Standard Dental Labs Inc S-1, filed Dec 30, 2022
Standard Dental Labs Inc. (TUTH)
As filed with the Securities and Exchange Commission on December 29, 2022
Registration No. 333- ___________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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| COSTAS, INC. |
| (Exact name of registrant as specified in its charter) |
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Nevada |
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3843 |
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88-0411500 |
| (State or other jurisdiction of |
| (Primary Standard Industrial |
| (I.R.S. Employer |
| incorporation or organization) |
| Classification Code Number) |
| Identification Number) |
# 424 E Central Blvd, Suite 308,
Orlando, FL, 32801
321-465-9899
(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)
With a copy to:
William (Bill) Macdonald Esq.
641 Lexington Avenue, 13th Floor
New York, NY 10022
Tel: (212) 271-4272
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after this Registration Statement is declared 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, please 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 Prospectus 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, or a smaller reporting company.
| ☐ Large accelerated filer | ☐ Accelerated filer | ☐ Non-accelerated filer | ☒ Smaller reporting company |
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 Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
| The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED December ____, 2022 |
212,140,000 common shares underlying previously issued convertible promissory notes
750,000 common shares previously issued pursuant to asset acquisition
8,333,333 common shares issuable pursuant to purchase agreement
The date of this Prospectus is December ____, 2022.
Costas, Inc. (“Costas”, “we”, “us”, “our” and “our company”) is registering 221,223,333 shares of common stock underlying previously issued convertible promissory notes, an asset purchase agreement and a purchase agreement for the future issuance of common shares as drawn down by our company, which may be resold from time to time held by nine selling security holders (the “ Selling Security Holders ”). This aggregate of 221,223,333 shares of common stock consists of: 212,140,000 shares of common stock underlying previously issued convertible promissory notes issued by our company to certain Selling Security Holders; 750,000 shares issued to one Selling Security Holder for the acquisition of certain assets; and 8,333,333 shares issuable upon drawdowns under the Purchase Agreement with another Selling Security Holder, World Amber Corporation. The convertible promissory notes were acquired by the Selling Security Holders directly from us in private offerings that were exempt from registration requirements of the Securities Act of 1933. A registration statement under the Exchange Act relating to these securities has been filed with the Securities and Exchange Commission. Our Selling Security Holders may not offer or sell their shares of our common stock until this registration statement is declared effective. We have been advised by the Selling Security Holders that they may offer to sell all or a portion of their shares of common stock being offered in this prospectus from time to time. Please see “Plan of Distribution” at page 26 for a detailed explanation of how the securities may be sold. The Selling Security Holders may sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices. We will not receive any of the proceeds from the sale of shares by the Selling Security Holders. None of the Selling Security Holders are affiliates of our company.
Our common stock is quoted under the trading symbol “CSSI” on the Pink tier of the OTC quotation service operated by OTC Markets Inc.
The Selling Security Holders may sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices. We have arbitrarily set the $0.00975 price per share set out in this registration statement solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(c), based on the average of the high and low prices of the common stock as reported on the OTC Markets on December 19, 2022. The price does not reflect net worth, total asset value, or any other objective accounting measure of the value of our securities.
The Selling Security Holders are underwriters, within the meaning of section 2(a)(11) of the Securities Act. Any broker-dealers or agents that participate in the sale of the common stock or interests therein may also be deemed to be an “underwriter” within the meaning of section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions or profit earned on any resale of the shares may be underwriting discounts and commissions under the Securities Act. We will not receive any proceeds from the sale of shares of our common stock by the Selling Security Holders. We will incur all costs associated with this Prospectus.
Our sole director and officer is James Brooks: Chief Executive and Financial Officer, Secretary, President, Chairman of the Board and Director
Our common stock is presently not traded on any national securities exchange or the NASDAQ stock market. We do not intend to apply for listing on any national securities exchange or the NASDAQ stock market. The purchasers in this offering may be receiving an illiquid security.
An investment in our securities is speculative. See the section entitled “Risk Factors” beginning on page 8 of this Prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.
The information in this Prospectus is not complete and may be changed. The Selling Security Holders may not sell these securities until this registration statement is declared effective by the Securities and Exchange Commission. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall the Selling Security Holders sell any of these securities in any state where such an offer or solicitation would be unlawful before registration or qualification under such state’s securities laws.
You should rely only on the information contained in this Prospectus. We have not authorized anyone to provide you with information different from that contained in this Prospectus. The Selling Security Holders are offering to sell, and seeking offers to buy, their common shares. The information contained in this Prospectus is accurate only as of the date of this Prospectus, regardless of the time of delivery of this Prospectus or of any sale of our common shares.
Dealer Prospectus Delivery Obligation
Until __________________ (90th day after the later of (1) the effective date of the registration statement; or (2) the first date on which the securities are offered publicly), all dealers that effect in 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.
The date of this Prospectus is December ____, 2022.
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| Table of Contents |
PROSPECTUS SUMMARY AND RISK FACTORS
We qualify all the forward-looking statements contained in this Prospectus by the following cautionary statements.
This Prospectus, and any supplement to this Prospectus include “forward-looking statements”. To the extent that the information presented in this Prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of words such as “intends”, “anticipates”, “believes”, “estimates”, “projects”, “forecasts”, “expects”, “plans” and “proposes”. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These include, among others, the cautionary statements in the “Risk Factors” section beginning on page 9 of this Prospectus and the “Management’s Discussion and Analysis of Financial Position and Results of Operations” section elsewhere in this Prospectus.
Our current business activities include discovering, acquiring, and developing dental labs throughout the United States. The company plans to acquire independent labs looking to exit the market or who may be interested in retirement. Acquiring labs will be the focus of our growth strategy. Labs will be consolidated into one regionally central lab, and continue to operate, adding revenue to the company's income statement. All North American markets with populations over 1 million are targets. The company is headquartered in Orlando, Florida.
Actual results may vary from those expected. Undue reliance should not be placed on any forward-looking statements, which are appropriate only for the date made. We do not plan to subsequently revise these forward-looking statements to reflect current circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
Corporate Background
Costas, Inc. was incorporated in the State of Nevada on December 10, 1998. Costas was a development stage company that had a primary business plan to acquire, improve, and re-market undeveloped real estate in Las Vegas, Nevada and its surrounding communities.
The company had pursued a number of different industries since its inception in 1998, including real estate speculation, financial technologies in 2014 through 2018, and in 2019, the company attempted to acquire a surgical materials supplier in Mexico (such acquisition was not completed).
In 2017, James Brooks commenced an action against the company and was awarded a judgment in the 8th Circuit against the company for breach of contract, and non-payment. A portion of that judgment was later converted into shares, and a controlling interest in Costas, Inc. Specifically, on September 20, 2017, the court filed an order effective September 18, 2017, whereby Mr. Brooks, as a creditor of the company was granted a Judgment against the company in the principal amount of $1,114,500. On October 21, 2020, Mr. Brooks filed a motion requesting the appointment of a Receiver over the company. On March 25, 2021, the Receiver filed a motion with the Court requesting approval to appoint Mr. Brooks as an officer and director of the company and to increase the authorized capital of the issuer and subsequently to issue sufficient common and preferred shares on terms to be finalized with Mr. Brooks, whereby Mr. Brooks became the controlling shareholder of the company. On February 9, 2022, an Order was entered by the Eighth Judicial District Court, Clark County, Nevada, Case No. A-17-749977D, terminating the receivership for the company.
Mr. Brooks is now guiding the company into becoming a Florida based dental laboratory services company.
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| Table of Contents |
The Offering
The 221,223,333 shares of common stock offered by the Selling Security Holders represent approximately 33.2% of our issued and outstanding common stock as of December 19, 2022, assuming all of the notes are converted and all drawdowns under the Purchase Agreement are completed.
We have entered into a registration rights agreement pursuant to which we are obligated to register 8,333,333 of the shares being registered in this Prospectus. We are not currently a reporting company with the SEC. We are bearing all costs associated with registering the shares being offered.
| Common Stock Outstanding Prior to the Offering |
| 445,728,363 shares | ||
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| Common Stock to be Outstanding Following the Offering |
| 666,951,696 shares | ||
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| Common Stock Offered |
| 221,223,333 shares of common stock consisting of: | ||
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| · | 212,140,000 shares of common stock underlying previously issued convertible promissory notes |
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| · | 750,000 shares issued for the acquisition of certain assets |
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| · | 8,333,333 shares issuable upon drawdowns under a Purchase Agreement. |
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| Offering Price |
| $0.00975 per share (estimated solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(c) based on the average of the high and low prices of the common stock as reported on the OTC Markets on December 19, 2022).
The Selling Security Holders may actually sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices. | ||
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| Aggregate Offering Price |
| N/A | ||
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| Number of Selling Security Holders |
| 9 | ||
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| Use of Proceeds |
| We will not receive any of the proceeds of the shares offered by the Selling Security Holders. Our company will pay all the expenses of this offering estimated at approximately $50,000. | ||
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| Underwriters |
| The Selling Security Holders are underwriters, within the meaning of section 2(a)(11) of the Securities Act. | ||
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| Plan of Distribution |
| The Selling Security Holders named in this Prospectus are making this offering and may sell at market or privately negotiated prices. | ||
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| World Amber Purchase Agreement
On November 22, 2022, 2021, we entered into a purchase agreement (the “Purchase Agreement”), and a registration rights agreement (the “Registration Rights Agreement”) with World Amber pursuant to which World Amber committed to purchase up to $2,500,000 of our common stock.
