short-term finance agreements for their insurance premiums. The agreements bear interest at 14.3% to 12.8% to per annum for year ending December 31, 2023 and 2022, respectively. Interest expense incurred for the year ended December 31, 2023 and 2022 are $8,131 and $6,118, respectively.
| F-12 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
NOTE 6 – COMMITMENTS AND CONTINGENCIES
The Company has various warehouse leases with its landlord that expire between 2024 and 2026. The Company’s right-of-use assets and lease liabilities primarily represent lease payments that are fixed at the commencement of a lease and variable lease payments that are dependent on an index or rate. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, including periods in which termination options are reasonably certain of not being exercised and periods in which renewal options are reasonably certain of being exercised. The discount rate is determined using the Company’s estimated incremental borrowing rate coinciding with the lease term at the commencement of a lease. The estimated incremental borrowing rate for the Company was determined to be 3.0%-8.50%.
Lease – related assets and liabilities recorded on the Balance Sheets are as follows:
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Right of use asset – long term | $ | 275,208 | $ | 290,870 | ||||
| Total right of use asset | $ | 275,208 | $ | 290,870 | ||||
| Liabilities | ||||||||
| Right of use liability – current | $ | 151,627 | $ | 171,339 | ||||
| Right of use liability – long-term | 132,488 | 129,255 | ||||||
| Total lease liabilities | $ | 284,115 | $ | 300,594 | ||||
As of December 31, 2023, maturities of lease liabilities were as follows:
| Maturities | ||||
| 2024 | $ | 162,167 | ||
| 2025 | 133,350 | |||
| 2026 | 2,500 | |||
| Total | 298,017 | |||
| Less imputed interest | 13,902 | |||
| Total lease liabilities | $ | 284,115 |
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business.
During May 2024, the Company was sent a demand letter alleging that the company breached the terms of a Customer Service Agreement with one of its vendors that it did business within a prior year. The vendor alleges that the Company improperly terminated the agreement without proper notice and therefore owes it $507,573. The Company responded to the vendor’s demand letter and asserts that it only owes the vendor the sum of $85,000 which is included in its accounts payable as of December 31, 2023.
Management is not aware of any other pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
| F-13 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
NOTE 7 – RELATED PARTY TRANSACTIONS
Business Partner
Health Hero America, who is a related party by virtue of common ownership of the Company. In 2022, the Company received an advance of $110,736, from Health Hero America. The advance was due on demand, non-interest bearing, and classified within related party payables in the balance sheet. As of December 31, 2023, and 2022, the amount owed to the related party was $0.
Outlaw Run Ranch (“ORR”) who is a related party by virtue of common ownership of the Company. In 2023, the Company receives rents receipts from a third-party vendor on behalf of related party, Outlaw Run Ranch. The cash is due to ORR on demand, non-interest bearing, and classified within related party loans in the balance sheet. In addition, the Company pays $7,500 per month to ORR for rent expense. As of December 31, 2023, and 2022, the Company has $17,134 and $0, respectively in accounts payable for these amounts due.
Warehouse Asset Management, who is a related party by virtue of common ownership. The Company’s leases its headquarters, warehouse, other warehouse equipment and a box truck for $6,700 per month. As of December 31, 2023, and 2022, the Company has $0 owed to this related party.
During the year ended December 31, 2023 and 2022, the Company made advancements of $21,969 and $16,632 respectively, to the director of the Company. The advances are due on demand, non-interest bearing, and classified within the balance sheet as a current asset. As of December 31, 2023 and 2022, the amount owed from the director was $21,969 and $16,631, respectively.
NOTE 8 – INCOME TAXES
The provision for state income taxes for the years ended is as follows:
| 2023 | 2022 | |||||||
| Current – State | $ | 67,000 | $ | 110,000 | ||||
| Deferred – State | (44,000 | ) | (35,000 | ) | ||||
| Total provision for income taxes | $ | 23,000 | $ | 75,000 | ||||
The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities is a result of the following at December 31:
| Deferred tax assets (liabilities) | 2023 | 2022 | ||||||
| Allowance for credit losses | $ | 1,008 | $ | 233 | ||||
| Depreciation | - | (147 | ) | |||||
| Right of use assets - net | (146 | ) | 7 | |||||
| Accounts receivable | 17,025 | 15,740 | ||||||
| Inventory | (128 | ) | 148 | |||||
| Other current assets | (95 | ) | (51 | ) | ||||
| Accounts Payable and accrued expenses | (829 | ) | (2,472 | ) | ||||
| Deferred income | 44 | (6,861 | ) | |||||
| Cash to accrual tax return differences | 27,121 | 28,403 | ||||||
| Deferred tax assets (liabilities) net | 44,000 | 35,000 | ||||||
| Deferred tax liability -beginning | 51,000 | 86,000 | ||||||
| Deferred tax liability -end | $ | 7,000 | $ | 51,000 | ||||
| F-14 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2023 and 2022
Reconciliation between the effective tax rate on income from continuing operations and the statutory rate for the year ending December 31, 2023 and 2022, is as follows:
| 2023 | 2022 | |||||||||||||||
| Tax | Percentage | Tax | Percentage | |||||||||||||
| Book income before taxes | $ | - | 21 | % | $ | - | 21 | % | ||||||||
| Pass- through entity effect | (21 | )% | (21 | )% | ||||||||||||
| Permanent tax basis differences (guaranteed payments and penalties) | 1,000 | 0 | % | |||||||||||||
| States taxes | 22,000 | 1.0 | % | 75,000 | 1.1 | % | ||||||||||
| Total | $ | 23,000 | $ | 75,000 | ||||||||||||
| Effective tax rate | 1.0 | % | 1.1 | % | ||||||||||||
The Company will file tax returns in the United States and various states in which nexus is achieved. The Company is subject to U.S. federal and state tax examinations by tax authorities for years 2020 through present. As of December 31, 2023 and 2022, the Company has not recorded a liability for unrecognized tax benefits, interest, or penalties related to federal and state income tax matters and there are currently no pending tax examinations. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense.
NOTE 9 – SUBSEQUENT EVENTS
Callan JMB Inc. was formed on January 24, 2024, in the State of Nevada for the purpose of reorganizing and becoming a holding company for Coldchain Technology Services, LLC a Texas limited liability company (“CTS”). In February 2024, CTS became a direct, wholly owned subsidiary of the Company as a result of the closing of the Reorganization Agreement and Plan of Share Exchange dated February 14, 2024 (the “Reorganization Agreement”). Pursuant to the Reorganization Agreement, each member of CTS exchanged 100% of their membership interest for shares of the Company’s common stock. As a result, each member of CTS became a shareholder of the Company and CTS became a direct, wholly owned subsidiary of the Company. During the reorganization, the CTS members exchanged all their interest for 5,000,000 shares of Common Stock on a pro-rata basis.
Prior to the reorganization, profits and losses were allocated pro-rata to members of CTS as agreed upon by the members.
Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company and all of the existing stockholders of the Company, such stockholders have exchanged all their existing shares of Company common stock for new shares at a ratio of 0.6 new share for each 1 existing share. As a result of the exchange, the total number of shares of Company common stock outstanding was reduced from 5,000,000 shares to 3,000,000 shares.
The Company has evaluated subsequent events that occurred after December 31, 2023, through August 2, 2024, except for the effects of the reverse stock split as discussed in Note 2 to the financial statements, to which the date is November 18, 2024, the issuance date of these financial statements. There have been no other events or transactions during this time which would have a material effect on these consolidated financial statements.
| F-15 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
| Unaudited Financial Statements of Callan JMB Inc. for the Nine Months Ended September 30, 2024 and 2023 | |
| Balance Sheets as of September 30, 2024 and December 31, 2023 | F-17 |
| Statements of Operations for the Nine Months Ended September 30, 2024 and 2023 | F-18 |
| Statements of Stockholders’ Equity (Deficit) for the Nine Months Ended September 30, 2024 and 2023 | F-19 |
| Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 | F-20 |
| Notes to Financial Statements | F-21 |
| F-16 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
CONDENSED CONSOLIDATED BALANCE SHEETS as of
SEPTEMBER 30, 2024 (Unaudited) AND DECEMBER 31, 2023
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 2,809,303 | $ | 5,155,620 | ||||
| Accounts receivable, net of allowance for credit losses of $114,000 and $378,695, respectively | 1,258,426 | 2,899,150 | ||||||
| Inventory | 107,653 | 114,739 | ||||||
| Related party loan | 21,969 | 21,969 | ||||||
| Other current assets | 193,850 | 235,987 | ||||||
| Deferred offering costs | 107,675 | 25,000 | ||||||
| Total current assets | 4,498,876 | 8,452,465 | ||||||
| Right of use asset | 966,320 | 275,208 | ||||||
| Property and equipment, net | 912,314 | 974,206 | ||||||
| Security deposit | 3,650 | 3,650 | ||||||
| Total assets | $ | 6,381,160 | $ | 9,705,529 | ||||
| Liabilities and Stockholders’ Equity / Members’ Capital | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 889,437 | $ | 416,084 | ||||
| Corporate taxes payable | 57,454 | 67,000 | ||||||
| Related party loans | 17,134 | 17,073 | ||||||
| Deferred revenue | 11,103 | 12,113 | ||||||
| Deferred tax liability | 7,000 | 7,000 | ||||||
| Note payable | - | 98,809 | ||||||
| Right of use liability – current | 297,799 | 151,627 | ||||||
| Total current liabilities | 1,279,927 | 769,706 | ||||||
| Deferred revenue, net of current portion | - | 8,075 | ||||||
| Right of use liability | 686,822 | 132,488 | ||||||
| Total long-term liabilities | 686,822 | 140,563 | ||||||
| Total liabilities | 1,966,749 | 910,269 | ||||||
| Commitments and contingencies (Note 4) | - | - | ||||||
| Stockholders’ Equity/ Members’ Capital | ||||||||
| Members’ capital | 8,795,260 | |||||||
| Preferred stock - authorized 10,000,000 shares, $0.001 par value; zero issued and outstanding as of September 30, 2024 and December 31, 2023 | - | - | ||||||
| Common stock - authorized 190,000,000 shares, par value $0.001 par value; 3.000,000 issued and outstanding as of September 30, 2024 and 0, December 31, 2023. | 3,000 | - | ||||||
| Additional Paid in Capital | 5,410,007 | - | ||||||
| Retained earnings (deficit) | (998,596 | ) | - | |||||
| Total Stockholders’ Equity/Members’ Capital | 4,414,411 | 8,795,260 | ||||||
| Total liabilities and equity/members’ capital | $ | 6,381,160 | $ | 9,705,529 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-17 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 and 2023 (Unaudited)
| For the Nine Months Ended | ||||||||
| 2024 | 2023 | |||||||
| Revenue | $ | 5,211,665 | $ | 11,529,341 | ||||
| Cost of revenue | 3,067,421 | 6,293,520 | ||||||
| Gross profit | 2,144,244 | 5,235,821 | ||||||
| Operating expenses | ||||||||
| Selling, general and administrative expenses | 3,146,109 | 2,295,897 | ||||||
| Operating Income (loss) | (1,001,865 | ) | 2,939,924 | |||||
| Other income (expenses) | ||||||||
| Interest income | 8,641 | 4,809 | ||||||
| Interest expense | (5,372 | ) | (5,359 | ) | ||||
| Total other income (expenses) | 3,269 | (550 | ) | |||||
| Income (loss) before income taxes | (998,596 | ) | 2,939,374 | |||||
| Provision for income taxes | - | 23,000 | ||||||
| Net income (loss) | $ | (998,596 | ) | $ | 2,916,374 | |||
| Weighted average common shares outstanding - basic and diluted | 2,505,495 | - | ||||||
| Net loss per common share - basic and diluted | $ | (0.40 | ) | $ | - | |||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-18 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY/ MEMBERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (Unaudited)
| Total | ||||||||||||||||||||||||||||||||
| Stockholders’ | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Members’ | Additional Paid in | Retained Earnings | Equity/ Members’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Capital | (Deficit) | Capital | |||||||||||||||||||||||||
| January 1, 2024 | $ | - | $ | - | $ | 8,795,260 | $ | - | $ | - | $ | 8,795,260 | ||||||||||||||||||||
| Net loss | ` | (998,596 | ) | (998,596 | ) | |||||||||||||||||||||||||||
| Distributions | (3,382,253 | ) | (3,382,253 | ) | ||||||||||||||||||||||||||||
| Membership exchanged for common stock | 3,000,000 | 3,000 | (5,413,007 | ) | 5,410,007 | - | ||||||||||||||||||||||||||
| September 30, 2024 | $ | - | 3,000,000 | $ | 3,000 | $ | - | $ | 5,410,007 | $ | (998,596 | ) | $ | 4,414,411 | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF MEMBERS’ CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 (Unaudited)
| Total | ||||||||||||||||||||||||
| Preferred Stock | Common Stock | Members’ | Members’ | |||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Capital | |||||||||||||||||||
| January 1, 2023 | $ | - | $ | - | $ | 14,011,048 | $ | 14,011,048 | ||||||||||||||||
| Net income | ` | 2,916,373 | 2,916,373 | |||||||||||||||||||||
| Distributions | (6,374,896 | ) | (6,374,896 | ) | ||||||||||||||||||||
| September 30, 2023 | $ | - | $ | - | $ | 10,552,525 | $ | 10,552,525 | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-19 |
Callan JMB Inc.
(Formerly Coldchain Technology Services, LLC)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (Unaudited)
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | (998,596 | ) | $ | 2,916,373 | |||
| Adjustment to reconcile net income to net cash provided from operating activities: | ||||||||
| Reduction in allowance for credit losses by release of reserve for credit losses | (163,000 | ) | - | |||||
| Depreciation and amortization | 108,059 | 70,127 | ||||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | 1,803,724 | 4,144,878 | ||||||
| Inventory | 7,086 | (121,385 | ) | |||||
| Other current assets | 42,137 | 84,930 | ||||||
| Right of use asset – net | 9,394 | 126,448 | ||||||
| Accounts payable and accrued expenses | 473,353 | (115,775 | ) | |||||
| Deferred revenue | (9,085 | ) | 23,216 | |||||
| Corporate taxes payable | (9,546 | ) | (87,000 | ) | ||||
| Net cash provided by operating activities | 1,263,526 | 7,041,812 | ||||||
| Cash flows used in investing activities | ||||||||
| Purchase of property and equipment | (46,167 | ) | (363,743 | ) | ||||
| Net cash used in investing activities | (46,167 | ) | (363,743 | ) | ||||
| Cash flows used in financing activities | ||||||||
| Related party receivable | - | (4,161 | ) | |||||
| Related party loans | 61 | 34,102 | ||||||
| Deferred offering costs | (82,675 | ) | - | |||||
| Partner distributions | (3,382,253 | ) | (6,374,896 | ) | ||||
| Decrease in note payable | (98,809 | ) | (110,291 | ) | ||||
| Net cash used in financing activities | (3,563,676 | ) | (6,455,246 | ) | ||||
| Net decrease in cash | (2,346,317 | ) | 222,823 | |||||
| Cash beginning of period | 5,155,620 | 6,193,719 | ||||||
| Cash end of period | $ | 2,809,303 | $ | 6,416,542 | ||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | 5,372 | $ | 5,359 | ||||
| Supplemental Schedule of Non-Cash Financing and Investing Activities: | ||||||||
Reduction in allowance for credit losses | $ | 163,000 | $ | - | ||||
| Recognition of right of use asset and corresponding liability | $ | 900,127 | $ | 85,070 | ||||
| Membership exchange for common stock | $ | 5,410,007 | - | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-20 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Callan JMB Inc. was formed on January 24, 2024, in the State of Nevada for the purpose of reorganizing and becoming a holding company for Coldchain Technology Services, LLC. Coldchain Technology Services, LLC (“CTS”) was formed on December 27, 2006, in the state of Texas. Coldchain Technology Services, LLC is our main operating subsidiary engaged in a vertically integrated logistics and fulfillment ecosystem that utilizes advanced predictive technology for the supply chain by guaranteeing the safety, effectiveness, and potency of every product handled to ensure product integrity, and to provide immediate response in time sensitive industries while ensuring environmental responsibility. The financial statements of Callan JMB Inc. (which may be referred to as the “Callan” “Company”, “we,” “us,” or “our”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s headquarters are located in Spring Branch, Texas.
NOTE 2 – REORGANIZATION
Pursuant to the Reorganization Agreement, each member of CTS exchanged 100% of their membership interest for shares of the Company’s common stock. As a result, each member of CTS became a shareholder of the Company and CTS became a direct, wholly owned subsidiary of the Company. During the reorganization, the CTS members exchanged all their interest for 5,000,000 shares of Common Stock on a pro-rata basis.
Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company and all of the existing stockholders of the Company, such stockholders have exchanged all their existing shares for new shares at a ratio of 0.6 new share for 1 existing share. As a result of the exchange, the total number of shares of Company stock outstanding was reduced from 5,000,000 shares to 3,000,000 shares.
The following unaudited pro forma financial information has been prepared to reflect the effects of the reorganization of Coldchain Technology Services LLC (the “Company”) from a partnership to a C corporation on February 14, 2024. The pro forma financial information presents the financial results of the Company as if it had been taxed as a C corporation for the nine months ended September 30, 2024 and 2023.
Callan JMB Inc.