Under the terms and subject to the conditions of the Purchase Agreement, we have the obligation, to sell to World Amber, and World Amber is obligated to purchase up to $2,500,000 of shares of our common stock. Future sales of common stock under the Purchase Agreement, if any, will be subject to certain limitations, and may occur from time to time, over the 24-month period commencing on the date that a registration statement of which this prospectus forms a part, which we agreed to file with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed and the other conditions set forth in the Purchase Agreement are satisfied (such date on which all of such conditions are satisfied, the “Commencement Date”).
After the Commencement Date, for every month over the term of the Purchase Agreement, we have the right, in our sole discretion, to direct World Amber to purchase up to 346,667 shares of common stock per business day, at $0.30 per share (each, a “Regular Purchase”). In each case, World Amber’s maximum commitment in any single Regular Purchase may not exceed $104,000.
Pursuant to the terms of the Purchase Agreement, in no event may we issue or sell to World Amber any the shares of our common stock under the Purchase Agreement which, when aggregated with all other shares of common stock then beneficially owned by the World Amber and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by World Amber and its affiliates of more than 9.99% of the then issued and outstanding shares of common stock (the “Beneficial Ownership Limitation”).
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, agreements, conditions and indemnification obligations of the parties. We have the right to terminate the Purchase Agreement at any time, at no cost or penalty.
Issuances of our common stock in this aspect of the offering will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number of shares of common stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will represent a smaller percentage of our total outstanding shares after any such issuance to World Amber. |
This summary does not contain all the information that should be considered before making an investment in Costas, Inc.’s common stock. The entire prospectus should be read including the “Risk Factors” on page 9 and financial statements before deciding to invest in our common stock.
Financial Summary Information
All references to currency in this Prospectus are to U.S. Dollars, unless otherwise noted.
The following table sets forth selected financial information, which should be read in conjunction with the information set forth in the “Management’s Discussion and Analysis of Financial Position and Results of Operations” section and the accompanying financial statements and related notes included elsewhere in this Prospectus.
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Income Statement Data
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| Nine Months Ended September 30, 2022, (unaudited) $ |
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| Year Ended December 31, 2021 (audited) $ |
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| Year Ended December 31, 2020 (audited) $ |
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| Revenues |
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| 16,766 |
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| - |
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| - |
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| Operating Expenses |
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| 156,208 |
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| 76,727 |
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| 21,311 |
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| Net Income (Loss) |
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| (667,785 | ) |
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| (10,177,400 | ) |
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| (89,051 | ) |
| Net Earnings (Loss) Per Share |
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| (0.00 | ) |
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| (0.21 | ) |
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| (0.00 | ) |
Balance Sheet Data
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| As at September 30, 2022 (unaudited) |
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| As at December 31, 2021 (audited) |
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| As at December 31, 2020 (audited) |
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| Working Capital (Deficit) |
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| (736,850 | ) |
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| 133,023 |
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| 1,390,623 |
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| Total Assets |
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| 258,857 |
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| - |
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| - |
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| Total Liabilities |
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| 815,363 |
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| 133,023 |
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| 1,390,623 |
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RISK FACTORS
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.
You should carefully consider the risks described below. Together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in, or incorporated into, this registration statement that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks occur, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Associated with Our Business
Our business operations are subject to a number of risks and uncertainties, including, but not limited to those set forth below:
Our company has no operating history and an evolving business model which raises doubt about our ability to achieve profitability or obtain financing.
Our company has no operating history. Moreover, our business model is still evolving, subject to change, and will rely on the ability to make additional acquisitions of dental labs on commercially viable terms. Our company's ability to continue as a going concern is dependent upon our ability to obtain adequate financing and to reach profitable levels of operations has and we no proven history of performance, earnings, or success. There can be no assurance that we will achieve profitability or obtain future financing.
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Conflicts of interest between our company and our sole director and officer may result in a loss of business opportunity.
Our sole director and officer is not obligated to commit his full time and attention to our business and, accordingly, he may encounter a conflict of interest in allocating his time between our future operations and those of other businesses. In the course of his other business activities, he may become aware of investment and business opportunities which may be appropriate for presentation to us as well as other entities to which he owes a fiduciary duty. As a result, he may have conflicts of interest in determining to which entity a particular business opportunity should be presented. He may also in the future become affiliated with entities, engaged in business activities similar to those we intend to conduct.
In general, officers and directors of a corporation are required to present business opportunities to a corporation if:
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| · | the corporation could financially undertake the opportunity; |
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| · | the opportunity is within the corporation’s line of business; and |
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| · | it would be unfair to the corporation and its stockholders not to bring the opportunity to the attention of the corporation. |
We plan to adopt a code of ethics that obligates our directors, officers and employees to disclose potential conflicts of interest and prohibits those persons from engaging in such transactions without our consent. Despite our intentions, conflicts of interest may nevertheless arise which may deprive our company of a business opportunity, which may impede the successful development of our business and negatively impact the value of an investment in our company.
The speculative nature of our business plan may result in the loss of your investment.
Our operations are in the start-up or stage only and are unproven. We may not be successful in implementing our business plan to become profitable. There may be less demand for our services than we anticipate. There is no assurance that our business will succeed, and you may lose your entire investment.
General economic factors may negatively impact the market for our dental products.
The willingness of dental practices and their patients/consumers to spend money on our products may be dependent upon general economic conditions; and any material downturn may reduce the likelihood of such parties incurring costs toward what some consumers may consider a discretionary expense item.
A wide range of economic and logistical factors may negatively impact our operating results.
Our operating results will be affected by a wide variety of factors that could materially affect revenues and profitability, including the timing and cancellation of customer orders and projects, competitive pressures on pricing, availability of personnel, and market acceptance of our services. As a result, we may experience material fluctuations in future operating results on a quarterly and annual basis which could materially affect our business, financial condition and operating results.
If we fail to effectively and efficiently advertise, the growth of our business may be compromised.
The future growth and profitability of our business will be dependent in part on the effectiveness and efficiency of our advertising and promotional expenditures, including our ability to (i) create greater awareness of our services, (ii) determine the appropriate creative message and media mix for future advertising expenditures, and (iii) effectively manage advertising and promotional costs in order to maintain acceptable operating margins. There can be no assurance that we will experience benefits from advertising and promotional expenditures in the future. In addition, no assurance can be given that our planned advertising and promotional expenditures will result in increased revenues, will generate levels of service and name awareness or that we will be able to manage such advertising and promotional expenditures on a cost-effective basis.
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Our success is dependent on our unproven ability to attract qualified personnel.
We depend on our ability to attract, retain and motivate our management team, consultants and advisors. There is strong competition for qualified technical and management personnel in the dental business sector, and it is expected that such competition will increase. Our planned growth will place increased demands on our existing resources and will likely require the addition of technical personnel and the development of additional expertise by existing personnel. There can be no assurance that our compensation packages will be sufficient to ensure the continued availability of qualified personnel who are necessary for the development of our business.
We have a limited operating history with losses, and we expect the losses to continue, which raises concerns about our ability to continue as a going concern.
We have generated minimal revenues since our inception and will, in all likelihood, continue to incur operating expenses with minimal revenues until we are able to successfully develop our business. Our business plan will require us to incur further expenses. We may not be able to ever become profitable. These circumstances raise concerns about our ability to continue as a going concern. We have a limited operating history and must be considered in the start-up stage.
There is an explanatory paragraph to their audit opinion issued in connection with the financial statements for the year ended December 31, 2021, with respect to their doubt about our ability to continue as a going concern. As discussed in Note 2 to our financial statements for the year ended December 31, 2021, we have incurred cumulative losses of $10,177,400 which raises substantial doubt about its ability to continue as a going concern. Our management has been able, thus far, to finance the operations through equity financing and cash on hand. There is no assurance that our company will be able to continue to finance our company on this basis.
Without additional financing to develop our business plan, our business may fail.
Because we have generated only minimal revenue from our business and cannot anticipate when we will be able to generate meaningful revenue from our business, we will need to raise additional funds to conduct and grow our business. We do not currently have sufficient financial resources to completely fund the development of our business plan. We anticipate that we will need to raise further financing. With the exception of our Purchase Agreement with World Amber, we do not currently have any other arrangements for financing, and we can provide no assurance to investors that we will be able to find such financing if required. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing security-holders.
We may not be able to obtain all of the licenses necessary to operate our business, which would cause our business to fail.
Our operations require licenses and permits from various governmental authorities related to the operation of our acquired dental laboratory facilities. We believe that we will be able to obtain all necessary licenses and permits under applicable laws and regulations for our operations and believe we will be able to comply in all material respects with the terms of such licenses and permits. However, such licenses and permits are subject to change in various circumstances. There can be no guarantee that we will be able to obtain or maintain all necessary licenses and permits.
If we are unable to recruit or retain qualified personnel, it could have a material adverse effect on our operating results and stock price.
Our success depends in large part on the continued services of our sole executive officer and third-party relationships. We currently do not have key person insurance on these individuals. The loss of these people, especially without advance notice, could have a material adverse impact on our results of operations and our stock price. It is also very important that we be able to attract and retain highly skilled personnel, including technical personnel, to accommodate our acquisition and expansion plans and to replace personnel who leave. Competition for qualified personnel can be intense, and there are a limited number of people with the requisite knowledge and experience. Under these conditions, we could be unable to recruit, train, and retain employees. If we cannot attract and retain qualified personnel, it could have a material adverse impact on our operating results and stock price.
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If we fail to effectively manage our growth our future business results could be harmed and our managerial and operational resources may be strained.
As we proceed with our business plan, we expect to experience significant and rapid growth in the scope and complexity of our business. We will need to add staff to market our services, manage operations, handle sales and marketing efforts and perform finance and accounting functions. We will be required to hire a broad range of additional personnel in order to successfully advance our operations. This growth is likely to place a strain on our management and operational resources. The failure to develop and implement effective systems, or to hire and retain sufficient personnel for the performance of all of the functions necessary to effectively service and manage our potential business, or the failure to manage growth effectively, could have a materially adverse effect on our business and financial condition.
Coronavirus (COVID-19) Pandemic
On March 11, 2020 the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic and recommended containment and mitigation measures worldwide. The global outbreak of COVID-19 continues to rapidly evolve, and the extent to which COVID-19 may impact our business and the dental products and services market will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States, Canada and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. We are continuing to vigilantly monitor the situation with our primary focus on the health and safety of our employees and contractors.
Risks Associated with the Shares of Our Company
Because we do not intend to pay any dividends on our shares, investors seeking dividend income or liquidity should not purchase our shares.
We have not declared or paid any dividends on our shares since inception, and do not anticipate paying any such dividends for the foreseeable future. We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to retain all earnings to implement our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.
Investors seeking dividend income or liquidity should not invest in our shares.
Because we can issue additional shares, purchasers of our shares may incur immediate dilution and may experience further dilution.
We are authorized to issue up to 2,000,000,000 shares. The board of directors of our company has the authority to cause us to issue additional shares, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, our stockholders may experience more dilution in their ownership of our company in the future.
Other Risks
Trading on the OCT markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.
Our common stock is quoted on the OTC Pink tier operated by OTC Markets Group Inc. Trading in stock quoted on the OTC markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Pink tier not a stock exchange, and trading of securities on the OTC is often more sporadic than the trading of securities listed on a quotation system like Nasdaq or a stock exchange like the NYSE. Accordingly, shareholders may have difficulty reselling any of the shares.
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Our stock is a penny stock. Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction 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 prior to effecting 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 prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-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. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.
The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a stockholder’s ability to buy and sell our stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.
We believe that our operations comply, in all material respects, with all applicable environmental regulations.
Our operating partners maintain insurance coverage customary to the industry; however, we are not fully insured against all possible environmental risks.
Any change to government regulation/administrative practices may have a negative impact on our ability to operate and our profitability.
The laws, regulations, policies or current administrative practices of any government body, organization or regulatory agency in the United States, Canada, or any other jurisdiction, may be changed, applied or interpreted in a manner which will fundamentally alter the ability of our company to carry on our business.
The actions, policies or regulations, or changes thereto, of any government body or regulatory agency, or other special interest groups, may have a detrimental effect on us. Any or all of these situations may have a negative impact on our ability to operate and/or our profitably.
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Because we can issue additional shares, purchasers of our shares may incur immediate dilution and may experience further dilution.
We are authorized to issue up to 2,000,000,000 shares. The board of directors of our company has the authority to cause us to issue additional shares, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, our stockholders may experience more dilution in their ownership of our company in the future.
Our by-laws contain provisions indemnifying our officers and directors against all costs, charges and expenses incurred by them.
Our by-laws contain provisions with respect to the indemnification of our officers and directors against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him, including an amount paid to settle an action or satisfy a judgment in a civil, criminal or administrative action or proceeding to which he is made a party by reason of his being or having been one of our directors or officers.
Investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share if we issue additional shares or raise funds through the sale of equity securities.
Our constating documents authorize the issuance of 2,000,000,000 shares of common stock with a par value of $0.001. In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors” interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such issuance may result in a change in our control.
Our by-laws do not contain anti-takeover provisions, which could result in a change of our management and directors if there is a take-over of our company.
We do not currently have a shareholder rights plan or any anti-takeover provisions in our By-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.
Trends, risks and uncertainties.
We have sought to identify what we believe to be the most significant risks to our business, but we cannot predict whether, or to what extent, any of such risks may be realized nor can we guarantee that we have identified all possible risks that might arise such as a black swan event. An absolute worst-case scenario with sufficient potential impact to risk the future of the company as an independent business operating in its chosen markets. Significant reputational impact as a result of a major issue resulting in multiple fatalities, possibly compounded by apparently negligent management behavior; extreme adverse press coverage and viral social media linking the company name to consumer brands, leads to a catastrophic share price fall, very significant loss of consumer confidence and inability to retain and recruit quality people. Investors should carefully consider all of such risk factors before making an investment decision with respect to our common shares.
We are authorized to issue up to 2,000,000,000 shares. The board of directors of our company have the authority to cause us to issue additional shares, and to determine the rights, preferences and privileges of such shares, without consent of any of our stockholders. Consequently, our stockholders may experience more dilution in their ownership of our company in the future.
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This Prospectus relates to our common stock shares that will be offered on a continuous basis by the Selling Security Holders beginning immediately after the registration statement’s effective date, which is included in this Prospectus, and may continue for a period in excess of ninety (90) days from this effective date. We are completing this registration statement to allow the Selling Security Holders to sell their shares. The Selling Security Holders will receive all proceeds from this offering and, if all of the shares being offered by this Prospectus are sold at $0.00975 per share, those proceeds would be $2,156,927.50 (estimated based on, solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(c), the average of the high and low prices of the common stock as reported on the OTC on December 19, 2022). The Selling Security Holders may actually sell all or a portion of their shares through public or private transactions at prevailing market prices or at privately negotiated prices.
We, the issuer, will not receive any of the proceeds from the common stock sale by the Selling Security Holders in this offering. Our company will pay all expenses of this offering estimated at 50,000. See Part II, Item 13.
This prospectus also relates to shares of our common stock that may be offered and sold from time to time by World Amber. We may receive up to $2,500,000 aggregate gross proceeds under the Purchase Agreement from any sales we make to World Amber pursuant to the Purchase Agreement after the date of this prospectus. However, we may not be registering for sale or offering for resale under the registration statement of which this prospectus is a part all of the shares issuable pursuant to the Purchase Agreement.
In any event, we will receive no proceeds from the sale of any shares of common stock by World Amber pursuant to this prospectus. As we are unable to predict the timing or amount of potential issuances of all of the shares offered hereby, we have not allocated any proceeds of such issuances to any particular purpose. Accordingly, all such proceeds actually received under the Purchase Agreement are expected to be used for general working capital and general corporate purposes. Regardless of the actual proceeds raised, we intend to apply available proceeds in the following approximate order of priority: general corporate maintenance, compensation of essential employees and/or consultants, professional fees and expenses related to our public reporting requirements, and expenses related to the evaluation and acquisition of additional dental labs. In the event the proceeds actually received under the Purchase Agreement are insufficient for our planned purposes, we intend to limit or defer our planned acquisition activities, until such time as we have sufficient working capital.
Pending other uses, we intend to invest any proceeds from the offering in short-term investments or hold them as cash. We cannot predict whether the proceeds invested will yield a favorable return. Our management will have broad discretion in the use of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.
DETERMINATION OF OFFERING PRICE
The Selling Security Holders will sell their shares at prevailing market prices or privately negotiated prices. The number of securities that may be actually sold by a Selling Shareholder will be determined by each Selling Shareholder. The Selling Security Holders are under no obligation to sell all or any portion of the securities offered, nor are the Selling Security Holders obligated to sell such shares immediately under this Prospectus. A security holder may sell securities at any price depending on privately negotiated factors, such as a “shareholders” own cash requirements, or objective criteria of value such as the market value of our assets.
We have arbitrarily established the offering price of the common stock and it should not be considered to bear any relationship to our assets, book value or net worth and should not be considered to be an indication of our value. No valuation or appraisal has been prepared for our business.
Among the factors considered by our management were:
|
| · | the market price for our common stock on the OTC; |
|
| · | the potential of our acquisition program; |
|
| · | our capital structure; |
|
| · | the background of our management; and |
|
| · | our cash requirements relative to our business operations. |
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General
On November 22, 2022 (the “Execution Date”), we entered into a Purchase Agreement and a Registration Rights Agreement with World Amber. Pursuant to the terms of the Purchase Agreement, World Amber has agreed to purchase from us up to $2,500,000 of our common stock from time to time during the term of the Purchase Agreement, subject to certain limitations.