(Formerly known as Coldchain Technology Services, LLC)
Balance Sheets
| Unaudited Actual | Unaudited Pro-forma with tax accrual | |||||||
| September 30, 2024 | September 30, 2024 | |||||||
| Assets | ||||||||
| Total assets | $ | 6,381,160 | $ | 6,381,160 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Corporate taxes payable | 57,454 | 57,454 | ||||||
| Related party loans | 17,134 | 2,059,134 | ||||||
| Total current liabilities | 74,588 | 2,116,588 | ||||||
| Total long term liabilities | 686,822 | 686,822 | ||||||
| Total liabilities | 1,966,749 | 4,008,749 | ||||||
| Stockholders’ Equity | ||||||||
| Common stock | 3,000 | 3,000 | ||||||
| Additional paid in capital | 5,410,007 | 5,410,007 | ||||||
| Retained earnings (deficit) | (998,596 | ) | (3,040,596 | ) | ||||
| Total Stockholders’ Equity | 4,414,411 | 2,372,411 | ||||||
| Total Liabilities and Stockholders’ Equity | $ | 6,381,160 | $ | 6,381,160 | ||||
| F-21 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Assumptions for each of the pro-forma balance sheets are below:
a. The Company was a C Corporation as of January 1, 2022.
b. The pro forma balance sheets include an accrual for federal tax and state corporate taxes at a “blended rate” of 23% and was paid in the subsequent fiscal year.
c. Stockholders/loan the Company $2,042,000 to pay the assumed taxes, the loan will bear interest at the prime rate of interest.
d. The pro forma adjustments do not include adjustments for deferred tax assets or liabilities due to the immateriality of the temporary differences at the date of the reorganization and are expected to reverse in the near term with minimal impact on the financial statements.
e. No other financial data is being shown as there is no impact to the conversion to a C-Corp.
Pro forma income statements showing the pro-forma income taxes, net earnings and earnings per share for the nine months ended September 30, 2024 and 2023 are produced below. This information is unaudited.
| Unaudited Actual | Unaudited Pro-forma with tax accrual | Unaudited Actual | Unaudited Pro-forma with tax accrual | |||||||||||||
| September 30, 2024 | September 30, 2024 | September 30, 2023 | September 30, 2023 | |||||||||||||
| Revenue | $ | 5,211,665 | $ | 5,211,663 | $ | 11,529,341 | $ | 11,529,341 | ||||||||
| Operating income (loss) | (998,596 | ) | (998,596 | ) | 2,939,374 | 2,939,374 | ||||||||||
| Provision for income taxes | - | - | 23,000 | 656,000 | ||||||||||||
| Net income (loss) | $ | (998,596 | ) | $ | (998,596 | ) | $ | 2,916,374 | $ | 2,283,374 | ||||||
| Basic and diluted income per common share | $ | (0.40 | ) | $ | (0.33 | ) | $ | - | $ | 0.76 | ||||||
| Weighted-average number of common shares outstanding | 2,505,495 | 3,000,000 | 3,000,000 | |||||||||||||
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X.
Principles of Consolidation
The financial statements included herein comprise the consolidated results of the Company and its wholly owned subsidiary CTS and all intercompany transactions and balances have been eliminated.
| F-22 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Unaudited Interim Financial Information
The unaudited interim financial statements and related notes have been prepared in accordance with GAAP for interim financial information, within the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Certain information and disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results for the interim periods presented and of the financial condition as of the date of the interim balance sheet. The financial data and the other information disclosed in these notes to the interim financial statements related to the six-month periods are unaudited. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These unaudited interim financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2023, and notes thereto that are included in the Company’s Registration Statement.
Use of Estimates
The preparation of financial statements in conformity with GAAP, requires management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management bases its estimates on historical experience and other assumptions that it believes to be reasonable at the time. Actual results could differ from those estimates, and any such differences may be material to the financial statements. Significant estimates are contained in the accompanying financial statements for the useful lives for depreciation and amortization of long-lived assets, allowance for credit losses, and the incremental borrowing rate used on right-of-use asset.
Cash and Cash Equivalents
Cash consists primarily of cash on deposit and money market accounts. The Company’s cash and cash equivalents are held at major financial institutions. There is a concentration of credit risk related to certain account balances in excess of the Federal Deposit Insurance Corporation limit of $250,000 per financial institution. The Company regularly monitors the financial stability of these financial institutions and believes there is no exposure to any significant credit risk for its cash and cash equivalents and restricted cash and restricted cash equivalents.
Accounts Receivable
Accounts receivables are recorded at the invoiced amount, which is the amount the Company expects to collect from its customers. Generally, payment is due from customers within 30- 90 days of the invoice date. On a regular basis, the Company evaluates its accounts receivable and establishes the allowance for credit losses based on an evaluation of certain criteria and evidence of collection uncertainty including historical collection trends, reasonable expectations of future collections, current economic trends and changes in customer payment patterns. Past-due receivable balances are written off when the Company’s collection efforts have been deemed unsuccessful in collecting the outstanding balance due. During the nine months ended September 30, 2024, the Company evaluated its allowance for credit losses and released $163,000 of that income, as a result of collections on accounts that were previously reserved.
Credit Concentration
The concentration of credit risks in accounts receivable is due to several large customers comprising the Company’s customer base throughout North America. The Company maintains policies over credit extension that include credit evaluations, credit limits and collection monitoring procedures on a customer-by-customer basis. However, the Company generally does not require collateral before services are performed.
| F-23 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company has several customers for the nine months ended September 30, 2024, and 2023 that make up in excess of 10% of revenue as follows:
| Customer | 2024 | 2023 | ||||||
| 1 | 48 | % | 0 | % | ||||
| 2 | 0 | % | 14 | % | ||||
| 3 | 20 | % | 13 | % | ||||
| 4 | 0 | % | 38 | % | ||||
| 5 | 13 | % | 0 | % | ||||
| 6 | 0 | % | 12 | % | ||||
The Company has several customers as of September 30, 2024, and December 31, 2023, that make up in excess of 10% of accounts receivable as follows:
| Customer | 2024 | 2023 | ||||||
| 1 | 0 | % | 46 | % | ||||
| 2 | 0 | % | 11 | % | ||||
| 3 | 23 | % | 0 | % | ||||
| 4 | 16 | % | 0 | % | ||||
| 5 | 11 | % | 0 | % | ||||
| 6 | 15 | % | 0 | % | ||||
The Company has several vendors as of September 30, 2024, and December 31, 2023, that make up in excess of 10% of accounts payable as follows:
| Vendor | 2024 | 2023 | ||||||
| 1 | 0 | % | 33 | % | ||||
| 2 | 22 | % | 23 | % | ||||
| 3 | 24 | % | 0 | % | ||||
| 4 | 10 | % | 0 | % | ||||
The Company has several vendors for the nine months ended September 30, 2024, and September 30, 2023, that make up more than 10% of services rendered to us as follows:
| Vendor | 2024 | 2023 | ||||||
| 1 | 0 | % | 24 | % | ||||
| 2 | 16 | % | 0 | % | ||||
Inventory
Inventory is stated at the lower of cost (using the first-in, first-out method (“FIFO”)) or net realizable value. We continually analyze our slow moving and excess inventories. Based on historical and projected sales volumes and anticipated selling prices, we determined that establishing a reserve was not necessary at this time. Inventory that is in excess of current and projected use is reduced by an allowance to a level that approximates its estimate of future demand. Products that are determined to be obsolete are written down to net realizable value. The Company’s inventory is comprised of raw materials for a customer’s packaging needs as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Raw materials | $ | 107,653 | $ | 114,739 | ||||
| F-24 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Property and Equipment
Property and equipment, net is stated at cost less accumulated depreciation. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred. During the construction and development period of an asset, the costs incurred, including interest expense, are classified as construction-in-progress. When the asset is ready for its intended use, the asset is reclassified to an appropriate asset classification and depreciation, or amortization commences.
The Company depreciates and amortizes the capitalized cost of these assets, using the straight-line method as follows:
Asset Classification
Computer equipment 3-5 years
Furniture and fixtures 5-8 years
Leasehold Improvements 15 years
Fully depreciated assets are retained in property, plant and equipment and accumulated depreciation until they are removed from service.
The Company tests for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. An impairment in the carrying value of long-lived assets is recognized if the expected future undiscounted cash flows derived from the assets, or group of assets, are less than their carrying value. The Company did not record any impairment charges related to long-lived assets in the periods presented.
Revenue Recognition
The Company recognizes revenue when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Most of the Company’s revenues are for services, which are recognized based on time and materials incurred at contractually agreed-upon rates. Product revenues are recognized when the products are delivered and control transfers to the customer. The Company’s payment terms vary by the type of customers and the products or services offered. The periods between invoicing and when payments are due are not significant. Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and handling costs are included in costs of revenues.
Disaggregation of Revenue
The following table presents our disaggregated revenues by distribution channel for the nine months ended:
| Sales | September 30, 2024 | September 30, 2023 | ||||||
| Emergency preparedness | $ | 2,918,435 | $ | 6,537,157 | ||||
| Specialty Packaging | 2,293,230 | 4,992,184 | ||||||
| Total | $ | 5,211,665 | $ | 11,529,341 | ||||
Emergency preparedness
Provides comprehensive services to mainly state and local governments, which includes managing their building sites, medical stockpiles of equipment, supplies and responding to state or local emergencies. We also provide Quality Control/Assurance to safeguard vaccines, medical supplies and equipment. Revenue is recognized when services are rendered, or medical supplies are shipped.
| F-25 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Specialty Packaging.
Our specialty temperature-regulating packaging solutions provide a better thermal system to maintain and protect products and ensure peak customer experience. In utilizing this packaging, customers yield the benefits of lower costs and overhead while improving process, agility, velocity, accuracy, and repeatability of complex fulfillment networks. Revenue is recorded when products are delivered or services are rendered. The Company has a contract with a customer for cloud-based temperature monitoring software. The customer paid their contract in advance and therefore revenue is earned monthly over the term of the contract.
Deferred Offering Costs
Deferred offering costs consist of investment banking fees incurred through the balance sheet date that are directly related to the IPO and that will be charged to Stockholders’ equity upon the completion of the IPO. As of September 30, 2024, and December 31, 2023, the Company had deferred offering costs of $107,675 and $25,000, respectively.
Cost of Revenues
Our cost of revenue primarily includes the amounts paid to outside service providers, monitoring, direct and indirect labor, warehouse rent and other related expenses.
Leases
The Company’s leases predominately relate to real estate, equipment, such as vehicles and industrial equipment utilized in operations. Contracts are reviewed at inception to determine if the arrangement is a lease and, if so, whether it is an operating or finance lease. The Company generally enters into long-term real estate leases with one to ten-year terms. In the normal course of business, the Company also enters into short-term leases having terms of one year or less. These leases are generally equipment leases entered into for short periods of time (e.g., daily, weekly, or monthly) to satisfy immediate and/or short-term operational needs of the business which can arise based upon the nature of particular services performed. The Company has elected not to recognize right-of-use (“ROU”) assets and lease liabilities for these short-term leases. Operating and finance leases with terms exceeding one year are recognized as ROU assets and lease liabilities and measured at commencement date based on the present value of the future lease payments over the lease term. Certain of the Company’s real estate leases contain escalating future lease payments. Escalating lease payments that are based upon explicit amounts contained in the lease or an index (e.g., consumer price index) are included in the Company’s determination of future lease payments to determine the ROU asset and lease liability recognized at the commencement date. Any differences in the future lease payments from initial recognition are not anticipated to be material and will be recorded as variable lease cost in the period incurred. The variable lease cost will also include the Company’s portion of property tax, utilities, and common area maintenance. A significant portion of the Company’s real estate lease agreements include renewal periods at the Company’s option. The Company includes these renewal periods in the lease term only when renewal is reasonably certain based upon facts and circumstances specific to the lease and known by the Company. The Company uses its incremental borrowing rate available at the lease commencement date in determining the present value of future lease payments as the implicit rate is typically not readily determinable. For operating leases, lease cost is recognized on a straight-line basis over the lease term and is included in cost of revenues or selling, general and administrative expenses depending on the use of the asset. For finance leases, ROU assets are amortized on a straight-line basis and interest expense is recognized based on the incremental borrowing rate. Finance lease amortization is recognized in depreciation and amortization and finance lease related interest expense is recognized in interest expense, net of interest income. As of September 30, 2024, and December 31, 2023 the Company did not have any leases that were classified as finance leases.
| F-26 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Segment Reporting
Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the Company’s Chief Executive Officer to make decisions with respect to resource allocation and assessment of performance. To date, the Company has viewed its operations and manages its business as one operating segment.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updates (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 is intended to enhance the decision usefulness of income tax disclosures and requires the disclosure of various disaggregated information, including an entity’s effective tax rate reconciliation as well as additional information on taxes paid. This ASU is effective on a prospective basis for annual periods beginning after December 15, 2024 with early adoption allowed. The Company is in the process of evaluating the effect of ASU 2023-09 on the financial statements.
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 requires, among other updates, enhanced disclosures about significant segment expenses that are regularly provided to the CODM, as well as the aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective adoption. Early adoption is permitted. The adoption of this new standard is expected to require enhanced disclosures for Company’s like Callan that operate as a single business segment, including expanded disclosures of significant segment expenses. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
The FASB issues ASUs to amend the authoritative literature in ASC. There have been a number of ASUs to date, including those above, that amend the original text of ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact on our consolidated financial statements.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
The Company has various warehouse leases with its landlord that expire between 2024 and 2029. The Company’s right-of-use assets and lease liabilities primarily represent lease payments that are fixed at the commencement of a lease and variable lease payments that are dependent on an index or rate. Lease payments are recognized as lease cost on a straight-line basis over the lease term, which is determined as the non-cancelable period, including periods in which termination options are reasonably certain of not being exercised and periods in which renewal options are reasonably certain of being exercised. The discount rate is determined using the Company’s estimated incremental borrowing rate coinciding with the lease term at the commencement of a lease. The estimated incremental borrowing rate for the Company was determined to be 3.0%-8.50%. Rent expense for the nine months ended September 30, 2024 and 2023 was approximately $299,000 and 238,000, respectively.
| F-27 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As of September 30, 2024, the maturities of the Company’s operating lease liabilities were as follows:
| For three month period ending September 30, 2024 | $ | 96,144 | ||
| 2025 | 342,065 | |||
| 2026 | 187,600 | |||
| 2027 | 185,100 | |||
| 2028 | 185,100 | |||
| 2029 | 185,100 | |||
| Total lease payments | 1,181,109 | |||
| Less imputed interest | 196,488 | |||
| Total lease obligations | 984,621 | |||
| Less long term obligations | 686,822 | |||
| Total current | $ | 297,799 |
Legal Proceedings
The Company may be subject to legal proceedings and claims arising from contracts or other matters from time to time in the ordinary course of business.
During May 2024, the Company was sent a demand letter alleging that the Company breached the terms of a Customer Service Agreement with one of its vendors that it did business within a prior year. The vendor alleges that the Company improperly terminated the agreement without proper notice and therefore owes it $507,573. The Company responded to the vendor’s demand letter and asserts that it only owes the vendor the sum of $85,000 which is included in its accounts payable as of September 30, 2024.
Management is not aware of any other pending or threatened litigation where the ultimate disposition or resolution could have a material adverse effect on its financial position, results of operations or liquidity.
NOTE 5 – RELATED PARTY TRANSACTIONS
Business Partner
Outlaw Run Ranch (“ORR”) is a related party by virtue of common ownership of the Company. In 2023, the Company received rents receipts from a third-party vendor on behalf of a related party, Outlaw Run Ranch. The cash is due to ORR on demand, non-interest bearing, and classified within related party loans in the balance sheet. In addition, the Company pays $7,500 per month to ORR for rent expense. As of September 30, 2024, and December 31, 2023, the Company has $17,134 in accounts payable for these amounts due. Rent expense for the nine months ended September 30, 2024, and 2023 was $67,500 and $67,500, respectively.
Warehouse Asset Management, is a related party by virtue of common ownership. The Company’s leases its headquarters, warehouse, other warehouse equipment and a box truck for approximately $15,425 per month. As of September 30, 2024, and December 31, 2023, the Company has $52,350 and $0 owed to this related party.
During the year ended December 31, 2023, the Company made advancements of $21,969 to the director of the Company. The advances are due on demand, non-interest bearing, and classified within the balance sheet as a current asset. As of September 30, 2024, and December 31, 2023, the amount owed from the director was $21,969.
| F-28 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 – Equity
Callan JMB Inc. was formed on January 24, 2024, in the State of Nevada for the purpose of reorganizing and becoming a holding company for Coldchain Technology Services, LLC a Texas limited liability company (“CTS”). In February 2024, CTS became a direct, wholly owned subsidiary of the Company as a result of the closing of the Reorganization Agreement and Plan of Share Exchange dated February 14, 2024 (the “Reorganization Agreement”). Pursuant to the Reorganization Agreement, each member of CTS exchanged 100% of their membership interest for shares of the Company’s common stock. As a result, each member of CTS became a shareholder of the Company and CTS became a direct, wholly owned subsidiary of the Company. During the reorganization, the CTS members exchanged all their interest for 5,000,000 shares of Common Stock on a pro-rata basis.
During February 2024, the Company effectuated a reorganization as described (in Note 1). Upon reorganization, the Company authorized the issuance of 190,000,000 shares of common stock, par value of $0.001 per share, as well as 10,000,000 shares of preferred stock, par value of $0.001 per share. Common Stock is entitled to one vote per share held. Preferred Stock voting rights have not been defined under the articles of incorporation and are subject to designations determined by the Board of Directors. The Board of Directors has not made any decisions or designations for its preferred stock with regards to dividends, liquidating distributions, or any other matters as of the date of these financial statements.
Prior to the reorganization, profits and losses were allocated pro-rata to members of CTS as agreed upon by the members.
Pursuant to the Exchange and Reorganization Agreement, dated as of November 14, 2024, described above, all of the the existing stockholders have exchanged their existing outstanding shares of Company common stock for new shares of Company common stock at a ratio of 0.6 new share for 1 existing share.
NOTE 7 – Revisions of Previously Issued Financial Statements
During the three months ended March 31, 2024, the Company identified an omission related to exchange of member retained partnership earnings for common stock and additional paid in-capital. This omission resulted in incorrect presentation of retained earnings and additional paid- in- capital. As a result, the Company has revised these items in the condensed consolidated balance sheets, condensed consolidated statement of stockholders’ equity and the condensed consolidated statement of cash flows for the three months ended March 31, 2024, (Unaudited). This omission had no impact on the condensed consolidated statement of income previously reported. Furthermore, this adjustment had no effect on the calculation of Basic or Diluted Earnings per Share (“EPS”) for the periods concerned.