We do not have the right to commence any sales to World Amber under the Purchase Agreement until the Commencement Date (defined below) has occurred. Thereafter, we may, from time to time, in any one month period, direct World Amber to purchase shares of our common stock in amounts up to 346,667 shares, and subject to a maximum commitment by World Amber of $104,000 per Regular Purchase. The purchase price per share sold will be $0.30 per share of common stock. World Amber may not assign or transfer its rights and obligations under the Purchase Agreement.
Pursuant to the terms of the Purchase Agreement, in no event may we issue or sell to World Amber any shares of our common stock under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by World Amber and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder), would result in the beneficial ownership by World Amber and its affiliates of more than 9.99% of the then issued and outstanding shares of common stock.
Pursuant to the Registration Rights Agreement, the company is required to register the shares of common stock that may be issued to World Amber under the Purchase Agreement. We have filed the registration statement with the SEC that includes this prospectus to register for resale under the Securities Act, up to 8,333,333 shares of common stock, representing 18% of our issued and outstanding shares of common stock on December 19, 2022 and assuming all shares under the Purchase Agreement are issued
Purchase of Shares Under the Purchase Agreement
Under the terms and subject to the conditions of the Purchase Agreement, the Company has the obligation, to sell to World Amber, and World Amber is obligated to purchase up to $2,500,000 of shares of common stock. Such sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, over the 24-month period commencing on the Commencement Date when the registration statement covering the resale of shares of common stock that have been and may be issued under the Purchase Agreement, which the Company agreed to file with the SEC pursuant to the Registration Rights Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed and the other conditions set forth in the Purchase Agreement are satisfied, all of which are outside the control of World Amber.
Under the Purchase Agreement, in any one-month period over the term of the Purchase Agreement, the Company has the right to present World Amber with a purchase notice (each, a "Purchase Notice") directing World Amber to complete a Regular Purchase up to 346,667 shares of common stock per month In each case, World Amber's maximum commitment in any single Regular Purchase may not exceed $104,000. The Purchase Agreement provides for a purchase price per Purchase Share (the "Purchase Price") equal to $0.30 per Share.
Events of Default
Events of default under the Purchase Agreement include the following:
|
| ·
| the effectiveness of a registration statement registering the resale of the common stock issued or issuable to World Amber lapses for any reason (including, without limitation, the issuance of a stop order or similar order) or such registration statement (or the prospectus forming a part thereof) is unavailable to World Amber for resale of any or all of the Securities to be issued to World Amber, and such lapse or unavailability continues for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period, but excluding a lapse or unavailability where (i) the Company terminates a registration statement after World Amber has confirmed in writing that all of the Securities covered thereby have been resold or (ii) the Company supersedes one registration statement with another registration statement, including (without limitation) by terminating a prior registration statement when it is effectively replaced with a new registration statement covering Securities (provided in the case of this clause (ii) that all of the Securities covered by the superseded (or terminated) registration statement that have not theretofore been resold are included in the superseding (or new) registration statement); |
|
| · | the suspension of the common stock from trading on the OTCQB or any other market on which the common stock trades for a period of one (1) Business Day, provided that the Company may not direct World Amber to purchase any shares of common stock during any such suspension; |
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|
| · | the delisting of the common stock from the OTCQB, provided, however, that the common stock is not immediately thereafter trading on The Nasdaq Capital Market, the New York Stock Exchange, The Nasdaq Global Market, The Nasdaq Global Select Market, the NYSE American, the NYSE Arca, the OTC Bulletin Board, the OTCQX operated by the OTC Markets Group, Inc. (or nationally recognized successor to any of the foregoing); |
|
| · | the failure for any reason by the Company’s Transfer Agent to issue Purchase Shares to World Amber within two (2) Business Days after the applicable Purchase Date, on which World Amber is entitled to receive such Purchase Shares; |
|
| · | the Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach has or could have a Material Adverse Effect (as defined in the Purchase Agreement) and except, in the case of a breach of a covenant which is reasonably curable, only if such breach continues for a period of at least five (5) Business Days; |
|
| · | if any Person commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law; |
|
| ·
| if the Company is at any time insolvent, or pursuant to or within the meaning of any Bankruptcy Law, the Company (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors or is generally unable to pay its debts as the same become due; |
|
| ·
| a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all of its property, or (iii) orders the liquidation of the Company or any Subsidiary; or |
|
| · | if at any time the Company is not eligible to transfer its common stock electronically as DWAC Shares. |
World Amber does have the right to terminate the Purchase Agreement upon any of the events of default set forth above. During an event of default, all of which are outside of World Amber’s control, we may not direct World Amber to purchase any shares of our common stock under the Purchase Agreement.
Termination Rights of the Company
We have the unconditional right, at any time, for any reason and without any payment or liability to World Amber, to give notice to World Amber to terminate the Purchase Agreement.
No Short-Selling or Hedging by World Amber
World Amber has agreed that neither it nor any of its affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement.
Effect of Performance of the Purchase Agreement on Our Stockholders
All 8,333,333 shares registered in this offering which have been and may be issued or sold by us to World Amber under the Purchase Agreement are expected to be freely tradable. It is anticipated that shares registered in this offering may be sold over a period of up to 24-months commencing on the date that the registration statement including this prospectus becomes effective. The sale by World Amber of a significant number of shares registered in this offering at any given time could cause the market price of our common stock to decline and to be highly volatile. Sales of our common stock to World Amber, if any, will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to World Amber all, some or none of the additional shares of our common stock that may be available for us to sell pursuant to the Purchase Agreement. If and when we do sell shares to World Amber, after World Amber has acquired the shares, World Amber may resell all, some or none of those shares at any time or from time to time in its discretion. Therefore, sales to World Amber by us under the Purchase Agreement may result in substantial dilution to the interests of other holders of our common stock. In addition, if we sell a substantial number of shares to World Amber under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with World Amber may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales. However, we have the right to control the timing and amount of any additional sales of our shares to World Amber and the Purchase Agreement may be terminated by us at any time at our discretion without any cost to us.
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The Purchase Agreement prohibits us from issuing or selling to World Amber under the Purchase Agreement any shares of our common stock if those shares, when aggregated with all other shares of our common stock then beneficially owned by World Amber and its affiliates, would exceed the Beneficial Ownership Limitation.
If the convertible promissory notes are converted, the Purchase Agreement is fully drawn down on and as a result the common shares of our company, which are being registered pursuant to this registration statement, are issued as a result, our issued and outstanding will be 666,951,696 common shares. Upon the exercise of such notes and Purchase Agreement draw-downs, there will be a dilution of approximately 33%.
We are registering an aggregate of 221,223,333 shares of common stock and held by the Selling Security Holders. The Selling Security Holders have the option to sell the 221,223,333 shares of our common stock at prevailing market prices or privately negotiated prices.
This Prospectus covers the offering of up to an aggregate of 221,223,333 shares of common stock, consisting of: 212,140,000 shares of common stock underlying previously issued convertible promissory notes issued by our company to certain Selling Security Holders; 750,000 shares issued pursuant to one Selling Security Holder for the acquisition of certain assets; and 8,333,333 shares issuable upon drawdowns under the Purchase Agreement with another Selling Security Holder, World Amber Corporation. The aggregate of 221,223,333 common shares issued or issuable to the nine Selling Security Holders are restricted under applicable federal and state security laws and are being registered to give them the opportunity to sell their shares.
They are offering for sale a total of 221,223,333 shares of common stock of our company. This comprises approximately 33% percent of the total issued and outstanding shares assuming all convertible notes are converted, and the Purchase Agreement is fully draw down. To the best of our knowledge, the Selling Security Holders have sole voting and investment power and rights over all their shares and are the beneficial owners. They have given all information regarding share ownership. The shares being offered are being registered to permit public secondary trading and the Selling Security Holders may offer all or part of their respective shares from time to time but is under no obligation to immediately sell them pursuant to this Prospectus. Thus, our company cannot guarantee that any shares will be sold after this registration statement is declared effective.
The offering of 212,140,000 shares of our issued and outstanding common stock by the Selling Security Holders were originally issued or are issuable pursuant to private placements, transactions or agreements as described herein.
Our common stock is quoted on the OTC Pink tier under the trading symbol “CSSI”.
The Selling Security Holders will have the option to sell their shares at an initial offering price of $0.00975 per share (estimated solely for the purpose of determining the amount of the registration fee pursuant to Rule 457(c) based on the average of the high and low prices of the common stock as reported on the OTC Markets on December 19, 2022) or at prevailing market prices or privately negotiated prices.
All of these shares were issued in reliance upon an exemption from registration pursuant to Section 4(2), Regulation S, or Regulation D under the Securities Act of 1933 (the “Securities Act ”). Our reliance upon Rule 903 of Regulation S was based on the fact that the sales of the securities were completed in an “offshore transaction”, as defined in Rule 902(h) of Regulation S. We did not engage in any directed selling efforts, as defined in Regulation S, in the United States in connection with the sale of the securities.