Adjustments to the Condensed Consolidated Balance Sheet and Condensed Consolidated Stockholders’ Equity March 31, 2024 (unaudited)
March 31, 2024 As previously reported | Adjustment | March 31, 2024 As revised | ||||||||||
| Retained earnings | $ | 5,328,874 | $ | (5,410,007 | ) | $ | (81,133 | ) | ||||
| Additional Paid in Capital | $ | - | $ | 5,410,007 | $ | 5,410,007 | ||||||
| Common stock | $ | 3,000 | $ | - | $ | 3,000 | ||||||
| Total | $ | 5,331,874 | $ | - | $ | 5,331,874 | ||||||
The adjustments will be reflected prospectively, including when prior periods are presented in future filings.
Adjustments to the Condensed Consolidated Statement of Cash Flows March 31, 2024 (unaudited)
March 31, 2024 As previously reported | Adjustment | March 31, 2024 As revised | ||||||||||
| Supplemental disclosures of cash flow information: | ||||||||||||
| Membership exchange for common stock | - | $ | 5,410,007 | $ | 5,410,007 | |||||||
The adjustments will be reflected prospectively, including when prior periods are presented in future filings.
During the six months ended June 30, 2023, the Company identified an error related to the pass-through entity tax that which was included in selling, general and administrative expenses. This entity level tax is the responsibility of its members. This resulted in incorrect presentation of net income and distributions. As a result, the Company has revised these items in the condensed consolidated statement of income, condensed consolidated statement of members’ capital, condensed consolidated statement of income and the condensed consolidated statement of cash flows for the six months ended June 30. 2023 (Unaudited).
| F-29 |
CALLAN JMB INC.
(Formerly known as Coldchain Technology Services, LLC)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Adjustments to the Condensed Consolidated Statement of Income For The Six Months Ended June 30, 2023 (unaudited)
| June 30, 2023 | June 30, 2023 | |||||||||||
| As previously reported | Adjustment | As revised | ||||||||||
| Selling, general and administrative expenses | $ | 1,677,942 | $ | (183,953 | ) | $ | 1,493,989 | |||||
| Operating Income | $ | 2,307,699 | $ | 183,953 | $ | 2,491,652 | ||||||
| Income before taxes | $ | 2,303,567 | $ | 183,953 | $ | 2,487,520 | ||||||
| Net income | $ | 2,285,567 | $ | 183,953 | $ | 2,469,520 | ||||||
Adjustments to the Condensed Consolidated Statement of Members’ Capital June 30, 2023 (unaudited)
| June 30, 2023 | June 30, 2023 | |||||||||||
| As previously | As | |||||||||||
| Reported | Adjustment | Revised | ||||||||||
| Net income | $ | 2,285,567 | $ | 183,953 | $ | 2,469,520 | ||||||
| Distributions | $ | (6,061,143) | $ | (183,953 | ) | $ | (6,245,096 | ) | ||||
Adjustments to the Condensed Consolidated Statement of Cash Flows June 30, 2023 (unaudited)
| June 30, 2023 | June 30, 2023 | |||||||||||
| As Previously | As | |||||||||||
| Reported | Adjustment | Revised | ||||||||||
| Net income | $ | 2,285,567 | $ | 183,953 | $ | 2,469,520 | ||||||
| Net cash provided by operating activities: | $ | 5,551,573 | $ | 183,953 | $ | 5,735,526 | ||||||
| Distributions | $ | (6,061,143 | ) | $ | (183,953 | ) | $ | (6,245,096 | ) | |||
| Net cash used in financing activities: | $ | (6,133,414 | ) | $ | (183,953 | ) | $ | (6,317,367 | ) | |||
NOTE 8 – SUBSEQUENT EVENTS
2024 Equity Compensation Plan
On October 24, 2024, the Company’s stockholders approved the 2024 Equity Incentive Plan, or the 2024 Plan. The 2024 Plan provides that grants may be in any of the following forms: incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards. The 2024 Plan will be administered and interpreted by the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine the individuals to whom grants will be made under the 2024 Plan, determine the type, size and terms of the grants, determine the time when grants will be made and the duration of any applicable exercise or restriction period (subject to the limitations of the 2024 Plan) and deal with any other matters arising under the 2024 Plan. All the employees of the Company and its subsidiaries are eligible for grants under the 2024 Plan. Non-employee directors and consultants of the Company are also eligible to receive grants under the 2024 Plan. The Company has reserved 1,500,000 shares of common stock of Callan JMB Inc. for the granting of such options.
At the time of the initial public offering the company will be issuing approximately 1,220,000 options to its employees and consultants. The exercise price of the options is the initial public offering price. The options will vest quarterly over a twenty- four period.
Pursuant to the Exchange and Reorganization Agreement, dated as of November 14, 2024, described above, all of the existing stockholders have exchanged their existing shares of the Company’s common stock for new shares of common stock at a ratio of 0.6 new share for 1 existing share.
The Company has evaluated subsequent events that occurred after September 30, 2024, through November 18, 2024, the issuance date of these financial statements. There have been no other events or transactions during this time which would have a material effect on these consolidated financial statements.
| F-30 |
1,280,000 Shares of Common Stock
Representative’s warrants to purchase up to 64,000
shares of Common Stock
64,000 Shares of Common Stock Underlying the Representative’s Warrants
CALLAN JMB INC.
PROSPECTUS
Sole Book-Runner
Alexander Capital, L.P.
_______ ___, 2024
Until ____, 2024 (25 days from the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by Callan JMB Inc., or the Registrant, in connection with the sale of our common stock being registered. The Registrant will bear all of the below fees and expenses, which are inclusive of the fees and expenses incidental to the registration of our common stock and the selling stockholders’ shares. All amounts shown are estimates except for the Securities and Exchange Commission (“SEC”) registration fee, the Financial Industry Regulatory Authority, Inc. (“FINRA”) filing fee, and Nasdaq listing fee.
| Amount | ||||
| SEC registration fee | $ | 1,119.77 | ||
| Nasdaq listing fee | $ | * | ||
| FINRA filing fee | $ | 1,962.80 | ||
| Accounting fees and expenses | $ | * | ||
| Legal fees and expenses | $ | 450,000.00 | ||
| Transfer agent fees and expenses | $ | * | ||
| Printing and related fees and expenses | $ | * | ||
| Miscellaneous fees and expenses | $ | * | ||
| Total | $ | * | ||
*To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Nevada law provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation (i.e., a “non-derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he or she:
| ● | Is not liable under Section 78.138 of the Nevada Revised Statutes for breach of his or her fiduciary duties to the corporation; or | |
| ● | Acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. |
In addition, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor (i.e., a “derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he:
| ● | Is not liable under Section 78.138 of the Nevada Revised Statute for breach of his or her fiduciary duties to the corporation; or |
| II-1 |
| ● | Acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation. |
Under Nevada law, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any non-derivative proceeding or any derivative proceeding, or in defense of any claim, issue or matter therein, the corporation is obligated to indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense.
Further, Nevada law permits a Nevada corporation to purchase and maintain insurance or to make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
The Company plans to enter into an underwriting agreement in connection with this offering that provides that the underwriter is obligated, under some circumstances, to indemnify the Company’s directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
During the past three years, we have issued the following securities, which were not registered under the Securities Act.
| ● | On February 2, 2024, the Company entered into a Reorganization Agreement and Plan of Share Exchange (as amended, the “Exchange Agreement”) with Coldchain Technology Services, LLC. (“CTS”), pursuant to which, amongst other things, it acquired CTS’s 100% membership interest in exchange for a combined of 5,000,000 shares of common stock, consisting of: (a) 3,750,000 shares of common stock to Wayne Williams, its Chief Executive Officer and President, and (b) 1,250,000 shares of common stock to David J. Croyle, M.D., its Chief Medical Officer. Pursuant to the said transaction, CTS is now a wholly-owned subsidiary of the Company. | |
| Pursuant to an Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company, and all the existing stockholders of the Company , such stockholders have exchanged all their existing shares of the Company’s common stock for new shares common stock at a ratio of 0.6 new share for 1 existing share. As a result of the exchange, the total number of shares of Company stock outstanding was reduced from 5,000,000 shares to 3,000,000 shares. |
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Unless otherwise noted, the above-listed securities were issued in reliance upon the exemption from the registration requirements of Section 5 of the Securities Act provided by Section 4(a)(2) and/or Rule 506(b) of Form D promulgated under the Securities Act due the fact that such issuances did not involve a public offering of securities and no solicitation or advertisement was made.
Item 16. Exhibits.
(a) Exhibits.
| Exhibit No. |
Description | |
| 1.1* | Form of Underwriting Agreement | |
| 3.1** | Callan JMB Inc. Articles of Incorporation | |
| 3.2** | Bylaws, adopted on February 2, 2024 | |
| 4.1* | Form of Representative’s Warrant | |
| 5.1** | Opinion of Sichenzia Ross Ference Carmel LLP | |
| 10.1** | Reorganization Agreement and Plan of Share Exchange, dated February 2, 2024 by and among Coldchain Technology Services, LLC, (“CTS”), Callan JMB Inc., and shareholders of CTS | |
| 10.2** | Professional Services Agreement, by and between The City of Chicago Department of Public Health and Coldchain Technology Services, LLC, dated December 21, 2018 | |
| 10.3** | Professional Services Agreement, by and between The City of Chicago Department of Public Health and Coldchain Technology Services, LLC, dated February 10, 2023 | |
| 10.5** | Standard Lease Agreement, dated April 1, 2024, by and between Warehouse Asset Management, LLC and Coldchain Technology Services, LLC | |
| 10.6†** | Callan JMB Inc. 2024 Equity Incentive Plan | |
| 10.7†** | Employment Agreement entered into between the Callan JMB Inc. and Wayne Williams, dated October 15, 2024, as amended as October 24,2024 | |
| 10.8†** | Employment Agreement entered into between the Callan JMB Inc. and Jeffrey Appleman, dated October 1, 2024, as amended as of October 24, 2024 | |
| 10.9†** | Employment Agreement entered into between the Callan JMB Inc. and David J. Croyle, M.D., dated 1, 2024, as amended as of October 24, 2024 | |
| 10.10†** | Employment Agreement entered into between the Callan JMB Inc. and Eric L. Kash, dated October 1, 2024, as amended as of October 24, 2024 | |
| 10.11†* | Form of Independent Director Agreement | |
| 10.12** | Exchange and Reorganization Agreement, dated as of November 14, 2024, among the Company, Wayne Williams and Dr. David Croyle | |
| 21.1** | List of Subsidiaries of Callan JMB Inc. | |
| 23.1* | Consent of Rosenberg Rich Baker Berman, P.A. | |
| 23.2** | Consent of Sichenzia Ross Ference Carmel LLP (included in Exhibit 5.1 hereto) | |
| 99.1** | Consent of Mark Meller (Director Nominee) | |
| 99.2** | Consent of Liberty Duke (Director Nominee) | |
| 99.3** | Consent of Gerald Dial (Director Nominee) | |
| 99.4** | Audit Committee Charter | |
| 99.5** | Compensation Committee Charter | |
| 99.6** | Code of Ethics | |
| 99.7** | Executive Compensation Clawback Policy | |
| 107*** | Filing Fee Table |
| * | Filed herewith. |
| ** | To be filed by amendment. |
| *** | Previously filed. |
| † | Management compensatory agreement. |
(b) Financial Statement Schedules.
All financial statement schedules are omitted because the information called for is not required or is shown either in the financial statements or in the notes thereto.
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Item 17. Undertakings
a) The undersigned registrant hereby undertakes:
(1.) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i.) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii.) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii.) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
(2.) That, for the purpose of determining any liability under the Securities Act of 1933, each such post- effective amendment 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;
(3.) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and
(4.) That, for the purpose of determining liability under the Securities Act of 1933, as amended, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; | |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; | |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and | |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(5.) That, for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
(6.) That, for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, 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 Securities Act of 1933 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 Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.
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SIGNATURES
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 Spring Branch, Texas, on November 18, 2024.
| CALLAN JMB INC. | ||
| By: | /s/ Wayne Williams | |
| Wayne Williams | ||
| Chief Executive Officer and President | ||
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/ Wayne Williams | Chief Executive Officer, President (Principal Executive Officer) and Director | November 18, 2024 | ||
| Wayne Williams | ||||
| /s/ Jeffrey Appleman | Chief Financial Officer (Principal Financial and Accounting Officer) | November 18, 2024 | ||
| Jeffrey Appleman | ||||
| /s/ David J. Croyle, M.D. | Chief Medical Officer | November 18, 2024 | ||
| David J. Croyle, M.D. | ||||
| /s/ Eric L. Kash | Executive Vice President, and Chairman of the Board | November 18, 2024 | ||
| Eric L. Kash |
| II-5 |
Exhibit 1.1
UNDERWRITING AGREEMENT
by and between
CALLAN JMB INC.
And
ALEXANDER CAPITAL, L.P.,
as Representative of the Several Underwriters
UNDERWRITING AGREEMENT
[______], 2024
Alexander Capital, L.P.
As Representative of the several Underwriters named on Schedule 1 attached hereto
c/o Alexander Capital, L.P.
10 Drs James Parker Boulevard #202
Red Bank, New Jersey 07701
Ladies and Gentlemen:
The undersigned, Callan JMB Inc., a company incorporated under the laws of the State of Nevada (collectively, with its Subsidiaries as hereinafter defined, the “Company”), hereby confirms its agreement (this “Agreement”) with Alexander Capital, L.P., as the representative of the several underwriters named in Schedule 1 hereto (the “Representative” and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:
1. Purchase and Sale of Shares.
1.1. Firm Shares.
1.1.1. Nature and Purchase of Firm Shares.
(i) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [______] shares (the “Firm Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”).
(ii) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[___] per share (91.5% of the per Firm Share offering price). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).
1.1.2. Shares Payment and Delivery.
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the first (1st) Business Day following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the second (2nd) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such other time as shall be agreed upon by the Representative and the Company, at the offices of Sullivan & Worcester LLP, 1251 Avenue of the Americas, New York, NY 10020 (“Representative Counsel”), or at such other place (or remotely by other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”
(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company, upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
1.2. Over-allotment Option.
1.2.1. Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters, severally and not jointly, an option to purchase up to [_____] additional shares of Common Stock, representing fifteen percent (15%) of the Firm Shares sold in the offering, from the Company (the “Over-allotment Option”). Such [_____] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public Securities is hereinafter referred to as the “Offering.”
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1.2.2. Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than five (5) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1.
1.2.3. Payment and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to the Representative of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Representative. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least two (2) full Business Days prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares. The Option Closing Date may be simultaneous with, but not earlier than, the Closing Date; and in the event that such time and date are simultaneous with the Closing Date, the term “Closing Date” shall refer to the time and date of delivery of the Firm Shares and Option Shares.
1.3. Representative’s Warrants.
1.3.1. Purchase Warrants. The Company hereby agrees to issue and sell to the Representative (and/or its designee(s)) on the Closing Date a warrant, substantially in the form attached hereto as Exhibit A (the “Representative’s Warrants”) for the purchase of an aggregate of up to [_____] shares of Common Stock, representing 5% of the Firm Shares (including the Option Shares) for an aggregate purchase price of $100. The Representative’s Warrants shall be exercisable upon issuance, in whole or in part, commencing on a date which is 180 days after the commencement of sales of the Company’s securities in connection with the Offering (the “Commencement Date”) and shall be exercisable until the five-year anniversary of the Commencement Date at an initial exercise price per share of Common Stock of $[___], which is equal to 120% of the initial public offering price of the Firm Shares. The Representative’s Warrants and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrants and the underlying shares of Common Stock during the one hundred eighty (180) days after the Commencement Date, and by its acceptance thereof, it shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrants, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Commencement Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
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1.3.2. Delivery. Delivery of the Representative’s Warrants shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request in writing.
2. Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows:
2.1. Filing of Registration Statement.
2.1.1. Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-[_____]), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated [_____], 2024, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
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“Applicable Time” means 5:00 p.m., Eastern time, on the date of this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”))
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Pricing Disclosure Package” means the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 001-[_____]) providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
2.2. Stock Exchange Listing. The shares of Common Stock have been approved for listing on the Nasdaq Capital Market (the “Exchange”) subject only to official notice of issuance, and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.3. No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
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2.4. Disclosures in Registration Statement.
2.4.1. Compliance with Securities Act and 10b-5 Representation.
(i) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
(iii) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus does not conflict in any material respect with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the disclosure contained in the “Underwriting” section of the Prospectus (the “Underwriters’ Information”).
(iv) Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
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2.4.2. Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, none of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder except for such defaults that would not reasonably be expected to result in a Material Adverse Change (as defined below). To the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations or taxes, except for such violations that would not reasonably be expected to result in any change or development that, singularly or in the aggregate, would involve a material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “Material Adverse Change”).
2.4.3. Prior Securities Transactions. No securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
2.4.4. Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
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2.5. Changes After Dates in Registration Statement.
2.5.1. No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company or any of its Subsidiaries, nor to the Company’s knowledge, a Material Adverse Change; and (ii) there have been no material transactions entered into by the Company or any of its Subsidiaries not in the ordinary course of business, other than as contemplated pursuant to this Agreement.
2.5.2. Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities, other than securities issued pursuant to the Company’s existing equity incentive plans or shares issuable upon the exercise of then outstanding options, warrants and convertible securities, which in each case were disclosed in the Prospectus, Pricing Disclosure Package or the Registration Statement, or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
2.6. Independent Accountants. To the knowledge of the Company, Rosenberg Rich Baker Berman, P.A. (the “Auditor”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
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2.7. Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly in all material respects present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and any supporting schedules included in the Registration Statement present fairly in all material respects the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. The pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly in all material respects the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. All disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) neither the Company nor any of its direct or indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each a “Subsidiary” and, collectively, the “Subsidiaries”), has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (d) there has not been any Material Adverse Change in the Company’s long-term or short-term debt. The Company represents that it has no Subsidiaries other than those listed in Exhibit 21.1 to the Registration Statement.
2.8. Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
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2.9. Valid Issuance of Securities, etc.
2.9.1. Outstanding Securities. All issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission with respect thereto, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. The offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such Shares, exempt from such registration requirements. The description of the Company’s stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted thereunder, as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, accurately and fairly present, in all material respects, the information required to be shown with respect to such stock plans, arrangements and the options and rights granted thereunder.
2.9.2. Securities Sold Pursuant to this Agreement. The Public Securities and Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken. The Public Securities and Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representative’s Warrants has been duly and validly taken; the shares of Common Stock issuable upon exercise of the Representative’s Warrants have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrants, such shares of Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.
2.10. Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company.
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2.11. Validity and Binding Effect of Agreements. This Agreement and the Representative’s Warrants have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
2.12. No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement, the Representative’s Warrants and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict in any material respect with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any material lien, charge or encumbrance upon any property or assets of the Company pursuant to the terms of any agreement or instrument to which the Company is a party; (ii) result in any violation of the provisions of the Company’s articles of incorporation (as the same may be amended or restated from time to time, the “Charter”) or the bylaws of the Company (the “Bylaws”); or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof; except in the cases of clause (iii) above, for such breaches, conflicts or defaults that would not reasonably be expected to result in a Material Adverse Change.
2.13. No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision of its Charter or Bylaws, or corresponding governing documents, as applicable. The Company is not in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity, except for such violations that would not reasonably be expected to result in a Material Adverse Change.
2.14. Corporate Power; Licenses; Consents.
2.14.1. Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary authorizations, approvals, orders, licenses, certificates and permits (“Permits”) of and from any Governmental Entity that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except for such Permits the absence of which would not reasonably be expected to have a Material Adverse Change.
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2.14.2. Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals and orders required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Warrants and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except (i) such consents, approvals, authorizations, orders, filings, registrations or qualifications that have already been obtained or made and (ii) with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
2.15. D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal stockholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreements (as defined in Section 2.24 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate or incorrect in any material respect.
2.16. Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director, which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the Common Stock on the Exchange, which individually or in the aggregate, if determined adversely to the Company would reasonably be expected to have a Material Adverse Change.
2.17. Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Nevada as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change. Each of the Subsidiaries of the Company is duly organized or incorporated, as applicable, and in good standing under the laws of its place of organization or incorporation, and each Subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a Material Adverse Change on the assets, business or operations of the Company and its Subsidiaries taken as a whole. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.18. Insurance. The Company carries or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not reasonably be expected to result in a Material Adverse Change.
2.19. Transactions Affecting Disclosure to FINRA.
2.19.1. Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities or Representative’s Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA and neither the Company nor, to the Company’s knowledge any Insider has paid any monies or other compensation or issued any securities to any member of FINRA, or to any affiliate or associate of such a member, regarding this Offering.
2.19.2. Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) in connection with the Offering to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder.
2.19.3. Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.19.4. FINRA Affiliation. (i) No officer or director of the Company, and to the knowledge of the Company (ii) no beneficial owner of 5% or more of any class of the Company’s securities and (iii) no beneficial owner of the Company’s unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement, is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
2.19.5. Information. All information provided by the Company in its FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
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2.20. Foreign Corrupt Practices Act. None of the Company, its Subsidiaries, nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any of its Subsidiaries or any other person acting on behalf of the Company, has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any Governmental Entity or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (i) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (ii) if not given in the past, might have caused a Material Adverse Change or (iii) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
2.21. Compliance with OFAC. None of the Company, its Subsidiaries, nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or the Subsidiaries or any other person acting on behalf of the Company or any of its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and neither the Company nor any of its Subsidiaries will knowingly, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
2.22. Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
2.23. Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to the Representative or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
2.24. Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers, directors and each owner of at least 5% of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into shares of Common Stock) that will be subject to a Lock-Up Agreement (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the execution of this Agreement.
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2.25. Related Party Transactions. There are no business relationships or related party transactions involving the Company, its Subsidiaries or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
2.26. Board of Directors. The Board of Directors of the Company comprises the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange.
2.27. Sarbanes-Oxley Compliance. Upon consummation of the Offering, the Company will design and implement internal controls in accordance with the requirements of the Sarbanes-Oxley Act. Upon such design and implementation, the Company will comply with the Disclosure, Compliance, and Accounting Controls in all material respects with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures, when implemented, will be effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents, as applicable.
2.28. Accounting Controls. The Company and its Subsidiaries collectively maintain systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply in all material respects with the requirements of the Exchange Act applicable to the Company and have been designed by, or under the supervision of, its respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
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2.29. No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
2.30. No Labor Disputes. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent. The Company is not aware that any key employee or significant group of employees of the Company or any of its Subsidiaries plans to terminate employment with the Company.
2.31. Intellectual Property Rights. The Company and each of its Subsidiaries owns or possesses or has valid rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) necessary for the conduct of the business of the Company and each of its Subsidiaries as currently carried on and as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others (other than license or similar fees described or contemplated in the Registration Statement, the Pricing Disclosure Package and the Prospectus). Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim, and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims referred to in this Section 2.32, reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. Neither the Company nor its Subsidiaries is a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company or any of its Subsidiaries has been obtained or is knowingly being used by the Company in material violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of their respective officers, directors or employees, or otherwise in material violation of the rights of any persons. The Company and each of its Subsidiaries owns or has a valid right to access and use all computer systems, networks, hardware, software, databases, websites, and equipment used to process, store, maintain and operate data, information, and functions used in connection with the business of the Company and each of its Subsidiaries (the “Company IT Systems”). The Company IT Systems are adequate for, and operate and perform in all material respects as required in connection with, the operation of the business of the Company and each of its Subsidiaries as currently conducted, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and each of its Subsidiaries has implemented commercially reasonable backup, security and disaster recovery technology consistent in all material respects with applicable regulatory standards and customary industry practices.
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2.32. Taxes. The Company and its Subsidiaries have filed all material returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. The Company has paid all material taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all material taxes imposed on or assessed against the Company or any of its Subsidiaries. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid material taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no material issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or any of its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or any of its Subsidiaries. There are no tax liens against the assets, properties or business of the Company or its Subsidiaries other than liens for taxes not yet delinquent or being contested in good faith by appropriate proceedings and for which reserves in accordance with GAAP have been established in the Company’s books and records. The term “material taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto, other than those taxes, the failure of which to have paid, would not result in a Material Adverse Change. The term “material returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes, other than those returns, the failure of which to have filed, would not result in a Material Adverse Change.
2.33. ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
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2.34. Compliance with Laws. The Company and its Subsidiaries: (A) is and at all times has been in compliance with all statutes, rules, or regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, marketing, labeling, promotion, sale, offer for sale, storage, import, export or disposal of any product manufactured or distributed by the Company (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change (any such noncompliance being referred to as “nonmaterial noncompliance” for the purposes of this Section 2.35); (B) has not received any warning letter, untitled letter or other correspondence or notice from any other Governmental Entity alleging or asserting material noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such material Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding that if brought would result in a Material Adverse Change; (E) has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Entity is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications and records, as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, and records, were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission), except where the failure to file, obtain, maintain or submit would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change; and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, or other notice or action relating to the alleged lack of safety or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
2.35. Environmental Matters.
2.35.1. The business and operations of the Company, have been and are being conducted in compliance with all applicable laws, ordinances, rules, regulations, licenses, permits, approvals, plans, authorizations or requirements relating to occupational safety and health, or pollution, or protection of health or the environment (including, without limitation, those relating to emissions, discharges, releases or threatened releases of pollutants, contaminants or hazardous or toxic substances, materials or wastes into ambient air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemical substances, pollutants, contaminants or hazardous or toxic substances, materials or wastes, whether solid, gaseous or liquid in nature) of any governmental department, commission, board, bureau, agency or instrumentality of the United States, any state or political subdivision thereof, or to the knowledge of the Company, any foreign jurisdiction (“Environmental Laws”), and all applicable judicial or administrative agency or regulatory decrees, awards, judgments and orders relating thereto, except where the failure to be in such compliance would not be reasonably expected, individually or in the aggregate, to have a Material Adverse Change; and the Company has not received any notice from any governmental instrumentality or any third party alleging any material violation thereof or liability thereunder (including, without limitation, liability for costs of investigating or remediating sites containing hazardous substances and/or damages to natural resources).
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2.35.2. There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials (as defined below) by or caused by the Company (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company is or could reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company, or at, on, under or from any other property or facility, in violation of any Environmental Laws or in a manner or amount or to a location that could reasonably be expected to result in any liability under any Environmental Law, except for any violation or liability which would not, individually or in the aggregate, have a Material Adverse Change. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into from or through any building or structure.
2.36. Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities, and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
2.37. Real and Personal Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and each of its Subsidiaries has good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries; and all of the leases and subleases material to the business of the Company and its Subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and the Company has not received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its Subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or any of its Subsidiaries to the continued possession of the leased or subleased premises under any such lease or sublease.
2.38. Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, its Subsidiaries, any of their respective affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s and its Subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.
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2.39. Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries, or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.40. Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.41. Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
2.42. Testing-the-Waters Communications. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-B hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
2.43. Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
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2.44. Confidentiality and Non-Competition. To the Company’s knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer (other than the Company) or prior employer that could materially affect his or her ability to be and act in his or her respective capacity of the Company or reasonably be expected to result in a Material Adverse Change.
2.45. Corporate Records. The minute books of the Company and its Subsidiaries have been made available to the Representative and Representative Counsel and such books (i) contain minutes of all material meetings and actions of the Board of Directors (including each board committee) and stockholders of the Company and its Subsidiaries, and (ii) reflect all material transactions referred to in such minutes.
2.46. Diligence Materials. The Company has provided to the Representative and Representative Counsel all materials required or necessary to respond in all material respects to the diligence request submitted to the Company or its counsel by the Representative.
2.47. Stabilization. Neither the Company nor, to its knowledge, any of its Subsidiaries, or any of their respective employees, directors or stockholders (without the consent of the Representative) has taken, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
2.48. XBRL. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.
2.49. Dividends and Distributions. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus, no Subsidiaries of the Company are currently prohibited or restricted, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other Subsidiary of the Company.
3. Covenants of the Company. The Company covenants and agrees as follows:
3.1. Amendments to Registration Statement. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
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3.2. Federal Securities Laws.
3.2.1. Compliance. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company, subject to Section 3.2.2, shall comply in all material respects with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement; and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems reasonably necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
3.2.2. Continued Compliance. Until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof, the Company shall comply in all material respects with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities and Representative’s Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities or Representative’s Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities and Representative’s Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser; or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement; and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or Representative Counsel shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.
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3.2.3. Exchange Act Registration. For a period of three (3) years after the date of this Agreement, the Company shall use its commercially reasonable efforts to maintain the registration of the shares of Common Stock under the Exchange Act. The Company shall not deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representative.
3.2.4. Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433.
3.2.5. Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
3.3. Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and Representative Counsel, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, upon request and without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
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3.4. Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.5. Events Requiring Notice to the Representative. The Company shall notify the Representative promptly and confirm the notice in writing: (i) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (ii) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (iii) of the receipt of any comments or request for any additional information from the Commission; and (iv) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (A) the Registration Statement in order to make the statements therein not misleading, or (B) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
3.6. Review of Financial Statements. For a period of three (3) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three (3) fiscal quarters immediately preceding the announcement of any quarterly financial information.
3.7. Listing. The Company shall use its commercially reasonable efforts to maintain the listing of the shares of Common Stock (including the Public Securities) on the Exchange for at least three (3) years from the date of this Agreement.
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3.8. Reports to the Representative.
3.8.1. Periodic Reports, etc. For a period of not less than one (1) year after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Current Report on Form 8-K prepared and filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section 3.8.1.
3.8.2. Transfer Agent; Transfer Sheets. For a period of one (1) year after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. ClearTrust LLC, is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock.
3.9. Payment of Expenses
3.9.1. General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering (including the Over-allotment Shares) with the Commission; (b) all Public Filing System filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of the Common Stock (including the Public Securities and as applicable, the Representative’s Securities) on the Exchange and such other stock exchanges as the Company and the Representative together determine; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors; (e) all fees, expenses and disbursements, if any, relating to the registration or qualification of the Public Securities and Representative’s Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate, as applicable; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs of preparing, printing and delivering certificates representing the Public Securities and Representative’s Securities, as applicable; (i) fees and expenses of the Transfer Agent for the shares of Common Stock; (j) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (k) the cost associated with the Underwriter’s use of book-building and compliance software for the Offering; (l) the costs associated with one set of bound volumes of the public offering materials as well as commemorative lucite mementos, each of which the Company or its designee shall provide within a reasonable time after the Closing Date in such quantities as the Representative may reasonably request; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) the fees and expenses of the Representative Counsel not to exceed $200,000; and (p) the Underwriter’s actual accountable “road show” expenses for the Offering; provided, that the maximum amount that the Company shall pay for items (d), (k), (l), (o) and (p) and shall be $200,000. In addition, the Company has agreed to pay the Representative closing costs, which shall include the reimbursement of the out-of-pocket cost of the escrow agent or clearing agent, as applicable, not exceeding $12,900. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters, other than amounts already advanced to the Representative as of the date of this Underwriting Agreement. The Company previously paid the Representative an advance in the amount of $25,000 to be applied towards accountable expenses due and payable to the Representative, which shall be reimbursed to the Company to the extent not actually incurred pursuant to the terms of this Agreement, in accordance with FINRA Rule 5110(g)(5)(B).
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3.9.2. Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.9.1, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Firm Shares (excluding the Option Shares), provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
3.10. Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
3.11. Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.
3.12. [RESERVED]
3.13. Internal Controls. The Company shall use its best efforts to maintain a system of internal accounting controls for itself sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
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3.14. Accountants. As of the date of this Agreement, the Company has retained an independent registered public accounting firm reasonably acceptable to the Representative, and the Company shall continue to retain an independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement. The Representative acknowledges that the Auditor is acceptable to the Representative.
3.15. FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 5% or more of any class of the Company’s securities or (iii) any beneficial owner of the Company’s unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement, is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
3.16. No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
3.17. Company Lock-Up Agreements.
3.17.1. Restriction on Sale of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of one (1) year after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our capital stock or any securities convertible into or exercisable or exchangeable for our shares of capital stock; (ii) file or caused to be filed any registration statement with the SEC relating to the offering of any of our capital stock or any securities convertible into or exercisable or exchangeable for our shares of capital stock; (iii) complete any offering of our debt securities, other than entering into a line of credit with a traditional bank; or (iv) enter into any swap or arrangement that transfers to another, in whole or in part, any of the economic consequences or ownership of our capital stock, whether any such transactions described in subsections (i), (ii), (iii) or (iv) above is to be settled by delivery of shares of our capital stock of the Company or such other securities, in cash or otherwise.
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The restrictions contained in this Section 3.17.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, of which the Representative has been advised in writing, (iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan of the Company or (iv) the filing of a registration statement on Form S-8 with the Commission.
Notwithstanding the foregoing, if (i) during the last seventeen (17) days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Section 3.17.1 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representative waives, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its stockholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its stockholders after the initial public offering date.
3.17.2. Restriction on Continuous Offerings. Notwithstanding the restrictions contained in Section 3.17.1, the Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 12 months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
3.18. Release of D&O Lock-up Period. If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.24 hereof for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
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3.19. Blue Sky Qualifications. The Company shall use its commercially reasonable efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities and Representative’s Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities and Representative’s Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
3.20. Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities and Representative’s Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will use its commercially reasonable efforts to file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
3.21. Emerging Growth Company Status. The Company shall promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period.
3.22. Investor Relations. The Company shall use commercially reasonable efforts to maintain and execute an active investor relations program for a period of twelve (12) months following the Closing Date.
4. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
4.1. Regulatory Matters.
4.1.1. Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by the Representative, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
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4.1.2. FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3. Exchange Stock Market Clearance. On the Closing Date, the Company’s shares of Common Stock, including the Firm Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
4.2. Company Counsel Matters.
4.2.1. Closing Date Opinions of Counsel. On the Closing Date, the Representative shall have received the favorable opinion and negative assurance letter of Sichenzia Ross Ference Carmel LLP, counsel to the Company, dated the Closing Date and addressed in form and substance acceptable to the Representative.
4.2.2. Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable opinion and negative assurance letter of counsel listed in Section 4.2.1, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsel in their opinion delivered on the Closing Date.
4.3. Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested.
4.4. Comfort Letters.
4.4.1. Cold Comfort Letter. Prior to the Closing Date the Representative shall have received a cold comfort letter containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to the Representative and to the Auditor, dated as of the date of this Agreement.
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4.4.2. Bring-down Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.
4.5. Officers’ Certificates.
4.5.1. Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer and its Chief Financial Officer stating that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to their knowledge, after reasonable inquiry, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
4.5.2. Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Closing Date, as the case may be, respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; and (iii) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
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4.5.3. Chief Financial Officer’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Chief Financial Officer of the Company, dated the Closing Date or the Option Closing Date, as the case may be, respectively, with respect to the accuracy of certain information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, in a form reasonably acceptable to the Representative.
4.6. No Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no Material Adverse Change or development involving a prospective Material Adverse Change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending, or to the Company’s knowledge, threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may result in a Material Adverse Change, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
4.7. Delivery of Agreements.
4.7.1. Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
4.7.2. Representative’s Warrants. On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Warrants.
4.8. Additional Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may reasonably require in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Securities as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.
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5. Indemnification.
5.1. Indemnification of the Underwriters.
5.1.1. General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses documented and reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (i) the Registration Statement, the Pricing Disclosure Package, the Preliminary Prospectus, the Prospectus, or in any Issuer Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (ii) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (iii) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information. With respect to any untrue statement or omission or alleged untrue statement or omission made in the Pricing Disclosure Package, the indemnity agreement contained in this Section 5.1.1 shall not inure to the benefit of any Underwriter Indemnified Party to the extent that any loss, liability, claim, damage or expense of such Underwriter Indemnified Party results from the fact that a copy of the Prospectus was not given or sent to the person asserting any such loss, liability, claim or damage at or prior to the written confirmation of sale of the Public Securities and Representative’s Securities to such person as required by the Securities Act and the Securities Act Regulations, and if the untrue statement or omission has been corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of non-compliance by the Company with its obligations under Section 3.3 hereof.