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The following table provides information as of December 19, 2022, regarding the beneficial ownership of our common stock by each of the Selling Security Holders, including:
|
| · | the identity of the beneficial holder that owns the shares being offered |
|
|
|
|
|
| · | the number of shares owned by each prior to this offering; |
|
|
|
|
|
| · | the number of shares being offered by each; |
|
|
|
|
|
| · | the number of shares that will be owned by each upon completion of the offering, assuming that all the shares being offered are sold; and |
|
|
|
|
|
| · | the percentage of shares owned by each. |
Additional information regarding the holders of the 212,140,000 common shares underlying the convertible promissory notes, the 750,000 common shares issued pursuant to the asset acquisition with Prime Dental Lab LLC and the 8,333,333 common shares issuable pursuant to the Purchase Agreement with World Amber is included the following table.
| Name of Selling Security Holder |
| Shares underlying Convertible Promissory Notes Owned Prior to this offering |
|
| Percent % |
|
| Maximum Number Shares being offered |
|
| Beneficial Ownership after offering |
|
| Percentage of Owned upon completion of the offering |
| |||||
| Ilya Aharon |
|
| 10,000,000 |
|
|
| 1.5 |
|
|
| 10,000,000 |
|
|
| 0 |
|
|
| 0 |
|
| Yohanan Aharon |
|
| 20,000,000 |
|
|
| 3.0 |
|
|
| 20,000,000 |
|
|
| 0 |
|
|
| 0 |
|
| Rosa Shimonov |
|
| 20,000,000 |
|
|
| 3.0 |
|
|
| 20,000,000 |
|
|
| 0 |
|
|
| 0 |
|
| Aaron Abraham |
|
| 12,000,000 |
|
|
| 1.8 |
|
|
| 12,000,000 |
|
|
| 0 |
|
|
| 0 |
|
| Shannon Sekhri |
|
| 20,900,000 |
|
|
| 3.1 |
|
|
| 20,900,000 |
|
|
| 0 |
|
|
| 0 |
|
| Nirmal Sekhri |
|
| 119,240,000 |
|
|
| 17.8 |
|
|
| 119,240,000 |
|
|
| 0 |
|
|
| 0 |
|
| Kenneth Brown |
|
| 10,000,000 |
|
|
| 1.5 |
|
|
| 10,000,000 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
| 212,140,000 |
|
|
| 31.8 | % |
|
| 212,140,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Shares previously issued pursuant to asset acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| Prime Dental Lab LLC(3) |
|
| 750,000 |
|
|
| 0.1 | % |
|
| 750,000 |
|
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Shares issuable underlying Purchase Agreement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| World Amber Corporation(4) |
|
| 8,333,333 |
|
|
| 1.3 | % |
|
| 8,333,333 |
|
|
| 0 |
|
|
| 0 |
|
| Total |
|
| 221,223,333 |
|
|
| 33 | % |
|
| 221,223,333 |
|
|
| 0 |
|
|
| 0 |
|
NOTES:
| (1) | The number and percentage of shares beneficially owned is determined to the best of our knowledge in accordance with the Rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the selling security holder has sole or shared voting or investment power and also any shares which the selling security holder has the right to acquire within 60 days of the date of this Prospectus. |
|
|
|
| (2) | The percentages are based on a diluted basis assuming all 212,140,000 shares are issued upon conversion of the notes, 8,333,333 shares are issued under the Purchase Agreement and based on 445,728,363 shares of our common stock issued and outstanding as at December 19, 2022 for an aggregate of 666,951,696 issued and outstanding shares post-conversion. |
|
|
|
| (3) | John (Jong Pil) Kim, the managing member of Prime Dental Lab LLC is deemed to be beneficial owner of all of the shares of common stock owned by Prime Dental Lab LLC. Mr. Kim has voting and investment power over the shares being offered under the prospectus by Prime Dental Lab LLC. |
|
|
|
| (4) | Yohanan Aharon, the Chief Executive Officer of World Amber Corporation, is deemed to be beneficial owner of all of the shares of common stock owned by World Amber Corporation. Mr. Aharon has voting and investment power over the shares being offered under the prospectus filed with the SEC in connection with the transactions contemplated under the Purchase Agreement. World Amber Corporation is not a licensed broker dealer or an affiliate of a licensed broker dealer. |
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Except as otherwise noted in the above lists, the named party beneficially owns and has sole voting and investment power over all the shares or rights to the shares. The numbers in this table assume that none of the Selling Security Holders will sell shares not being offered in this Prospectus or will purchase additional shares and assumes that all the shares being registered will be sold.
We are registering an aggregate of 221,223,333 shares of common stock, issuable pursuant to: the Purchase Agreement with World Amber, previously issued to Prime Dental Lab LLC, and underlying previously issued convertible promissory notes by our company, by Selling Security Holders. The Selling Security Holders have the option to sell the 221,223,333 shares of our common stock at prevailing market prices or privately negotiated prices.
The shares may be sold in a lawful manner using any one or more of the following methods: private transaction; ordinary brokerage transactions; transactions in which the broker-dealer solicits purchasers; broker-dealer as principal purchasers and resale by the broker-dealer for its own account; block trades in which the broker-dealer will attempt to sell the shares as an agent, but may position and resell a portion of the block as principal to facilitate the transaction; broker-dealer agreements with the selling shareholder to sell a specified number of such shares at a stipulated price per share; exchange distribution following the rules of the applicable exchange; short sales that are not violations of the laws and regulations of any state of the United States; through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or through a combination of any such methods or other lawful means.
The Selling Security Holders are underwriters, within the meaning of section 2(a)(11) of the Securities Act. Any broker-dealers or agents that participate in the sale of the common stock or interests therein may also be deemed to be an “underwriter” within the meaning of section 2(a)(11) of the Securities Act. Any discounts, commissions, concessions or profit earned on any resale of the shares may be underwriting discounts and commissions under the Securities Act. The Selling Security Holders, who are “underwriters” within the meaning of section 2(a)(11) of the Securities Act, are subject to the prospectus delivery requirements of the Securities Act.
The brokers or dealers may receive commissions or discounts from the Selling Security Holders, if any of the broker-dealer acts as an agent for the purchaser of said shares, from the purchaser in the amount to be negotiated which are not expected to exceed those customary in the types of transactions involved. Broker-dealers may agree with the Selling Security Holders to sell a specified number of the shares of common stock at a stipulated price per share. In connection with such re-sales, the broker-dealer may pay to or receive from the purchasers of the shares, commissions as described above. Any broker or dealer participating in any distribution of the shares may be required to deliver a copy of this Prospectus, including any prospectus supplement, to any individual who purchases any shares from or through such broker-dealer.
Our common stock is quoted on the Pink tier of the OTC markets.
Trading in stocks quoted on the OTC is often thin and is characterized by wide fluctuations in trading prices due to many factors that may have little to do with a company’s operations or business prospects. The OTC should not be confused with the NASDAQ market. OTC companies are subject to far less restrictions and regulations than companies whose securities are traded on the NASDAQ market. Moreover, the OTC is not a stock exchange, and the trading of securities on the OTC is often more sporadic than the trading of securities listed on a quotation system like the NASDAQ Small Cap or a stock exchange. In the absence of an active trading market investors may have difficulty buying and selling or obtaining market quotations for our common stock and its market visibility may be limited, which may have a negative effect on the market price of our common stock.
We are bearing all costs relating to the registration of our common stock. The Selling Security Holders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the shares of our common stock.
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The Selling Security Holders must comply with the requirements of the Securities Act and the Exchange Act in the offer and sale of our common stock. In particular, during such times as the Selling Security Holders may be deemed to be engaged in a distribution of any securities, and therefore be considered to be an underwriter, they must comply with applicable laws and may, among other things:
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| · | furnish each broker or dealer through which our common stock may be offered such copies of this Prospectus, as amended from time to time, as may be required by such broker or dealer; |
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| · | not engage in any stabilization activities in connection with our securities; and |
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| · | not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act. |
Regulation M
During such time as the Selling Security Holders may be engaged in a distribution of any of the securities being registered by this Prospectus, the Selling Security Holders are required to comply with Regulation M under the Exchange Act. In general, Regulation M precludes any selling security holder, any affiliated purchaser and any broker-dealer or other person who participates in a distribution from bidding for or purchasing or attempting to induce any person to bid for or purchase, any security that is the subject of the distribution until the entire distribution is complete.
Regulation M defines a “distribution” as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a “distribution participant as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution”.
Regulation M prohibits, with certain exceptions, participants in a distribution from bidding for or purchasing, for an account in which the participant has a beneficial interest, any of the securities that are the subject of the distribution. Regulation M also governs bids and purchases made in order to stabilize the price of a security in connection with a distribution of the security. We have informed the Selling Security Holders that the anti- manipulation provisions of Regulation M may apply to the sales of their shares offered by this Prospectus, and we have also advised the Selling Security Holders of the requirements for delivery of this Prospectus in connection with any sales of the shares offered by this Prospectus.
With regard to short sales, the Selling Security Holders cannot cover their short sales with securities from this offering. In addition, if a short sale is deemed to be a stabilizing activity, then the Selling Security Holders will not be permitted to engage in such an activity. All of these limitations may affect the marketability of our common stock.
The Selling Security Holders may also elect to sell their common shares in accordance with Rule 144 under the Securities Act, rather than pursuant to this Prospectus. After the sale of the shares offered by this Prospectus the Selling Security Holders will have no common shares. The sale of these shares could have an adverse impact on the price of our shares or on any trading market that is developed.