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5.1.2. Procedure. If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the reasonable approval of such Underwriter Indemnified Party) and payment of actual expenses. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter Indemnified Party unless (i) the employment of such counsel at the expense of the Company shall have been authorized in writing by the Company in connection with the defense of such action, or (ii) the Company shall not have employed counsel to have charge of the defense of such action within a reasonable time after receipt by the Company of notice of the institution of such action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events the reasonable fees and expenses of not more than one additional firm of attorneys selected by the Underwriter Indemnified Party (in addition to local counsel) shall be borne by the Company. Notwithstanding anything to the contrary contained herein, if any Underwriter Indemnified Party shall assume the defense of such action as provided above, the Company shall have the right to approve the terms of any settlement of such action, which approval shall not be unreasonably withheld.
5.2. Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees to promptly notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities and Representative’s Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.
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5.3. Contribution.
5.3.1. Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Public Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering of the Public Securities purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Common Stock purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, all documented and reasonably incurred legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
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5.3.2. Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several and not joint.
6. Defaults.
6.1. Default by an Underwriter. If any of the Underwriters shall default on the Closing Date (or on any Option Closing Date) in its obligation to take up and pay for the Firm Shares or the Option Shares to be purchased by it under the Underwriting Agreement on such date, the Representative shall have the right, within thirty-six (36) hours after such default, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Firm Shares or the Option Shares which such Underwriter shall have agreed but failed to take up and pay for. Absent the completion of such arrangements within such thirty-six (36)-hour period:
6.1.1. Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.1.2. Default Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 relates to more than 10% of the number of Firm Shares or Option Shares, the Representative may in its discretion arrange for itself or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the number of Firm Shares or Option Shares, the Representative does not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties reasonably satisfactory to the Representative to purchase said Firm Shares or Option Shares on such terms. In the event that neither the Representative nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by the Representative or the Company without liability on the part of the Company (except as provided in Sections 3.8 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
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6.1.3. Postponement of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, the Representative or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common Stock.
7. Additional Covenants.
7.1. Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Common Stock listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
7.2. Prohibition on Press Releases and Public Announcements. The Company shall not issue press releases or engage in any other publicity without the Representative’s prior written consent (which consent shall not be unreasonably withheld), for a period ending at 5:00 p.m., Eastern time, on the first (1st) Business Day following the forty-fifth (45th) day after the Closing Date, other than normal and customary releases issued in the ordinary course of the Company’s business.
8. Effective Date of this Agreement and Termination Thereof.
8.1. Effective Date. This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.
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8.2. Termination. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in the Representative’s reasonable opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in the Representative’s reasonable opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s reasonable judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities; or (ix) if any other event listed in the Engagement Agreement occurs which grants the Representative the right not to proceed with the Offering.
8.3. Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) up to an aggregate of $200,000, inclusive of any advance for accountable expenses previously paid by the Company to the Representative (the “Advance”) and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(5)(B).
8.4. Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
| 38 |
8.5. Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities or Representative’s Securities.
9. Tail Fee. The Representative shall be entitled to the same compensation for this offering set forth in Section 1.1.1 hereunder, calculated in the manner set forth therein, with respect to any public or private offering or other equity financing or capital-raising transaction of any kind (“Tail Financing”) to the extent that such financing or capital is provided to the Company by investors whom the Representative had contacted during the period of time starting on July 2, 2024 and ending on July 2, 2025 (the “Engagement Term”) or introduced to the Company during the Engagement Term, if such Tail Financing is consummated at any time within the Engagement Term or within 12 months following the termination of the Engagement Agreement. Notwithstanding the above, this provision shall be subject to the Company’s rights in accordance with FINRA Rule 5110(g)(5)(B).
10. Miscellaneous.
10.1. Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by facsimile transmission or email with confirmation and shall be deemed given when so delivered or faxed or emailed with confirmation or if mailed, two (2) days after such mailing.
If to the Representative:
Alexander Capital, L.P.
10 Drs James Parker Boulevard #202
Red Bank, New Jersey 07701
Attention: Jonathan Gazdak, Managing Director
Email: jgazdak@alexandercapitallp.com
with a copy (which shall not constitute notice) to:
Sullivan & Worcester LLP
1251 Avenue of the Americas
New York, NY 10020
Attn: David E. Danovitch, Esq.
Email: ddanovitch@sullivanlaw.com
| 39 |
If to the Company:
Callan JMB Inc.
244 Flightline Drive
Spring Branch, Texas 78070-6241
Attention: Wayne Williams, Chief Executive Officer
Email: wwilliams@coldchain-tech.com
with copies (which shall not constitute notice) to:
Sichenzia Ross Ference Carmel LLP
1185 Avenue of the Americas, 31st Floor
New York, NY 10036
Attention: Ross D. Carmel, Esq.
Email: rcarmel@srfc.law
10.2. Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
10.3. Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
10.4. Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and the Representative, dated July 2, 2024, as amended by that certain letter dated [____], 2024 (together, the “Engagement Agreement”), shall remain in full force and effect; provided that, in the event of any conflict between the terms of this Agreement and the Engagement Agreement, the terms of this Agreement shall control.
10.5. Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company, the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
| 40 |
10.6. Governing Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 10.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
10.7. Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
10.8. Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
[Signature Page Follows]
| 41 |
If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this Agreement shall constitute a binding agreement between us.
| Very truly yours, | ||
| CALLAN JMB INC. | ||
| By: | ||
| Wayne Williams | ||
| Chief Executive Officer | ||
| Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto: | ||
| ALEXANDER CAPITAL, L.P. | ||
| By: | ||
| Jonathan Gazdak | ||
| Managing Director | ||
[Callan JMB Inc. - Underwriting Agreement Signature Page]
SCHEDULE 1
| Underwriter | Total Number of Firm Shares to be Purchased |
Number of Additional Shares to be Purchased if the Over- Allotment Option is Fully Exercised | ||
| Alexander Capital, L.P. | [ ] | [ ] | ||
| TOTAL | [ ] | [ ] |
SCHEDULE 2-A
Pricing Information
Number of Firm Shares: [ ]
Number of Option Shares: [ ]
Public Offering Price per Share: $[ ]
Underwriting Discount per Share: $[ ]
Underwriting Non-accountable expense allowance per Share: $[ ]
Proceeds to Company per Share (before expenses): $[ ]
SCHEDULE 2-B
Written Testing-the-Waters Communications
None.
SCHEDULE 3
List of Lock-Up Parties
EXHIBIT A
Form of Representative’s Warrant
[See attached]
| A-1 |
EXHIBIT B
Form of Lock-Up Agreement
[__], 2024
Alexander Capital, L.P., as Representative
10 Drs James Parker Boulevard #202
Red Bank, New Jersey 07701
Ladies and Gentlemen:
The undersigned understands that you, as representative (the “Representative”) of the several Underwriters (as defined below), propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Callan JMB Inc., a Nevada corporation (the “Company”), providing for the initial public offering (the “Initial Public Offering”) by the several underwriters named in [ ] of the Underwriting Agreement of shares of common stock, par value $0.001 per share, of the Company (the “Shares”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement.
To induce the Representative to continue its efforts in connection with the Initial Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof and ending one (1) year after the date of the final prospectus (the “Prospectus”) relating to the Initial Public Offering (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Shares or any securities convertible into or exercisable or exchangeable for Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities.
| B-1 |
Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Initial Public Offering; (b) transfers of Lock-Up Securities as a bona fide gift or gifts or for estate planning purposes, by will, other testamentary document or intestacy or to a family member or trust for the benefit of a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned, directly or indirectly, controls a corporation, partnership, limited liability company, trust or other business entity, any transfers of Lock-Up Securities to any shareholder, partner or member of, or owner of similar equity interests in, the undersigned, as the case may be, (e) if required by the terms of a qualified domestic relations order, divorce settlement, divorce decree, separation agreement or court order, (f) transfers to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust, (g) transfers to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (b), (d), (e) or (f) above, (h) transfers to the Company from an employee or other service provider of the Company upon death, disability or termination of employment or service, in each case, of such employee or other service provider, (i) transfers to the Company in connection with the vesting, settlement, or exercise of restricted stock units, options, warrants or other rights to purchase shares of Common Stock (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement, or exercise of such restricted stock units, options, warrants or rights, provided that any such shares of Common Stock received upon such exercise, vesting or settlement shall be subject to the terms of this Lock-up Agreement, and provided further that any such restricted stock units, options, warrants or rights are held by the undersigned pursuant to an agreement or equity awards granted under a stock incentive plan or other equity award plan, each such agreement or plan which is described in the [Registration Statement, the Pricing Disclosure Package and the Prospectus], and (j) transfers pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Board of Directors of the Company and made to all holders of the Company’s capital stock involving a Change of Control (as defined below) of the Company (for purposes hereof, “Change of Control” shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons, of shares of capital stock if, after such transfer, such person or group of affiliated persons would hold at least a majority of the outstanding voting securities of the Company (or the surviving entity)); provided that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Lock-Up Securities shall remain subject to the provisions of this Lock-up Agreement; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c), (d) or (g), if applicable, (i) any such transfer shall not involve a disposition for value and (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s Transfer Agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
If (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this lock-up agreement shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representative waives, in writing, such extension.
If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed Shares the undersigned may purchase in the Initial Public Offering.
| B-2 |
The Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
No provision in this lock-up agreement shall be deemed to restrict or prohibit the exercise, exchange or conversion by the undersigned of any securities exercisable or exchangeable for or convertible into Shares, as applicable; provided that the undersigned does not transfer the Shares acquired on such exercise, exchange or conversion during the Lock-Up Period, unless otherwise permitted pursuant to the terms of this lock-up agreement. In addition, no provision herein shall be deemed to restrict or prohibit the entry into or modification of a so-called “10b5-1” plan at any time (other than the entry into or modification of such a plan in such a manner as to cause the sale of any Lock-Up Securities within the Lock-Up Period).
The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Initial Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns. The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this lock-up agreement and that this lock-up agreement has been duly authorized (if the undersigned is not a natural person) and constitutes the legal, valid and binding obligation of the undersigned, enforceable in accordance with its terms. Upon request, the undersigned hereby agrees to execute any additional documents necessary in connection with the enforcement hereof.
The undersigned understands that, if the Underwriting Agreement is not executed by [__], 2024, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Shares to be sold thereunder, then this lock-up agreement shall be void and of no further force or effect.
Whether or not the Initial Public Offering actually occurs depends on a number of factors, including market conditions. The Initial Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.
This agreement and any matters related to this lock-up agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflict of laws that would result in the application of any law other than the laws of the State of New York. The undersigned agrees that any suit or proceeding arising in respect of this lock-up agreement will be tried exclusively in the U.S. District Court for the Southern District of New York or, if that court does not have subject matter jurisdiction, in any state court located in the City and County of New York and the undersigned agrees to submit to the jurisdiction of, and to venue in, such courts.
Delivery of a signed copy of this lock-up agreement by facsimile or e-mail/.pdf transmission shall be as effective as the delivery of the original hereof.
[Signature page follows]
| B-3 |
| Very truly yours, | ||
| (Name - Please Print) | ||
| (Name of Signatory, in the case of entities - Please Print) | ||
| (Signature) | ||
| (Title of Signatory, in the case of entities - Please Print) | ||
| Address: | ||
| B-4 |
EXHIBIT C
Form of Press Release
Callan JMB Inc.
[Date]
Callan JMB Inc. (the “Company”) announced today that Alexander Capital, L.P., acting as representative for the underwriters in the Company’s initial public offering of _______ shares of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to _________ shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares may be sold on or after such date.
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.
Exhibit 4.1
Representative’s Warrant Agreement
THE REGISTERED HOLDER OF THIS PURCHASE WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE WARRANT OR CAUSE IT TO BE THE SUBJECT OF ANY HEDGING, SHORT SALE, DERIVATIVE, PUT, OR CALL TRANSACTION THAT WOULD RESULT IN THE EFFECTIVE ECONOMIC DISPOSITION OF THE PURCHASE WARRANT BY ANY PERSON FOR A PERIOD OF ONE YEAR FOLLOWING THE COMMENCEMENT DATE (DEFINED BELOW) TO ANYONE OTHER THAN (I) ALEXANDER CAPITAL, L.P. OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF ALEXANDER CAPITAL, L.P. OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER AND IN ACCORDANCE WITH FINRA RULE 5110(E)(2).
THIS PURCHASE WARRANT IS NOT EXERCISABLE PRIOR TO [______], 2025. VOID AFTER 5:00 P.M., EASTERN TIME, [_____], 2029.
COMMON STOCK PURCHASE WARRANT
For
the Purchase of Up To [____] Shares of Common Stock
of
CALLAN JMB INC.
THIS CERTIFIES THAT, in consideration of funds duly paid by or on behalf of Alexander Capital, L.P. (“Holder”), as registered owner of this Common Stock Purchase Warrant (this “Purchase Warrant”), to Callan JMB Inc. a Nevada corporation (the “Company”), Holder is entitled, at any time or from time to time from one hundred eighty (180) days following [_______], 2024, (the “Commencement Date”), and at or before 5:00 p.m., Eastern time, [_____]1, 2029 (the “Expiration Date”), but not thereafter, to subscribe for, purchase and receive, in whole or in part, up [_____] shares (the “Shares”) of common stock of the Company, par value $0.001 per share (the “Common Stock”), subject to adjustment as provided in Section 5 hereof. If the Expiration Date is a day on which banking institutions are authorized by law to close, then this Purchase Warrant may be exercised on the next succeeding day which is not such a day in accordance with the terms herein. During the period ending on the Expiration Date, the Company agrees not to take any action that would terminate this Purchase Warrant. This Purchase Warrant is initially exercisable at $[____] per Share; provided, however, that upon the occurrence of any of the events specified in Section 5 hereof, the rights granted by this Purchase Warrant, including the exercise price per Share and the number of Shares to be received upon such exercise, shall be adjusted as therein specified. This Purchase Warrant is being issued pursuant to the certain Underwriting Agreement (the “Underwriting Agreement”), dated [_____], 2024, by and among the Company, the Representative and other underwriters named therein, providing for the public offering (the “Offering”) of shares of Common Stock. The term “Exercise Price” shall mean the initial exercise price or the adjusted exercise price, as applicable. Initially capitalized terms not otherwise defined herein shall have the meanings given to those terms in the Underwriting Agreement.
1. Exercise.
1.1 Exercise Form. In order to exercise this Purchase Warrant, the exercise form attached hereto (the “Notice of Exercise”) must be duly executed and completed and delivered to the Company, together with this Purchase Warrant and payment of the Exercise Price for the Shares being purchased payable in cash by wire transfer of immediately available funds to an account designated by the Company or by certified check or official bank check. If the subscription rights represented hereby shall not be exercised at or before 5:00 p.m., Eastern time, on the Expiration Date, this Purchase Warrant shall become and be void without further force or effect, and all rights represented hereby shall cease and expire.
1Insert the date that is 5 years from the commencement of sales of securities in the Company’s initial public offering.
1.2 Cashless Exercise. If at any time after one hundred eighty (180) days following the Commencement Date there is no effective registration statement registering or no current prospectus available for the resale of the Shares by the Holder, then in lieu of exercising this Purchase Warrant by payment of cash or check payable to the order of the Company pursuant to Section 1.1 above, Holder may elect to receive the number of Shares equal to the value of this Purchase Warrant (or the portion thereof being exercised), by surrender of this Purchase Warrant to the Company, together with the exercise form attached hereto, in which event the Company shall issue to Holder, Shares in accordance with the following formula:
| X = | Y(A-B) |
| A |
Where,
X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share; and
B = The Exercise Price.
For purposes of this Section 1.2, the fair market value of a Share is defined as follows:
(i) if the Company’s Common Stock is traded on a securities exchange, the fair market value shall be deemed to be the closing price on such exchange on the Trading Day (as defined below) immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or
(ii) if the Company’s Common Stock is actively traded over-the-counter, the fair market value shall be deemed to be the closing bid price on the Trading Day immediately prior to the date the exercise form is submitted to the Company in connection with the exercise of the Purchase Warrant; or
(iii) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Company’s Board of Directors.
As used herein and below, “Trading Day” means a day on which the principal Trading Market or if applicable, the OTCQB or OTCQX Markets operated by OTC Markets Group, Inc., or any similar over the counter market is open for trading; and “Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or any successors to any of the foregoing.
1.3 [Reserved]
1.4 No Obligation to Net Cash Settle. Notwithstanding anything to the contrary contained in this Purchase Warrant, in no event will the Company be required to net cash settle the exercise of the Purchase Warrant. The holder of the Purchase Warrant will not be entitled to exercise the purchase option unless it exercises such Purchase Warrant pursuant to the cashless exercise right or a registration statement is effective, or an exemption from the registration requirements is available at such time and, if the Holder is not able to exercise the Purchase Warrant, the Purchase Warrant will expire worthless.
| 2 |
1.5 Mechanics of Exercise.
(i) Delivery of Shares Upon Exercise. The Company shall cause the Shares purchased hereunder to be transmitted by ClearTrust LLC (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Shares to or resale of the Shares by the Holder or (B) the Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 (assuming cashless exercise of the Purchase Warrants), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise, provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period (as defined below) after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). Upon delivery of the Notice of Exercise, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Shares with respect to which this Purchase Warrant has been exercised, irrespective of the date of delivery of the Shares, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period following delivery of the Notice of Exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Purchase Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise.
(ii) Delivery of New Warrants Upon Exercise. If this Purchase Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Purchase Warrant certificate, at the time of delivery of the Shares, deliver to the Holder a new Purchase Warrant evidencing the rights of the Holder to purchase the unpurchased Shares called for by this Purchase Warrant, which new Purchase Warrant shall in all other respects be identical with this Purchase Warrant.
(iii) Rescission Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder the Shares pursuant to Section 1.5(i) hereof by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise.
(iv) Compensation for Buy-In on Failure to Timely Deliver Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause the Transfer Agent to transmit to the Holder the Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date (other than any such failure that is solely due to any action or inaction by the Holder with respect to such exercise), and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Purchase Warrant and equivalent number of Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
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(v) No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Purchase Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
(vi) Charges, Taxes and Expenses. Issuance of Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Shares, all of which taxes and expenses shall be paid by the Company, and such Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Shares are to be issued in a name other than the name of the Holder, this Purchase Warrant when surrendered for exercise shall be accompanied by the assignment form attached hereto (the “Assignment Form”) duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all Transfer Agent fees required for same-day processing of any Notice of Exercise.
(vii) Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Purchase Warrant, pursuant to the terms hereof.
1.6 Holder’s Exercise Limitations. The Company shall not effect any exercise of this Purchase Warrant, and a Holder shall not have the right to exercise any portion of this Purchase Warrant, pursuant to Section 1 hereof or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates (as defined below), and any other Persons (as defined below) acting as a group together with the Holder or any of the Holder’s Affiliates (such Persons, “Attribution Parties”)), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates and Attribution Parties shall include the number of shares of Common Stock issuable upon exercise of this Purchase Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Purchase Warrant beneficially owned by the Holder or any of its Affiliates or Attribution Parties and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents (as defined below)) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates or Attribution Parties. Except as set forth in the preceding sentence, for purposes of this Section 1.6, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 1.6 applies, the determination of whether this Purchase Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Purchase Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Purchase Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates and Attribution Parties) and of which portion of this Purchase Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 1.6, in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the U.S. Securities and Exchange Commission (the “Commission”), as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within one Trading Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Purchase Warrant, by the Holder or its Affiliates or Attribution Parties since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Purchase Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 1.6, provided that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Purchase Warrant held by the Holder and the provisions of this Section 1.6 shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this paragraph shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 1.6 to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to a successor holder of this Purchase Warrant. As used herein, “Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act; “Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
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2. Transfer.
2.1 General Restrictions. The registered Holder of this Purchase Warrant agrees by his, her or its acceptance hereof, that such Holder will not: (a) sell, transfer, assign, pledge or hypothecate this Purchase Warrant for a period of one hundred eighty (180) days following the Commencement Date to anyone other than: (i) Alexander Capital, L.P. (“Alexander Capital”) or another underwriter or a selected dealer participating in the Offering, or (ii) a bona fide officer or partner of Alexander Capital or of any such underwriter or selected dealer, in each case in accordance with FINRA Rule 5110(e)(1), or (b) cause this Purchase Warrant or the securities issuable hereunder to be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of this Purchase Warrant or the securities hereunder, except as provided for in FINRA Rule 5110(e)(2). On and or after the Commencement Date, or the date on which this Purchase Warrant was initially issued by the Company, as applicable, transfers of the Purchase Warrant and/or the underlying Shares to others may be made subject to compliance with or exemptions from applicable securities laws, including Rule 144 promulgated under the Securities Act. In order to make any permitted assignment, the Holder must deliver to the Company the Assignment Form duly executed and completed, together with this Purchase Warrant and payment of all transfer taxes, if any, payable in connection therewith. The Company shall within five (5) Business Days transfer this Purchase Warrant on the books of the Company and shall execute and deliver a new purchase warrants or purchase warrants of like tenor to the appropriate assignee(s) expressly evidencing the right to purchase the aggregate number of Shares purchasable hereunder or such portion of such number as shall be contemplated by any such assignment.
2.2 [Reserved]
3. Registration Rights.
3.1 “Piggy-Back” Registration.
3.1.1 Grant of Right. Unless any portion of the Shares underlying this Purchase Warrant and the shares of Common Stock underlying all of the other Representative’s Warrants (collectively, the “Registrable Securities”) are included in an effective registration statement with a current prospectus, the Holder, along with the holders of all of the other Representative’s Warrants (as such term is defined in the Underwriting Agreement) shall have the right, for a period of no more than seven (7) years from the Commencement Date in accordance with FINRA Rule 5110(g)(8)(D), to include any portion of the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of shares of Common Stock which may be included in the registration statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Securities with respect to which the Holder and the holders of the other Representative’s Warrants have requested inclusion thereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holder and the holders of the other Representative’s Warrants seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by the holder and the holders of the other Representative’s Warrants; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such registration statement or are not entitled to pro rata inclusion with the Registrable Securities.
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3.1.2 Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 3.1.1 hereof, but the Holder and the holders of the other Representative’s Warrants shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holder and the holders of the other Representative Warrants to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to such holders shall continue to be given for each registration statement filed by the Company until such time as all of the Registrable Securities have been sold by the Holder and the holders of the other Representative Warrants. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement.
3.2 General Terms.
3.2.1 Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters contained in Section 5.1 of the Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company and its affiliates, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
3.2.2 Exercise of Purchase Warrant. Nothing contained in this Purchase Warrant shall be construed as requiring the Holder to exercise this Purchase Warrant prior to or after the initial filing of any registration statement or the effectiveness thereof.
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3.2.3 Documents Delivered to Holders. The Company shall furnish to each Holder participating in any underwritten offerings and to each underwriter of any such offering, a signed counterpart, addressed to such Holder and underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the underwritten offering requesting the correspondence and memoranda described below and to the managing underwriter copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
3.2.4 Underwriting Agreement. In the event the Company shall enter into an underwriting agreement with any managing underwriter(s), if any, selected by the Company with respect to the Registrable Securities that are being registered pursuant to this Section 3, which managing underwriter shall be reasonably satisfactory to the holders of at least 51% of the Registerable Securities, such agreement shall be reasonably satisfactory in form and substance to the Company and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Shares and their intended methods of distribution.
3.2.5 Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
3.2.6 Damages. Should the registration or the effectiveness thereof required by Section 3.1 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to seek specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
4. New Purchase Warrants to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in Section 2 hereof, this Purchase Warrant may be exercised or assigned in whole or in part. In the event of the exercise or assignment hereof in part only, upon surrender of this Purchase Warrant for cancellation, together with the duly executed exercise or assignment form and funds sufficient to pay any Exercise Price and/or transfer tax if exercised pursuant to Section 1.1 hereof, the Company shall cause to be delivered to the Holder without charge a new Purchase Warrant of like tenor to this Purchase Warrant in the name of the Holder evidencing the right of the Holder to purchase the number of Shares purchasable hereunder as to which this Purchase Warrant has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Purchase Warrant and of reasonably satisfactory indemnification or the posting of a bond, the Company shall execute and deliver a new Purchase Warrant of like tenor and date. Any such new Purchase Warrant executed and delivered as a result of such loss, theft, mutilation or destruction shall constitute a substitute contractual obligation on the part of the Company.
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5. Adjustments.
5.1 Adjustments to Exercise Price and Number of Securities. The Exercise Price and the number of Shares underlying this Purchase Warrant shall be subject to adjustment from time to time as hereinafter set forth:
5.1.1 Share Dividends; Stock Splits. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares is increased by a stock dividend payable in Shares or by a stock split of shares of Common Stock or other capital stock of the Company, or other similar event, then, on the effective day thereof, the number of Shares purchasable hereunder shall be increased in proportion to such increase in outstanding shares, and the Exercise Price shall be proportionately decreased.
5.1.2 Aggregation of Shares. If, after the date hereof, and subject to the provisions of Section 5.3 below, the number of outstanding Shares is decreased by a consolidation, combination or reclassification of shares of Common Stock or other capital stock of the Company, or other similar event, then, on the effective date thereof, the number of Shares purchasable hereunder shall be decreased in proportion to such decrease in outstanding shares, and the Exercise Price shall be proportionately increased.
5.1.3 Replacement of Securities upon Reorganization, etc. In case of any reclassification or reorganization of the outstanding shares of Common Stock or other capital stock of the Company, other than a change covered by Section 5.1.1 or 5.1.2 hereof or that solely affects the par value of such Shares, or in the case of any share reconstruction or amalgamation or consolidation of the Company with or into another corporation or other entity (other than a consolidation or share reconstruction or amalgamation in which the Company is the continuing corporation and that does not result in any reclassification or reorganization of the Company’s outstanding shares), or in the case of any sale or conveyance to another corporation or entity of the property of the Company as an entirety or substantially as an entirety in connection with which the Company is dissolved, the Holder of this Purchase Warrant shall have the right thereafter (until the expiration of the right of exercise of this Purchase Warrant) to receive upon the exercise hereof, for the same aggregate Exercise Price payable hereunder immediately prior to such event, the kind and amount of shares of stock or other securities or property (including cash) receivable upon such reclassification, reorganization, share reconstruction or amalgamation, or consolidation, or upon a dissolution following any such sale or transfer, by a Holder of the number of Shares of the Company obtainable upon exercise of this Purchase Warrant immediately prior to such event; and if any reclassification also results in a change in Shares covered by Section 5.1.1 or 5.1.2 hereof, then such adjustment shall be made pursuant to Sections 5.1.1, 5.1.2 hereof and this Section 5.1.3. The provisions of this Section 5.1.3 shall similarly apply to successive reclassifications, reorganizations, share reconstructions or amalgamations, or consolidations, sales or other transfers.
5.1.4 Changes in Form of Purchase Warrant. This form of Purchase Warrant need not be changed because of any change pursuant to this Section 5.1, and Purchase Warrants issued after such change may state the same Exercise Price and the same number of Shares as are stated in the Purchase Warrants initially issued to the Holder. The acceptance by any Holder of the issuance of new Purchase Warrants reflecting a required or permissive change shall not be deemed to waive any rights to an adjustment occurring after the Commencement Date or the computation thereof.
5.2 Substitute Purchase Warrant. In case of any consolidation of the Company with, or share reconstruction or amalgamation of the Company with or into, another corporation or other entity (other than a consolidation or share reconstruction or amalgamation which does not result in any reclassification or change of the outstanding Shares), the corporation or other entity formed by such consolidation or share reconstruction or amalgamation shall execute and deliver to the Holder a supplemental Purchase Warrant providing that the holder of each Purchase Warrant then outstanding or to be outstanding shall have the right thereafter (until the stated expiration of such Purchase Warrant) to receive, upon exercise of such Purchase Warrant, the kind and amount of shares of stock and other securities and property receivable upon such consolidation or share reconstruction or amalgamation, by a holder of the number of Shares of the Company for which such Purchase Warrant might have been exercised immediately prior to such consolidation, share reconstruction or amalgamation, sale or transfer. Such supplemental Purchase Warrant shall provide for adjustments which shall be identical to the adjustments provided for in this Section 5. The above provision of this Section 5.2 shall similarly apply to successive consolidations or share reconstructions or amalgamations.
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5.3 Elimination of Fractional Interests. The Company shall not be required to issue certificates representing fractions of Shares upon the exercise of this Purchase Warrant, nor shall it be required to issue scrip or pay cash in lieu of any fractional interests, it being the intent of the parties that all fractional interests shall be eliminated by rounding any fraction up or down, as the case may be, to the nearest whole number of Shares or other securities, properties or rights.
6. Reservation and Listing. The Company shall at all times reserve and keep available out of its authorized Shares, solely for the purpose of issuance upon exercise of this Purchase Warrant, such number of Shares or other securities, properties or rights as shall be issuable upon the exercise thereof. The Company covenants and agrees that, upon exercise of this Purchase Warrant and payment of the Exercise Price therefor, in accordance with the terms hereby, all Shares and other securities issuable upon such exercise shall be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights of any stockholder. As long as this Purchase Warrant shall be outstanding, the Company shall use commercially reasonable efforts to cause all Shares issuable upon exercise of this Purchase Warrant to be listed (subject to official notice of issuance) on all national securities exchanges (or, if applicable, on the OTC Bulletin Board or any successor trading market) on which the shares of Common Stock issued to the public in the Offering may then be listed and/or quoted.
7. Certain Notice Requirements.
7.1 Holder’s Right to Receive Notice. Nothing herein shall be construed as conferring upon the Holders the right to vote or consent or to receive notice as a stockholder for the election of directors or any other matter, or as having any rights whatsoever as a stockholder of the Company. If, however, at any time prior to the expiration of this Purchase Warrant and their exercise, any of the events described in Section 7.2 below shall occur, then, in one or more of said events, the Company shall give written notice of such event at least fifteen (15) days prior to the date fixed as a record date or the date of closing the transfer books for the determination of the stockholders entitled to such dividend, distribution, conversion or exchange of securities or subscription rights, or entitled to vote on such proposed dissolution, liquidation, winding up or sale. Such notice shall specify such record date or the date of the closing of the transfer books, as the case may be. Notwithstanding the foregoing, the Company shall deliver to each Holder a copy of each notice given to the other stockholders of the Company at the same time and in the same manner that such notice is given to the stockholders.
7.2 Events Requiring Notice. The Company shall be required to give the notice described in this Section 7 upon one or more of the following events: (i) if the Company shall take a record of the holders of its shares of Common Stock for the purpose of entitling them to receive a dividend or distribution payable otherwise than in cash, or a cash dividend or distribution payable otherwise than out of retained earnings, as indicated by the accounting treatment of such dividend or distribution on the books of the Company, (ii) the Company shall offer to all the holders of its shares of Common Stock any additional shares of capital stock of the Company or securities convertible into or exchangeable for shares of capital stock of the Company, or any option, right or warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation or share reconstruction or amalgamation) or a sale of all or substantially all of its property, assets and business shall be proposed.
7.3 Notice of Change in Exercise Price. The Company shall, promptly after an event requiring a change in the Exercise Price pursuant to Section 5 hereof, send notice to the Holders of such event and change (“Price Notice”). The Price Notice shall describe the event causing the change and the method of calculating same and shall be certified as being true and accurate by the Company’s Chief Financial Officer.
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7.4 Transmittal of Notices. All notices, requests, consents and other communications under this Purchase Warrant shall be in writing and shall be deemed to have been duly made when hand delivered, or mailed by express mail or private courier service: (i) if to the registered Holder of this Purchase Warrant, to the address of such Holder as shown on the books of the Company, or (ii) if to the Company, to following address or to such other address as the Company may designate by notice to the Holders:
If to the Holder:
Alexander Capital, L.P.
10 Drs James Parker Boulevard #202
Red Bank, New Jersey 07701
Attention: Jonathan Gazdak, Managing Director
Email: jgazdak@alexandercapitallp.com
with a copy (which shall not constitute notice) to:
Sullivan
& Worcester LLP
1251 Avenue of the Americas
New York, New York 10020
Attn: David E. Danovitch, Esq.
Email: ddanovitch@sullivanlaw.com
If to the Company:
Callan JMB Inc.
244 Flightline Drive
Spring Branch, Texas 78070-6241
Attention: Wayne Williams, Chief Executive Officer
Email: wwilliams@coldchain-tech.com
with copies (which shall not constitute notice) to:
Sichenzia Ross Ference Carmel LLP
1185 Avenue of the Americas, 31st Floor
New York, New York 10036
Attention: Ross D. Carmel Esq.
Email: rcarmel@srfc.law
8. Miscellaneous.
8.1 Amendments. The Company and Alexander Capital may from time to time supplement or amend this Purchase Warrant without the approval of any of the Holders in order to cure any ambiguity, to correct or supplement any provision contained herein that may be defective or inconsistent with any other provisions herein, or to make any other provisions in regard to matters or questions arising hereunder that the Company and Alexander Capital may deem necessary or desirable and that the Company and Alexander Capital deem shall not adversely affect the interest of the Holders. All other modifications or amendments shall require the written consent of and be signed by the party against whom enforcement of the modification or amendment is sought.
8.2 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Purchase Warrant.
8.3 Entire Agreement. This Purchase Warrant (together with the Underwriting Agreement and the other agreements and documents being delivered pursuant to or in connection with this Purchase Warrant and the Offering) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof.
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8.4 Binding Effect. This Purchase Warrant shall inure solely to the benefit of and shall be binding upon, the Holder and the Company and their permitted assignees, respective successors, legal representative and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Purchase Warrant or any provisions herein contained.
8.5 Governing Law; Submission to Jurisdiction; Trial by Jury. This Purchase Warrant shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Purchase Warrant shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 7 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company and the Holder agree that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and the Holder hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
8.6 Waiver, etc. The failure of the Company or the Holder to at any time enforce any of the provisions of this Purchase Warrant shall not be deemed or construed to be a waiver of any such provision, nor to in any way affect the validity of this Purchase Warrant or any provision hereof or the right of the Company or any Holder to thereafter enforce each and every provision of this Purchase Warrant. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Purchase Warrant shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
8.7 Execution in Counterparts. This Purchase Warrant may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Such counterparts may be delivered by facsimile transmission or other electronic transmission.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Purchase Warrant to be signed by its duly authorized officer as of the [__]th day of [_____], 2024.
| Very truly yours, | ||
| CALLAN JMB INC. | ||
| By: | ||
| Wayne Williams | ||
| Chief Executive Officer | ||
| 12 |
[Form to be used to exercise Purchase Warrant]
Date: _______________, 20___
The undersigned hereby elects irrevocably to exercise the Purchase Warrant for shares of common stock, par value $0.001 per share (the “Shares”), of Callan JMB Inc., a Nevada corporation (the “Company”), and hereby makes payment of $ (at the rate of $[●] per Share) in payment of the Exercise Price pursuant thereto. Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
Or
The undersigned hereby elects irrevocably to convert its right to purchase ___ Shares of the Company under the Purchase Warrant for ______ Shares, as determined in accordance with the following formula:
| X = | Y(A-B) |
| A |
Where,
X = The number of Shares to be issued to Holder;
Y = The number of Shares for which the Purchase Warrant is being exercised;
A = The fair market value of one Share which is equal to $_____; and
B = The Exercise Price which is equal to $______ per share
The undersigned agrees and acknowledges that the calculation set forth above is subject to confirmation by the Company and any disagreement with respect to the calculation shall be resolved by the Company in its sole discretion.
Please issue the Shares as to which this Purchase Warrant is exercised in accordance with the instructions given below and, if applicable, a new Purchase Warrant representing the number of Shares for which this Purchase Warrant has not been exercised.