We have not registered or qualified offers and sales of shares of common stock under the laws of any country, other than the United States. To comply with certain states” securities laws, if applicable, the Selling Security Holders will offer and sell their shares of common stock in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain states the Selling Security Holders may not offer or sell shares of common stock unless we have registered or qualified such shares for sale in such states or we have complied with an available exemption from registration or qualification.
All expenses of this registration statement, estimated to be approximately $50,000 including but not limited to legal, accounting, printing and mailing fees will, be paid by our company. However, any selling costs or brokerage commissions incurred by each Selling Security Holder relating to the sale of their shares will be paid by them. See “Use of Proceeds” on page 16.
Penny Stock Rules
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).
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The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC which:
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| · | contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; |
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| · | contains a brief, clear, narrative description of a dealer market, including “bid” and “ask” prices for penny stocks and the significance of the spread between the bid and ask prices; |
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| · | contains the toll-free telephone number for inquiries on disciplinary actions; |
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| · | defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and |
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| · | contains such other information, and is in such form (including language, type size, and format) as the SEC shall require by rule or regulation. |
Prior to effecting any transaction in a penny stock, a broker-dealer must also provide a customer with:
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| · | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; |
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| · | the amount and a description of any compensation that the broker-dealer and its associated salesperson will receive in connection with the transaction; and |
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| · | a monthly account statement indicating the market value of each penny stock held in the customer’s account. |
In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, (ii) a written agreement to transactions involving penny stocks, and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our securities, and therefore our stockholders may have difficulty selling their shares.
Blue Sky Restrictions on Resale
When a Selling Security Holder wants to sell shares of our common stock under this Prospectus in the United States, the Selling Security Holder will need to comply with state securities laws, also known as “blue sky laws”, with regard to secondary sales. All states offer a variety of exemptions from registration of secondary sales. Many states, for example, have an exemption for secondary trading of securities registered under section 12(g) of the Exchange Act or for securities of issuers that publish continuous disclosure of financial and non-financial information in a recognized securities manual, such as Standard & Poor’s. The broker for a selling security holder will be able to advise the stockholder as to which states have an exemption for secondary sales of our common stock.
Any person who purchases shares of our common stock from a Selling Security Holder pursuant to this Prospectus, and who subsequently wants to resell such shares will also have to comply with blue sky laws regarding secondary sales.
When this Registration Statement becomes effective, and a Selling Security Holder indicates in which state(s) he desires to sell his shares, we will be able to identify whether he will need to register or may rely on an exemption from registration.
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DESCRIPTION OF SECURITIES TO BE REGISTERED
Our authorized capital stock consists of 2,000,000,000 shares of common stock, $0.001 par value, and no authorized shares of preferred stock.
Common Stock
As of December 19, 2022, we had 445,728,363 outstanding shares of our common stock, and no outstanding options or warrants.
Holders of our common stock have no preemptive rights to purchase additional shares of common stock or other subscription rights. Our common stock carries no conversion rights and is not subject to redemption or to any sinking fund provisions. All shares of our common stock are entitled to share equally in dividends from sources legally available, when, as and if declared by our Board of Directors, and upon our liquidation or dissolution, whether voluntary or involuntary, to share equally in our assets available for distribution to our stockholders.
Our Board of Directors is authorized to issue additional shares of our common stock not to exceed the amount authorized by our Articles of Incorporation, on such terms and conditions and for such consideration as our Board may deem appropriate without further security holder action.
Voting Rights
Each holder of our common stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Since the shares of our common stock do not have cumulative voting rights, the holders of more than 50% of the shares voting for the election of directors can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to our Board of Directors.
Dividend Policy
Holders of our common stock are entitled to dividends if declared by the Board of Directors out of funds legally available for payment of dividends. From our inception to December 19, 2022, we did not declare any dividends.
We do not intend to issue any cash dividends in the future. We intend to retain earnings, if any, to finance the development and expansion of our business. However, it is possible that our management may decide to declare a cash or stock dividend in the future. Our future dividend policy will be subject to the discretion of our Board of Directors and will be contingent upon future earnings, if any, our financial condition, our capital requirements, general business conditions and other factors.
Anti-takeover Effects of Our Articles of Incorporation and By-laws
Our amended and restated articles of incorporation and bylaws contain certain provisions that may have anti-takeover effects, making it more difficult for or preventing a third party from acquiring control of our company or changing its board of directors and management. According to our bylaws and articles of incorporation, neither the holders of our company’s common stock have cumulative voting rights in the election of our directors. The combination of an ownership by a few stockholders of a significant portion of our company’s issued and outstanding common stock and lack of cumulative voting makes it more difficult for other stockholders to replace our company’s board of directors or for a third party to obtain control of our company by replacing its board of directors.
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Anti-takeover Effects of Nevada Law
Business Combinations
The “business combination” provisions of Sections 78.411 to 78.444, inclusive, of the Nevada Revised Statutes, or NRS, prohibit a Nevada corporation with at least 200 stockholders from engaging in various “combination” transactions with any interested stockholder: for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status; or after the expiration of the three-year period, unless:
| · | the transaction is approved by the board of directors or a majority of the voting power held by disinterested stockholders, or |
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| · | if the consideration to be paid by the interested stockholder is at least equal to the highest of: (a) the highest price per share paid by the interested stockholder within the three years immediately preceding the date of the announcement of the combination or in the transaction in which it became an interested stockholder, whichever is higher, (b) the market value per share of common stock on the date of announcement of the combination and the date the interested stockholder acquired the shares, whichever is higher, or (c) for holders of preferred stock, the highest liquidation value of the preferred stock, if it is higher. |
A “combination” is defined to include mergers or consolidations or any sale, lease exchange, mortgage, pledge, transfer or other disposition, in one transaction or a series of transactions, with an “interested stockholder” having: (a) an aggregate market value equal to 5% or more of the aggregate market value of the assets of the corporation, (b) an aggregate market value equal to 5% or more of the aggregate market value of all outstanding shares of the corporation, or (c) 10% or more of the earning power or net income of the corporation.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, did own) 10% or more of a corporation’s voting stock. The statute could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire our company even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.
Control Share Acquisitions
The “control share” provisions of Sections 78.378 to 78.3793, inclusive, of the NRS, which apply only to Nevada corporations with at least 200 stockholders, including at least 100 stockholders of record who are Nevada residents, and which conduct business directly or indirectly in Nevada, prohibit an acquirer, under certain circumstances, from voting its shares of a target corporation’s stock after crossing certain ownership threshold percentages, unless the acquirer obtains approval of the target corporation’s disinterested stockholders. The statute specifies three thresholds: one-fifth or more but less than one-third, one-third but less than a majority, and a majority or more, of the outstanding voting power. Once an acquirer crosses one of the above thresholds, those shares in an offer or acquisition and acquired within 90 days thereof become “control shares” and such control shares are deprived of the right to vote until disinterested stockholders restore the right. These provisions also provide that if control shares are accorded full voting rights and the acquiring person has acquired a majority or more of all voting power, all other stockholders who do not vote in favor of authorizing voting rights to the control shares are entitled to demand payment for the fair value of their shares in accordance with statutory procedures established for dissenters” rights.
Transfer Agent and Registrar
Our independent stock transfer agent is Transfer Online, 512 SE Salmon Street, Portland, Oregon, 97214-3444 (Telephone: 503-227-2950; Facsimile: 503-227-6874).
INTERESTS OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Prospectus as having prepared or certified any part thereof or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of our common stock was employed on a contingency basis or had or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in us. Additionally, no such expert or counsel was connected with us as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.
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Experts
The audited financial statements of Costas for the two most recent fiscal years ended December 31, 2021 and 2019 and unaudited financial statements of Costas for the fiscal nine months ended September 30, 2022 2020 have been included in this Prospectus in reliance upon Olayinka Oyebola & Co, an independent registered public accounting firm, as experts in accounting and auditing.
Legal Matters
William Macdonald, Esq. has rendered a legal opinion regarding the validity of the shares of common stock offered by the Selling Security Holders. It is included at exhibit 5.1 to the registration statement of which this Prospectus is a part.
INFORMATION WITH RESPECT TO OUR COMPANY
Forward-Looking Statements
This Prospectus contains forward-looking statements. To the extent that any statements made in this report contain information that is not historical, these statements are essentially forward-looking. Forward-looking statements can be identified by the use of words such as “expects”, “plans”, “may”, “anticipates”, “believes”, “should”, “intends”, “estimates” and other words of similar meaning. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, our ability to raise additional capital to finance our activities; the effectiveness, profitability and marketability of our products; legal and regulatory risks; the future trading of our common stock; our ability to operate as a public company; our ability to protect our intellectual property; general economic and business conditions; the volatility of our operating results and financial condition; our ability to attract or retain qualified personnel; and other risks detailed from time to time in our filings with the SEC, or otherwise.
Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for the purposes of securities offerings or economic analysis. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications outlined above and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not undertake any obligation to publicly update any forward-looking statements.