Signature
Signature Guaranteed
| 13 |
[Form to be used to assign Purchase Warrant]
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of the within Purchase Warrant):
FOR VALUE RECEIVED, __________________ does hereby sell, assign and transfer unto
| Name: | ||
| (Please Print) | ||
| Address: | ||
| (Please Print) | ||
| Phone Number: | ||
| Email Address: |
the right to purchase shares of common stock, par value $0.001 per share, of Callan JMB Inc., a Nevada corporation (the “Company”), evidenced by the Purchase Warrant and does hereby authorize the Company to transfer such right to _________ on the books of the Company.
Dated: __________, 20__
Signature
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name as written upon the face of the within Purchase Warrant without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank, other than a savings bank, or by a trust company or by a firm having membership on a registered national securities exchange.
| 14 |
Exhibit 10.11
FORM OF CALLAN JMB INC.
INDEPENDENT DIRECTORS AGREEMENT
This BOARD OF DIRECTORS AGREEMENT (“Agreement”) dated as of October 1st, 2024, by and between Callan JMB Inc., a Nevada corporation (the “Company”), and the undersigned signatory (the “Director”), provides for director services, according to the following terms and conditions:
| I. | Position and Responsibilities |
| (a) | Position. As of the Effective Date, the Board of Directors hereby appoints the Director to serve as a Board member until the next annual meeting of the Company’s shareholders or until his earlier resignation, removal or death. The Director shall perform such duties and responsibilities as are customarily related to such position in accordance with Company’s bylaws and applicable law, including, but not limited to, those services described on Exhibit A attached hereto (the “Services”). Director hereby agrees to use his best efforts to provide the Services. Director shall not allow any other person or entity to perform any of the Services for or instead of Director. Director shall comply with the statutes, rules, regulations and orders of any governmental or quasi- governmental authority, which are applicable to the Company and the performance of the Services, and Company’s rules, regulations, and practices as they may from time-to-time be adopted or modified. | |
| (b) | Other Activities. Director may be employed by another company, may serve on other Boards of Directors or Advisory Boards, and may engage in any other business activity (whether or not pursued for pecuniary advantage), as long as such outside activities do not violate Director’s obligations under this Agreement or Director’s fiduciary obligations to the Company’s shareholders. The ownership of less than a 5% interest in an entity, by itself, shall not constitute a violation of this duty. Director represents that Director has no outstanding agreement or obligation that is in conflict with any of the provisions of this Agreement, and Director agrees to use his best efforts to avoid or minimize any such conflict and agrees not to enter into any agreement or obligation that could create such a conflict without the approval of a majority of the Board of Directors. If, at any time, Director is required to make any disclosure or take any action that may conflict with any of the provisions of this Agreement, Director will promptly notify the Board of such obligation, prior to making such disclosure or taking such action. | |
| (c) | No Conflict. Director will not engage in any activity that creates an actual or perceived conflict of interest with Company, regardless of whether such activity is prohibited by Company’s conflict of interest guidelines or this Agreement, and Director agrees to notify the Board of Directors before engaging in any activity that could reasonably be assumed to create a potential conflict of interest with Company. Notwithstanding the provisions of Section 1(b) hereof, Director shall not engage in any activity that is in direct competition with the Company or serve in any capacity (including, but not limited to, as an employee, consultant, advisor or director) in any company or entity that competes directly or indirectly with the Company, as reasonably determined by a majority of Company’s disinterested board members, without the approval of the Board of Directors. |
The Director agrees, subject to the Director’s continued status as a director, to serve on the Company’s Board of Directors (the “Board”) and to provide those services required of a director under the Company’s amended and restated certificate of incorporation and amended and restated bylaws, as both may be amended from time to time (“Charter Documents”) and under the federal securities laws and other state and federal laws and regulations, as applicable, and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and any stock exchange or quotation system on which the Company’s securities may be traded from time to time. Director will also serve on such one or more committees of the Board as he or she and the Board shall mutually agree.
| 1 |
| II. | Nature of Relationship |
| A. | The Director is an independent contractor and will not be deemed as an employee of the Company for any purposes by virtue of this Agreement. The Director shall be solely responsible for the payment or withholding of all federal, state, or local income taxes, social security taxes, unemployment taxes, and any and all other taxes relating to the compensation he or she earns under this Agreement. The Director shall not, in his or her capacity as a director of the Company, enter into any agreement or incur any obligations on the Company’s behalf, without appropriate Board action. |
| B. | The Company will supply, at no cost to the Director: periodic briefings on the business, director packages for each board and committee meeting, copies of minutes of meetings and any other materials that are required under the Company’s Charter Documents or the charter of any committee of the Board on which the Director serves and any other materials which may, by mutual agreement, be necessary for performing the services requested under this Agreement. |
| III. | Director’s Representations and Warranties |
| A. | The Director represents and warrants that no other party has exclusive rights to his services in the specific areas in which the Company is conducting business and that the Director is in no way compromising any rights or trust between any other party and the Director or creating a conflict of interest as a result of his or her participation on the Board. The Director also represents, warrants and covenants that so long as the Director serves on the Board, the Director will not enter into another agreement that will create a conflict of interest with this Agreement or the Company. The Director further represents, warrants and covenants that he or she will comply with the Company’s Articles, Bylaws, policies and guidelines, all applicable laws and regulations, including Sections 10 and 16 of the Securities Exchange Act of 1934, as amended, and listing rules of The Nasdaq Stock Market LLC or any other stock exchanges on which the Company’s securities may be traded; that if he or she is designated by the Board as an independent director, he or she shall promptly notify the Board of any circumstances that may potentially impair his or her independence as a director of the Company; and that he or she shall promptly notify the Board of any arrangements or agreements relating to compensation provided by a third party to him or her in connection with his or her status as a director or director nominee of the Company or the services requested under this Agreement. |
| B. | Throughout the term of this Agreement, the Director agrees he or she will not, without obtaining the Company’s prior written consent, directly or indirectly engage or prepare to engage in any activity in competition with the Company’s business, products or services, including without limitation, products or services in the development stage, accept employment or provide services to (including but not limited to service as a member of a board of directors), or establish a business in competition with the Company; provided, however, that the Director may serve or continue to serve as an officer or director of one or more entities that are affiliated with the Company, including without limitation, entities in which the Company does not have a majority holding. |
| IV. | Fees |
| A. | Cash Fee. Subject to Section VI and during the term of this Agreement, the Company shall pay the Director, if the Company does not otherwise compensate the Director as an officer or employee, a non-refundable base fee of $6,250 and 6,250 of Company’s common stock shares per quarter in consideration for the Director providing the services described in Section I which shall compensate him or her for all time spent preparing for, travelling to (if applicable) and attending Board or committee meetings. This cash fees may be revised by action of the Board from time to time. Such revision shall be effective as of the date specified in the resolution for payments not yet earned and need not be documented by an amendment to this Agreement to be effective. In addition, if the non- employee Director serves as the chairperson of any standing committee of the Board, he or she may be entitled to additional cash compensation as decided by the Board (or the compensation committee thereof) in its sole discretion. |
| 2 |
| B. | Payment. Cash fees shall be paid quarterly at the beginning of each calendar quarter. No invoices need be submitted by the Director for payment of the Base or Chair Fee. |
| A. | Equity Compensation. The Director shall be entitled to participate in any Company equity incentive plan adopted by the Board of Directors after the date hereof providing for the issuance of shares of the Company’s common stock, or options to acquire such shares, to the extent generally afforded to executive officers of the Company and in such amounts as the Board of Directors in the exercise of its fiduciary duties shall from time to time determine |
| B. | Expenses. During the term of this Agreement, the Company will reimburse the Director for reasonable business related expenses approved by the Company in advance, such approval not to be unreasonably withheld. Invoices for expenses, with receipts attached, shall be submitted. Such invoices must be approved by the Company’s Chief Executive Officer or Chief Financial Officer as to form and completeness. |
| V. | Indemnification and Insurance |
The Company will execute an indemnification agreement in favor of the Director substantially in the form of the agreement attached hereto as Exhibit C (the “Indemnification Agreement”). In addition, so long as the Company’s indemnification obligations exist under the Indemnification Agreement, the Company shall provide the Director with directors’ and officers’ liability insurance coverage in the amounts specified in the Indemnification Agreement.
| VI. | Term of Agreement and Amendments |
This Agreement shall commence from the date the Company’s FormS-1 registration statement goes effective with the U.S. Securities and Exchange Commission (the “Effective Date”) for the Company’s proposed initial public offering of securities (the “Public Offering” ) under the Securities Act of 1933, as amended (the “Securities Act”), and shall continue for a period of one (1) year from the Effective Date and shall continue thereafter for as long as Director is elected as a member of the Board of Directors by the shareholders of the Company unless the Board determines not to renew this Agreement. Any amendment to this Agreement must be approved by the Board. Any amendment to this Agreement must be approved by the Board. Amendments to Section Error! Reference source not found. “Fees” hereof do not require the Director’s consent to be effective.
| VII. | Termination |
| A. | This Agreement shall automatically terminate upon the death of the Director or upon his resignation or removal from, or failure to win election or reelection to, the Board. In the event of expiration or termination of this Agreement, the Director agrees to return or destroy any materials transferred to the Director under this Agreement except as may be necessary to fulfill any outstanding obligations hereunder. The Director agrees that the Company has the right of injunctive relief to enforce this provision. |
| B. | The Company’s and the Director’s continuing obligations hereunder in the event of expiration or termination of this Agreement shall be subject to the terms of Section XIV hereof. |
| 3 |
| VIII. | Limitation of Liability and Force Majeure |
| A. | Under no circumstances shall the Company be liable to the Director for any consequential damages claimed by any other party as a result of representations made by the Director with respect to the Company which are materially different from any to those made in writing by the Company. |
| B. | Furthermore, except for the maintenance of confidentiality, neither party shall be liable to the other for delay in any performance, or for failure to render any performance under this Agreement when such delay or failure is caused by Government regulations (whether or not valid), fire, strike, differences with workmen, illness of employees, flood, accident, or any other cause or causes beyond reasonable control of such delinquent party. |
| IX. | Confidentiality and Use of Director Information |
| A. | The Director agrees to sign and abide by the Company’s Director Proprietary Information Agreement attached hereto as Exhibit B (the “Proprietary Information Agreement”). |
| B. | The Director explicitly consents to the Company holding and processing both electronically and manually the information that he or she provides to the Company or the data that the Company collects which relates to the Director for the purpose of the administration, management and compliance purposes, including but not limited to the Company’s disclosure of any and all information provided by the Director in the Company’s proxy statements, annual reports or other securities filings or reports pursuant to federal or state securities laws or regulations, and the Director agrees to promptly notify the Company of any misstatement of a material fact regarding the Director, and of the omission of any material fact necessary to make the statements contained in such documents regarding the Director not misleading. |
| X. | Dispute Resolution |
| A. | Jurisdiction and Venue. The parties agree that any suit, action, or proceeding between Director and Company (and its affiliates, shareholders, directors, officers, employees, members, agents, successors, attorneys, and assigns) relating to this Agreement shall be brought in either the United States District Court for the State of Texas or in a Texas state court and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection the party may have to the laying of venue for any such suit, action or proceeding brought in such court. If any one or more provisions of this Section shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum extent necessary to make it or its application valid and enforceable. |
| B. | Attorneys’ Fees. Should any litigation, arbitration or other proceeding be commenced between the parties concerning the rights or obligations of the parties under this Agreement, the party prevailing in such proceeding shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for its attorneys’ fees in such proceeding. This amount shall be determined by the court in such proceeding or in a separate action brought for that purpose. In addition to any amount received as attorneys’ fees, the prevailing party also shall be entitled to receive from the party held to be liable, an amount equal to the attorneys’ fees and costs incurred in enforcing any judgment against such party. This Section is severable from the other provisions of this Agreement and survives any judgment and is not deemed merged into any judgment. |
| XI. | Entire Agreement |
This Agreement (including agreements executed in substantially the form of the exhibits attached hereto) supersedes all prior or contemporaneous written or oral understandings or agreements, and, except as otherwise set forth herein, may not be added to, modified, or waived, in whole or in part, except by a writing signed by the party against whom such addition, modification or waiver is sought to be asserted.
| 4 |
| XII. | Assignment |
This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns and, except as otherwise expressly provided herein, neither this Agreement, nor any of the rights, interests or obligations hereunder shall be assigned by either of the parties hereto without the prior written consent of the other party.
| XIII. | Notices |
Any and all notices, requests and other communications required or permitted hereunder shall be in writing, registered mail or by facsimile, to each of the parties at the addresses provided. Any such notice shall be deemed given when received and notice given by registered mail shall be considered to have been given on the tenth (10th) day after having been sent in the manner provided for above.
| XIV. | Survival of Obligations |
Notwithstanding the expiration or termination of this Agreement, neither party hereto shall be released hereunder from any liability or obligation to the other which has already accrued as of the time of such expiration or termination (including, without limitation, the Director’s obligations under the Proprietary Information Agreement, the Company’s obligation to make any fees and expense payments required pursuant to Section IV due up to the date of the expiration or termination, and the Company’s indemnification and insurance obligations set forth in Section V hereof) or which thereafter might accrue in respect of any act or omission of such party prior to such expiration or termination.
| XV. | Attorneys’ Fees |
If any legal action or other proceeding is brought for the enforcement of this Agreement, or because of a dispute, breach or default in connection with any of the provisions hereof, the successful or substantially prevailing party (including a party successful or substantially prevailing in defense) shall be entitled to recover its actual attorneys’ fees and other costs incurred in that action or proceeding, in addition to any other relief to which it may be entitled.
| XVI. | Severability |
Any provision of this Agreement which is determined to be invalid or unenforceable shall not affect the remainder of this Agreement, which shall remain in effect as though the invalid or unenforceable provision had not been included herein, unless the removal of the invalid or unenforceable provision would substantially defeat the intent, purpose or spirit of this Agreement.
| XVII. | Counterparts |
This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one instrument. Execution and delivery of this Agreement by facsimile or other electronic signature is legal, valid and binding for all purposes.
[SIGNATURE PAGE FOLLOWS]
| 5 |
IN WITNESS WHEREOF, the parties hereto have caused this Board of Directors Agreement to be executed as of the date first written above.
| CALLAN JMB INC. | ||
| By: | ||
| Wayne Williams | ||
| Chief Executive Officer | ||
| DIRECTOR: | ||
| Name: | ||
| 6 |
EXHIBIT A
DESCRIPTION OF SERVICES
Responsibilities as Director. Director shall have all responsibilities of a Director of the Company imposed by Nevada or applicable law, the Articles of Incorporation, as amended, and Bylaws, as amended, of Company. These responsibilities shall include, but shall not be limited to, the following:
| 1. | Attendance. Use best efforts to attend scheduled meetings of Company’s Board of Directors; |
| 2. | Act as a Fiduciary. Represent the shareholders and the interests of Company as a fiduciary; and |
| 3. | Participation. Participate as a full voting member of Company’s Board of Directors in setting overall objectives, approving plans and programs of operation, formulating general policies, offering advice and counsel, serving on Board Committees, and reviewing management performance. |
| A-1 |
EXHIBIT B
CALLAN JMB INC.
DIRECTOR PROPRIETARY INFORMATION AGREEMENT
This DIRECTOR PROPRIETARY INFORMATION AGREEMENT (the “Agreement”) is made effective as of as of the date of that certain Director Agreement (as defined herein), by and between Callan JMB Inc., a Nevada corporation (the “Company”), and the undersigned signatory (the “Director”).
WHEREAS, the Director has agreed to serve on the Board of Directors of the Company (the “Board”) pursuant to that certain Board of Directors Agreement between the Company and Director (the “Director Agreement”);
WHEREAS, the parties desire to assure the confidential status of the information which may be disclosed by the Company to the Director in connection with the Director serving on the Board; and
NOW THEREFORE, in reliance upon and in consideration of the following undertaking, the parties agree as follows:
| 1. | Subject to the limitations set forth in Section 2, all information disclosed by the Company to the Director shall be deemed to be “Proprietary Information.” In particular, Proprietary Information shall be deemed to include any information, process, technique, algorithm, program, design, drawing, formula or test data relating to any research project, work in process, future development, engineering, manufacturing, marketing, servicing, financing or personnel matter relating to the Company, any of its affiliates or subsidiaries, present or future products, sales, suppliers, customers, employees, investors, or business of the Company or any of its affiliates or subsidiaries, whether or oral, written, graphic or electronic form. |
| 2. | The term “Proprietary Information” shall not be deemed to include the following information: (i) information which is now, or hereafter becomes, through no breach of this Agreement on the part of the Director, generally known or available to the public; (ii) is known by the Director at the time of receiving such information; (iii) is hereafter furnished to the Director by a third party, as a matter of right and without restriction on disclosure; or (iv) is the subject of a written permission to disclose provided by the Company. |
| 3. | The Director shall maintain in trust and confidence and not disclose to any third party or use for any unauthorized purpose any Proprietary Information received from the Company. The Director may use such Proprietary Information only to the extent required to accomplish the purposes of his position at the Company. The Director shall not use Proprietary Information for any purpose or in any manner which would constitute a violation of any laws or regulations, including without limitation the export control laws of the United States. No other rights of licenses to trademarks, inventions, copyrights, or patents are implied or granted under this Agreement. |
| 4. | Proprietary Information supplied shall not be reproduced in any form except as required to accomplish the intent of this Agreement. |
| 5. | The Director represents, warrants and covenants that he shall protect the Proprietary Information received with at least the same degree of care used to protect his or her own Proprietary Information from unauthorized use or disclosure. |
| 6. | All Proprietary Information (including all copies thereof) shall remain in the property of the Company, and shall be returned to the Company (or destroyed) after the Director’s need for it has expired, or upon request of the Company, and in any event, upon the expiration or termination of Director Agreement. |
| B-1 |
| 7. | Notwithstanding any other provision of this Agreement, disclosure of Proprietary Information shall not be precluded if such disclosure: |
| a. | is in response to a valid order, including a subpoena, of a court or other governmental body of the United States or any political subdivision thereof; provided, however, that to the extent reasonably feasible, the Director shall first have given the Company notice of the Director’s receipt of such order and the Company shall have had an opportunity to obtain a protective order requiring that the Proprietary Information so disclosed be used only for the purpose for which the order was issued; |
| b. | is otherwise required by law; or |
| c. | is otherwise necessary to establish rights or enforce obligations under this Agreement, but only to the extent that any such disclosure is necessary. |
| 8. | This Agreement shall continue in full force and effect during the term of the Director Agreement. This Agreement may be terminated at any time thereafter upon thirty (30) days written notice to the other party. The termination of this Agreement shall not relieve the Director of the obligations imposed by Paragraphs 3, 4, 5 and 11 of this Agreement with respect to Proprietary information disclosed prior to the effective date of such termination and the provisions of these Paragraphs shall survive the termination of this Agreement indefinitely with respect to Proprietary Information that constitutes “trade secrets” and for a period of eighteen (18) months from the date of such termination with respect to other Proprietary Information. |
| 9. | This Agreement shall be governed by the laws of the State of Nevada as those laws are applied to contracts entered into and to be performed entirely in Nevada. |
| 10. | This Agreement contains the final, complete and exclusive agreement of the parties relative to the subject matter hereof and may not be changed, modified, amended or supplemented except by a written instrument signed by both parties. |
| 11. | Each party hereby acknowledges and agrees that in the event of any breach of this Agreement by the Director, including, without limitation, an actual or threatened disclosure of Proprietary Information without the prior express written consent of the Company, the Company will suffer an irreparable injury, such that no remedy at law will afford it adequate protection against, or appropriate compensation for, such injury. Accordingly, each party hereby agrees that the Company shall be entitled to specific performance of the Director’s obligations under this Agreement, as well as such further injunctive relief as may be granted by a court of competent jurisdiction. |
[SIGNATURE PAGE FOLLOWS]
| B-2 |
IN WITNESS WHEREOF, the parties hereto have executed this Director Proprietary Information Agreement on and as of the day and year first above written.
| CALLAN JMB INC. | ||
| By: | ||
| Wayne Williams | ||
| Chief Executive Officer | ||
| DIRECTOR: | ||
| Name: | Liberty Duke | |
| B-3 |
EXHIBIT C
CALLAN JMB INC. INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT is made effective as of ___________, 2024 (this “Agreement”), by and between Callan JMB Inc., a Nevada corporation (the “Company”) and the undersigned signatory (“Indemnitee”).
RECITALS
| A. | The Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for its directors, officers, employees, stockholders, controlling persons, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance. | |
| B. | the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, which subjects directors, officers, employees, controlling persons, stockholders, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited. | |
| C. | Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and other directors, officers, employees, stockholders, controlling persons, agents and fiduciaries of the Company may not be willing to serve in such capacities without additional protection. | |
| D. | The Company (i) desires to attract and retain highly qualified individuals and entities, such as Indemnitee, to serve the Company and, in part, in order to induce Indemnitee to be involved with the Company and (ii) wishes to provide for the indemnification and advancing of expenses to Indemnitee to the maximum extent permitted by law. | |
| E. | This Agreement forms part of the consideration for Indemnitee to serve, or to continue to serve, as an officer or director of the Company, and allows Indemnitee to fulfill his or her fiduciary duties under law and take on actions for or on behalf of the Company. | |
| F. | In view of the considerations set forth above, the Company desires that Indemnitee be indemnified by the Company as set forth herein. |
| C-1 |
NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee hereby agree as follows:
| 1. | Indemnification. |
| a. | Indemnification of Expenses. The Company shall indemnify and hold harmless Indemnitee (including its respective directors, officers, partners, former partners, members, former members, employees, agents and spouse, as applicable) and each person who controls any of them or who may be liable within the meaning of Section 15 of the Securities Act of 1933, as amended (the “Securities Act”), or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to the fullest extent permitted by law if Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other (hereinafter a “Claim”) by reason of (or arising in part or in whole out of) any event or occurrence related to the fact that Indemnitee is or was or may be deemed a director, officer, stockholder, employee, controlling person, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was or may be deemed to be serving at the request of the Company as a director, officer, stockholder, employee, controlling person, agent or fiduciary of another corporation, partnership, limited liability company, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity including, without limitation, any and all losses, claims, damages, expenses and liabilities, joint or several (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit, proceeding or any claim asserted) under the Securities Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise or which relate directly or indirectly to the registration, purchase, sale or ownership of any securities of the Company or to any fiduciary obligation owed with respect thereto or as a direct or indirect result of any Claim made by any stockholder of the Company against Indemnitee and arising out of or related to any round of financing of the Company (including but not limited to Claims regarding non-participation, or non- pro rata participation, in such round by such stockholder), or made by a third party against Indemnitee based on any misstatement or omission of a material fact by the Company in violation of any duty of disclosure imposed on the Company by federal or state securities or common laws (hereinafter an “Indemnification Event”) against any and all expenses (including attorneys’ fees and all other costs, expenses and obligations incurred in connection with investigating, defending a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in, any such action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if, and only if, such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of such Claim and any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (collectively, hereinafter “Expenses”), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses. Such payment of Expenses shall be made by the Company as soon as practicable but in any event no later than ten (10) days after written demand by Indemnitee therefor is presented to the Company. | |
| b. | Reviewing Party. Notwithstanding the foregoing, (i) the obligations of the Company under Section 1(a) shall be subject to the condition that the Reviewing Party (as described in Section 10(e) hereof) shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel referred to in Section 1(e) hereof is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) Indemnitee acknowledges and agrees that the obligation of the Company to make an advance payment of Expenses to Indemnitee pursuant to Section 2(a) (an “Expense Advance”) shall be subject to the condition that, if, when and to the extent that the Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee’s obligation to reimburse the Company for any Expense Advance shall be unsecured and no interest shall be charged thereon. If there has not been a Change in Control (as defined in Section 10(c) hereof), the Reviewing Party shall be selected by the Company’s Board of Directors (the “Board”), and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Board who were directors immediately prior to such Change in Control), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 1(e) hereof. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by the Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. |
| C-2 |
| c. | Contribution. If the indemnification provided for in Section 1(a) above for any reason is determined by the Reviewing Party or held by a court of competent jurisdiction to be unavailable to Indemnitee in respect of any losses, claims, damages, expenses or liabilities referred to therein, then the Company, in lieu of indemnifying Indemnitee thereunder, shall, to the fullest extent permissible under applicable law, contribute to the amount paid or payable by Indemnitee as a result of such losses, claims, damages, expenses or liabilities in such proportion as is appropriate to reflect the relative benefits received by the Company and Indemnitee and the relative fault of the Company and Indemnitee in connection with the action or inaction which resulted in such losses, claims, damages, expenses or liabilities, as well as any other relevant equitable considerations. In connection with losses, claims, damages, expenses or liabilities resulting from the registration of the Company’s securities, the relative benefits received by the Company and Indemnitee shall be deemed to be in the same respective proportions that the net proceeds from the offering (before deducting expenses) received by them, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the aggregate public offering price of the securities so offered. The relative fault of the Company and Indemnitee shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or Indemnitee and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. | |
| The Company and Indemnitee agree that it would not be just and equitable if contribution pursuant to this Section 1(c) were determined by pro rata or per capita allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. In connection with losses, claims, damages, expenses or liabilities resulting from the registration of the Company’s securities, in no event shall Indemnitee be required to contribute any amount under this Section 1(c) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages or liabilities indemnified against equal to Indemnitee’s proportion of the total securities being offered under such registration statement or (ii) the proceeds received by Indemnitee from its securities sold under the registration statement. Notwithstanding this Section 1(c), no person found guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation. | ||
| d. | Survival Regardless of Investigation. The indemnification and contribution provided for in this Section 1 will remain in full force and effect regardless of any investigation made by or on behalf of Indemnitee or any officer, director, employee, agent or controlling person of Indemnitee. |
| e. | Change in Control. The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Board who were directors immediately prior to such Change in Control) then, with respect to all matters thereafter arising concerning the rights of Indemnitee to payments of Expenses under this Agreement or any other agreement or under the Company’s Certificate of Incorporation, as amended (the “Certificate”) or Bylaws, as amended, as now or hereafter in effect, Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to abide by such opinion and to pay the reasonable fees of the Independent Legal Counsel referred to above and to fully indemnify such counsel against any and all expenses (including attorneys’ fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. |
| f. | Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in the defense of any action, suit, proceeding, inquiry or investigation referred to in Section 1(a) hereof or in the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection herewith. |
| C-3 |
| 2. | Expenses; Indemnification Procedure. |
| a. | Advancement of Expenses. Subject to Section 1(b) hereof, the Company shall advance all Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid by the Company to Indemnitee as soon as practicable but in any event no later than fifteen (15) days after written demand by Indemnitee therefor to the Company. |
| b. | Notice/Cooperation by Indemnitee. Indemnitee shall give the Company written notice as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement; provided, however, that any failure or delay in giving such notice shall not relieve the Company of its obligations under this Agreement unless and to the extent that (i) the Company is not aware of such Claim and (ii) the Company is materially prejudiced by such failure or delay. The written notice to the Company shall include a description of the nature of and the facts underlying the Claim and be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). |
| c. | No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under applicable law, shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. |
| d. | Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt written notice of the commencement of such Claim to the applicable insurers in accordance with the procedures set forth in each of the policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such action, suit, proceeding, inquiry or investigation in accordance with the terms of such policies. |
| e. | Selection of Counsel. In the event the Company is obligated hereunder to pay the Expenses of any Claim, the Company shall be entitled to participate in the proceeding and assume the control of the defense of such Claim, with counsel reasonably approved by Indemnitee (such approval shall not be unreasonably withheld, delayed or conditioned), upon the delivery to Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee’s counsel in any such Claim at Indemnitee’s sole expense; (ii) Indemnitee shall have the right to employ Indemnitee’s own counsel in connection with such proceeding, at the expense of the Company, if such counsel serves in a review, observer, advice and counseling capacity and does not otherwise materially control or participate in the defense of such Claim; and (iii) if the Company and Indemnitee have mutually concluded that there is a conflict of interest between them in the conduct of the defense of such Claim, then Indemnitee is entitled to retain its own counsel and the reasonable fees and expenses of Indemnitee’s counsel reasonably approved by the Company (such approval shall not be unreasonably withheld, delayed or conditioned) shall be at the expense of the Company. |
| C-4 |
| 3. | Additional Indemnification Rights; Non-Exclusivity. |
| a. | Scope. The Company hereby agrees to indemnify Indemnitee for the Expenses of any Claim to the fullest extent permitted by law, even if indemnification is not specifically authorized by the other provisions of this Agreement or any other agreement, the Company’s Certificate and Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Nevada corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Nevada corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties’ rights and obligations hereunder except as set forth in Section 8(a) hereof. |
| b. | Non-Exclusivity. Notwithstanding anything in this Agreement, the indemnification provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company’s Certificate or Bylaws, any agreement, any vote of stockholders or disinterested directors, the laws of the State of Nevada, or otherwise. Notwithstanding anything in this Agreement, the indemnification provided under this Agreement shall continue as to Indemnitee for any action Indemnitee took or did not take while serving in an indemnified capacity even though Indemnitee may have ceased to serve in such capacity and indemnification shall inure to the benefit of Indemnitee from and after Indemnitee’s first day of service as a director with the Company or affiliation with a director from and after the date such director commences services as a director with the Company. |
| c. | No Duplication of Payments. Notwithstanding anything herein to the contrary, the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, any other agreement, the Company’s Certificate and Bylaws or otherwise) of the amounts otherwise indemnifiable hereunder. |
| d. | Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for any portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled thereunder. |
| e. | Mutual Acknowledgement. The Company and Indemnitee acknowledge that in certain instances, applicable law or public policy may prohibit the Company from indemnifying its directors, officers, employees, controlling persons, agents or fiduciaries under this Agreement or otherwise. |
| f. | Liability Insurance. During any period of time Indemnitee is entitled to indemnification rights under this Agreement, the Company shall maintain liability insurance applicable to directors, officers, employees, control persons, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director, or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, controlling persons, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent, control person, or fiduciary. Said liability insurance shall provide coverage amounts of no less than $1 million and shall be held with an insurance carrier which the Board believes is of financially sound condition. Further, the Company shall at all times maintain a cash reserve of $2 million as a self-insurance fund to backstop any indemnification obligations pursuant to this Agreement. |
| C-5 |
| 4. | Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: |
| a. | Claims Under Section 16(b). To indemnify Indemnitee for Expenses arising from or in connection with any Claims for which a final decision by a court having jurisdiction in the matter determines that Indemnitee sold or purchased the Company’s securities in violation of Section 16(b) of the Exchange Act or any similar successor statute; |
| b. | Compensation Recovery Claims. To indemnify Indemnitee for Expenses arising from or in connection with any Claims for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required under the Exchange Act (including any such reimbursements that rise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act); |
| c. | Indemnitee Claims. To indemnify Indemnitee for Expenses arising from or in connection with any Claims initiated or brought voluntarily by Indemnitee not by way of defense, except with respect to Claims brought to establish or enforce a right to indemnification under this Agreement, the Company’s Certificate and Bylaws or any applicable law; |
| d. | Unlawful Indemnification. To indemnify Indemnitee for Expenses arising from or in connection with any Claims for which a final decision by a court having jurisdiction in the matter determines that such indemnification is not lawful; |
| e. | Fraud. To indemnify Indemnitee for Expenses arising from or in connection with any Claims for which a final decision by a court having jurisdiction in the matter determines that Indemnitee has committed fraud on the Company; and |
| f. | Insurance. To indemnify Indemnitee for which payment is actually and fully made to Indemnitee under a valid and collectible insurance policy. |
| 5. | Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee or Indemnitee’s estate, spouse, heirs, executors or personal or legal representatives after the expiration of five (5) years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such five (5) year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern. |
| 6. | Construction of Certain Phrases. |
| a. | For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was or may be deemed a director, officer, employee, agent, control person, or fiduciary of such constituent corporation, or is or was or may be deemed to be serving at the request of such constituent corporation as a director, officer, employee, control person, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. |
| C-6 |
| b. | For purposes of this Agreement, references to “other enterprise” shall include any employee benefit plan of the Company; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan of the Company, its participants or its beneficiaries. |
| c. | For purposes of this Agreement a “Change in Control” shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, (A) who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding Voting Securities, increases beneficial ownership of such securities by 5% or more, or (B) becomes the “beneficial owner” (as defined in Rule 13d-3 under said Exchange Act), directly or indirectly, of securities of the Company representing more than 30% of the total voting power represented by the Company’s then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board and any new director whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two- thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least two-thirds (2/3) of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of transactions) all or substantially all of the Company’s assets. “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors. |
| d. | For purposes of this Agreement, “Independent Legal Counsel” shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 1(e) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three (3) years (other than with respect to matters concerning the right of Indemnitee under this Agreement, or of other indemnitees under similar indemnity agreements). |
| e. | For purposes of this Agreement, a “Reviewing Party” shall mean any appropriate person or body consisting of a member or members of the Board or any other person or body appointed by the Board, who is not a party to the particular Claim for which Indemnitee is seeking indemnification, such as a committee of the Board or Independent Legal Counsel. |
| 3. | Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. |
| C-7 |
| 4. | Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect with respect to Claims relating to Indemnifiable Events regardless of whether Indemnitee continues to serve as a director, officer, employee, agent, controlling person, or fiduciary of the Company or of any other enterprise, including subsidiaries of the Company, at the Company’s request. |
| 5. | Attorneys’ Fees. In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be paid all Expenses incurred by Indemnitee with respect to such action if Indemnitee is ultimately successful in such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid Expenses incurred by Indemnitee in the defense of such action (including costs and expenses incurred with respect to Indemnitee counterclaims and cross-claims made in such action), and shall be entitled to the advancement of Expenses with respect to such action, in each case only to the extent that Indemnitee is ultimately successful in such action. |
| 6. | Notice. All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given (a) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid, or (d) one day after the business day of delivery by facsimile transmission, if deliverable by facsimile transmission, with copy by first class mail, postage prepaid, and shall be addressed if to Indemnitee, at Indemnitee’s address as set forth beneath the Indemnitee’s signature to this Agreement and if to the Company at the address of its principal corporate offices (attention: Secretary) or at such other address as such party may designate by ten (10) days’ advance written notice to the other party hereto. |
| 7. | Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions hereof shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, this Agreement (including, without limitations, each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. |
| 8. | Resolution of Dispute. This Agreement shall be governed by and its provisions construed and enforced in accordance with the laws of the State of Nevada, without regard to the conflict of laws principles thereof. To the fullest extent permitted by law, and unless the Company consents in writing to the selection of an alternative forum, the Courts of the State of Nevada shall be the sole and exclusive forum for all purposes in connection with any dispute regarding, arising out of or relating to this Agreement (including without limitation its validity, interpretation, performance, enforcement, termination and damages). |
| 9. | Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. |
| 10. | Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by the parties to be bound thereby. Notice of same shall be provided to all parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. |
| 11. | Corporate Authority. The Board has approved the terms of this Agreement. |
| C-8 |
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement on and as of the day and year first above written.
| CALLAN JMB INC. | ||
| By: | ||
| Wayne Williams | ||
| Chief Executive Officer | ||
| INDEMNITTEE: | ||
| Name: | Liberty Duke | |
| C-9 |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Callan JMB, Inc.
Spring Branch, TX
We hereby consent to the inclusion in this Registration Statement on Form S-1 (Amendment No. 1) (File No. 333-282879) of our report dated August 2, 2024, except for the effects of the reverse stock split as discussed in Note 2 to the financial statements, to which the date is November 18, 2024, relating to the financial statements of Callan JMB, Inc. (formerly Coldchain Technology Services, LLC) for the years ended December 31, 2023 and 2022.
We also consent to the reference to us under the caption “Experts” in the Prospectus.
/s/ Rosenberg Rich Baker Berman, P.A.
Somerset, New Jersey
November 18, 2024