Overview of Business over the Last Five Years
Costas, Inc. was incorporated in the State of Nevada on December 10, 1998. Costas was a development stage company that had a primary business plan to acquire, improve, and re-market undeveloped real estate in Las Vegas, Nevada and its surrounding communities.
On September 20, 2017, the court filed an order effective September 18, 2017, whereby Mr. James Brooks, a creditor of the company was granted a Judgment against the company in the principal amount of $1,114,500. On October 21, 2020, Mr. Brooks filed a motion requesting the appointment of a Receiver over the company. By order filed on November 7, 2020, the Eighth Judicial District Court for Clark County, Nevada appointed Fredrick P. Waid as Receiver for the company in Case No. A-17-749977-B notice of entry of that order was filed on November 9, 2020. On March 25, 2021, the Receiver filed a motion with the Court requesting approval to appoint Mr. Brooks as an officer and director of the company and to increase the authorized capital of the issuer and subsequently to issue sufficient common and preferred shares on terms to be finalized with Mr. Brooks, whereby Mr. Brooks became the controlling shareholder of the company.
On December 30, 2021, Fred Waid resigned as an officer and director of the company, and appointed James Brooks as the company’s sole officer and director. On February 9, 2022, an Order was entered by the Eighth Judicial District Court, Clark County, Nevada, Case No. A-17-749977D at the request of the Appointed Receiver of the Company, Frederick Waid, terminating the receivership for the company.
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On May 6, 2022, the company entered into a formal acquisition agreement with Standard Dental Labs Inc. (“SDL”), a Wyoming corporation controlled by the company’s CEO, James Brooks, in order to acquire certain assets including: (i) a ready to implement business model and platform for the identification and acquisition of small to medium sized dental labs in the United States, and (ii) a fully developed branding package created under SDL, including logo, website, presentation materials and corporate name. Under the terms of the acquisition agreement, assets valued at $75,900 was acquired through the issuance of a total of 31,661,760 shares of the company’s restricted common stock to SDL. With the conclusion of this acquisition, the company intends to operate in the dental lab industry, paving the way for future acquisitions and consolidations in the industry. The assets acquired from SDL will allow the company to immediately facilitate the acquisition of small to medium sized dental labs, of which there are thousands in the United States.
On August 15, 2022, the company announced the completion of a definitive agreement to acquire the assets of Prime Dental Lab, LLC. (“Prime Dental" or "PDL"), an Orlando-based dental lab in operation since 2012. The Purchased Assets consisted of: all client contracts for existing PDL clients; certain physical assets of PDL including all dental lab equipment, furniture, computers and other office equipment; the assumption of certain contracts, equipment leases and office leases (if any); certain employees and management of PDL as determined by the company to be retained and/or contracted by the company; and specifically the right to continue to use the name “Prime Dental Lab LLC” along with certain other rights, trademarks, intellectual property and intangible assets of the Seller. The Purchase Price consisted of 750,000 unregistered, restricted Common Shares (the “Consideration Shares”) of the company (the “Share Consideration) plus additional cash consideration in the amount of $140,000.00 (the “Cash Consideration”) payable in two (2) equal instalments of seventy thousand ($70,000.00) dollars (each a “Cash Instalment”). The first Cash Instalment shall be paid by the company to PDL no later than fifteen (15) calendar days after receipt by the effective date of this Registration Statement (the “First Cash Instalment”). The second Cash Instalment of seventy thousand ($70,000.00) dollars shall be paid by the Acquiror to PDL on the date that is no later than ninety (90) calendar days subsequent to the payment of the First Cash Instalment (the “Second Cash Instalment”).
The Share Consideration is subject to a lock-up agreement for a term of twenty-four months from the issuance date, whereunder PDL shall be entitled to a release of 12.5% of the total Consideration Shares each quarter (93,750 shares) provided certain minimum quarterly revenue targets are achieved. Further, the company had agreed to include such Consideration Shares in any registration statement filed, and in the event that the company decides to approve and complete a share consolidation or share rollback within twelve (12) months after the date of the issuance of the Consideration Shares, such shares shall be protected from such share consolidation action (on a one-time basis).
The company allocated the acquired assets on the company’s balance sheets as of the date of closing as Property and Equipment and Intangible Assets at fair market value. Assets acquired were as follows:
| 750,000 shares of common stock |
| $ | 10,500 |
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| 140,000 |
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| $ | 150,500 |
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| $ | 78,060 |
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Upon acquisition of the customers and operational assets of PDL, the company immediately commenced revenue generating operations effective September 1, 2022, and reported gross revenues of $44,770 in the one-month period ended September 30, 2022, and associated costs of goods sold totaling $28,004 for gross profit of $16,766.
The company is now operating in the dental lab industry and is currently manufacturing dental prosthetics for dentists and dental clinics via its first operational lab facility. Our existing dental lab supplies dentists and dental clinics with dental prosthetics such as crowns, bridges, and implants, including other prosthetics.
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Our Current Business
Our current business activities include discovering, acquiring, and developing dental labs throughout the United States. The company plans to acquire independent labs looking to exit the market, or whom may be interested in retirement. Acquiring labs will be the focus of our growth strategy. Labs will be consolidated into one regionally central lab, and continue to operate, adding revenue to the company's income statement. All North American markets with populations over 1 million are targets.
As noted above, in May of 2022, Costas, Inc. acquired Standard Dental Labs Inc. (SDL), a privately owned Wyoming corporation which is in the business of identifying and purchasing privately owned dental labs in the United States, consolidating them regionally, and operating them efficiently. In August of 2022, Costas purchased all of the assets, including the revenue, of Prime Dental Lab LLC, a Florida dental laboratory.
The consolidation of dental and medical clinics has been an increasing trend over the past two decades, but only recently have investors focused on dental labs. We see this as an opportunity to apply similar strategies to what has been learned from other consolidations. Our growth model will build on the strategy of companies that have gone through an industry consolidation and come out on top.
Our company’s view is that there is no faster way to grow than through acquisition. This industry, in particular, has not yet made its way into the public markets. Consolidation of this industry, currently represented by 7,000+ privately owned businesses, will be the company’s focus. We understand how to design strong companies, and how to build and scale to become regionally competitive. In the process, we will be positioning ourselves as leaders in setting new standards for the dental lab industry.
Despite growth in demand from dental clinics, small and medium sized labs, which represent more than half of the overall industry, may not be able to exit or retire due to lack of interest. This represents an acquisition opportunity for a liquid, publicly traded company. We estimate that each dental lab acquired will (on average) represent just under $1M in incremental revenue. Cities with a population of over 1 million people translates into more than 100 privately owned labs generating roughly $95M in annual revenue combined, and nearly all of whom either need investment capital to stay in business, which is motivation to sell, or are near retirement and may already be interested in selling today. These business owners are interested in selling their labs, or the book of business to our company on terms that may include primarily shares in our company. In this way, we will be able to preserve working capital for operations and expansion by using our equity as the acquisition consideration.
In addition to the Company’s expansion program, it operates day-to-day as a full-service dental lab. With more than 50 dental clinics as clients, Standard Dental Labs produces roughly 500 dental prosthetics each month. Although all the work is currently subcontracted to Prime Dental Lab LLC, we are also working on opening a large and modern facility in Orlando, Florida to accommodate 75 full-time employees, including dental lab technicians.
The 500 orders that are delivered each month are completed by a team of 5 dental lab techs. With 60+ techs working in the new facility, we expect tech productivity to factor on par or better than current levels due to improved support technologies and equipment in our new facility.
Products and services
Dental labs supply dentists and dental clinics with dental prosthetics such as crowns, bridges, and implants. Although they manufacture many other prosthetics, these represent a large majority of what is supplied, and would be called the “bread and butter” of the industry.
The type of dental labs the company has and will continue to acquire typically serve 20 to 25 dental clinics each and employ 4 to 6 dental lab technicians who prepare dental prosthetics for dentists. The dentists are normally responsible for the final fitting with the patient, but most of the work is done by the lab.
Over the past 5 years, 3D printing, and modelling technology has become more mainstream. As most of this technology has been unaffordable for small business owners, advanced technology is uncommon in these smaller operations. SDL plans to purchase the latest and most advanced equipment available in the sector, and integrate into in its operations following the consolidation of acquisition targets. This becomes possible through economies of scale. The more labs acquired, the more competitive the company will become and contributes to an overall higher purchasing power.
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The Market
The transition from skilled labor to computer driven technology in the dental lab industry, although in its infancy, is well underway. The changeover of skilled artisans to 3D printers and milling equipment is causing a shift in the perception for would-be investors. No one can predict how this technology might evolve, how long it will take, or how it may impact the industry in the long term. As of 2022, there are estimated to be more than 10,000 dental labs in North America which generate in excess of $10B in annual revenue.
The uncertain future of dental labs means there is less interest from investors in the field. The erosion of the one, two, and three person businesses is certain. (Forbes, Nov. 2019). The result: A generation of lab owners that may not be able to sell their business for retirement or raise the necessary capital to retool to this advancing technology.
Standard Dental Labs has identified this an exciting opportunity and will begin the acquisition and consolidation of dental labs that are interested in selling their business. SDL will establish offices across America, where acquisition targets are concentrated.
In a November 2019 survey conducted by Wilmington Trust, they determined that 69% of business owners are unprepared to sell their businesses; 51% say market conditions are not right to sell; 85% of owners are optimistic about the outlook for their business over the next year; and though 89% of business owners say their business will survive without them, only 55% have developed a formal transition plan.
Competition
The biggest competition to the private dental lab owner in the United States is large, Chinese factory labs operating in southern China. It is estimated that more than 35% of dental prosthetics are now sourced through these offshore manufacturers. This is detrimental to the local industry, and there is very little an individual lab owner can do to protect himself from the market erosion caused by this competitor.
However, this may represent an opportunity for Standard Dental Labs to lobby state government to enact legislation requiring the materials be “certified” prior to being used to supply the industry with the raw materials required to manufacture dental products.
Certified materials could only become certified through local inspectors which could be funded through a state or national association. So far in the US, the only such association is The National Association of Dental Laboratories, located in Tallahassee, Florida.
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Compliance with Government Regulation
In a 2009, American Dental Association member survey, nearly 65 percent of dentists responded that they believe dental technicians and laboratories are regulated in their state. This is not the case. In fact, only four states in the United States require either certification or continuing education.
However, 12 states require basic minimum standards be met for laboratories, which include state registration. The most up-to-date regulations were last set in 2019, in Washington State, but most haven't updated their requirements for 25 years or longer. We feel that there is an opportunity to contribute to the industry by proposing new, more current legislation that addresses the importation of materials from foreign countries. New legislation the requires certification of materials could greatly enhance the safety of the materials for patients, and also contribute to the success of US based dental labs.
| Dental Laboratory Minimum Standards By State | |||||||||||||
| Florida | Illinois | Kentucky | MN | Missouri | NC | Ohio | Oklahoma | PA | S.Carolina | Texas | Virginia | Washton | |
| Year of Initial Enactment | 1987 | 1993 | 1977 | 2012 | 1995 | 1962 | 2008 | 1992 | 1987 | 1942 | 1985 | 2012 | 2019 |
| Laboratory Registration Fee | $200/2yrs. | N/A | $150/yr. | $50/yr. | N/A | N/A | N/A | $300/yr. | $25/yr. | $150/2yrs. | $135/yr. | N/A | $250 |
| Laboratory Registration | Yes | No | Yes | Yes | No | No | No | Yes | Yes | Yes | Yes | No | Yes |
| Technician Registration Fee | No | No | No | No | No | No | No | No | No | $100 Initial $150 Renewal | No | No | No |
| Certificate to Perform Dental Technology | No | No | No | No | No | No | No | No | No | Yes - δ | No | No | No |
| CDT or Equivalent Required | No | No - | Yes | No | No | No | No | No | No | Yes | Yes | No | Yes (2025) |
| State Laws and Rules Exam Required | No | No | No | No | No | No | No | No | No | Yes | Yes | No | No |
| Out-Of-State Laboratories Required To Register | No | No | Yes | No | No | No | No | Yes | No - δ | Yes | Yes | No | Yes |
| Dentists Required to Use Registered Laboratory | No | No | Yes | Yes** | No | No | No | Yes | No | Yes | Yes | No | Yes |
| Materials Disclosure | Yes | Yes | Yes | Yes | Yes*** | Yes | Yes | No | No | Yes | No | Yes | Yes |
| Point of Origin Disclosure | Yes | Yes | Yes | Yes | Yes*** | Yes | Yes | No | No | Yes | Yes | Yes | Yes |
| CE for One Technician in Each Laboratory | Yes | No | Yes | No | No | No | No | No | No | Yes | Yes | No | Yes |
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| * - $20 on renewal | |||||||||||||
| ** - Only for lab work done in MN | |||||||||||||
| *** - Required | |||||||||||||
| δ - Out-Of-State labs required to register if employing sales representative or agents within the state. | |||||||||||||
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| HS or GED; 2 year DT degree, or 3 year OJT; CDT or pass SC state board exam; pass SC laws and rules exam. | |||||||||||||
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| - Updated March 2020 by NADL | |||||||||||||
- Dentists receive CE credit for attending NBC approved CE courses.
- The certificate to perform dental technological work in SC requires each of the following:
-Source: National Association of Dental Laboratories
Significant Acquisitions
In May of 2022, Costas, Inc. acquired Standard Dental Labs Inc. (SDL), a privately owned Wyoming corporation which is in the business of identifying and purchasing privately owned dental labs in the United States, consolidating them regionally, and operating them efficiently. In August of 2022, Costas signed an agreement to purchase all of the assets, including the revenue, of Prime Dental Lab LLC, a Florida dental laboratory.
On August 15, 2022, the company announced the completion of a definitive agreement to acquire the assets of Prime Dental an Orlando-based dental lab in operation since 2012. The Purchased Assets consisted of: all client contracts for existing PDL clients; certain physical assets of PDL including all dental lab equipment, furniture, computers and other office equipment; the assumption of certain contracts, equipment leases and office leases (if any); certain employees and management of PDL as determined by the company to be retained and/or contracted by the company; and specifically the right to continue to use the name “Prime Dental Lab LLC” along with certain other rights, trademarks, intellectual property and intangible assets of the seller. The Purchase Price consisted of 750,000 unregistered, restricted Common Shares (the “Consideration Shares”) of the company (the “Share Consideration) plus additional cash consideration in the amount of $140,000.00 (the “Cash Consideration”).
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| Table of Contents |
Offices
The mailing address of our company is # 424 E Central Blvd, Suite 308, Orlando, FL, 32801. This space is leased at $3,185 per month, plus the cost of utilities and insurances. Our main telephone number is 321-465-9899. Our initial lab location is at 1008 N Pine Hills Rd, Orlando, FL 32808. Our current locations provide adequate space for our purposes at this stage of our development.
Employees
We currently have employees consisting of our sole director and officer, James Brooks and five contractors in the dental lab operations. We primarily also use the services of sub-contractors and consultants for certain aspects of our business operations.
We do expect material changes in the number of employees over the next 12-month period, as will be required as we expand with our acquisitions of additional dental lab operations. Also, we do and will continue to outsource contract employment as needed.
Summary
The continuation of our business is dependent upon obtaining further financing, a successful program of development, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations. There is significant uncertainty as to whether we can obtain additional financing.
Executive Offices
Our mailing address is # 424 E Central Blvd, Suite 308, Orlando, FL, 32801. This space is leased at $ 3,185 per month, plus the cost of utilities and insurances. Our main telephone number is 407-789-1923. Our initial lab location is at 1008 N Pine Hills Rd, Orlando, FL 32808. These locations provide adequate space for our purposes at this stage of our development.
Laboratories
Our lab facilities operations can be described in 6 steps as follows:
Step 1
Day to day business at Standard Dental Labs starts with materials management. In order to keep up with demand, a review of inventories is conducted each day, and supplies are topped up. Raw materials are ordered from several different dental supply companies, and 80% of the raw materials are ordered from Henry Shein (NASDAQ: HSIC), one of the world’s largest medical and dental supply companies.
Meta Dental Supply, and Atlantic Dental Supply provide on demand inventories, and supply roughly 10% each to Standard Dental Labs.
| 29 |
| Table of Contents |
Step 2
Customer orders are currently being placed by phone, but SDL is developing software to streamline this process, and to provide transparency for dentist and patients.
Each order requires a courier to pick up dental impressions created by the dentist of the patient’s mouth, and a prescription with notes which outline exactly what is prescribed by the doctor, including details like shading the enamel (ceramic) prosthetic to match.
Dental impressions can also be transferred electronically to SDL by using an intra-oral scanner, but fewer than 10% of dental clinics possess that technology today due to limitations in the technology that have not yet become economical for dentists.
Step 3
Once received by the lab, and depending on the job, one of 3 possible technician types is assigned the work. First, a model is made by a model work technician from the impression, and the type of model depends on the prescription. The end product could be a ceramic implant, crown or bridge, or it could be a metal product made of silver or gold. These processes require different skill sets, and therefore different technicians.
With a model made from an impression, a wax-up technician can manually create a metal crown or bridge. When an impression is digitally scanned, it can be used to create a ceramic model from a digital milling machine, which can be finished by a ceramic technician. Ceramic technicians normally require a digital milling machine to create the base prosthetic, but could produce up to 4 prosthetics per hour if supported by the right equipment.
A tech working manually, ceramic or metal, can only produce one prosthetic per hour.
SDL is planning several upgrades that will include more advanced 3D printing and milling technologies, and is encouraging dental clinics to adopt intra-oral scanning technology to streamline the transfer of information, and improve turnaround times for patients.
Step 4
Once completed, the technician packages the finished product and updates the file with billing details. An invoice is created, attached to the package, and then moved to a staging area to await delivery.
Step 5
The next step is delivery. Several times per day, and more than 500 times per month, deliveries are performed by our in-house couriers. The final product, including the invoice, is delivered to the dental clinics. On delivery, the courier uses an itemized manifest which details each invoice in the delivery. The receiver signs for the delivery which completes the process.
Step 6
Finally, at the end of each billing cycle (normally monthly), a billing statement is sent to each client with a request for payment, which closes the job.
We know of no material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our company.
| 30 |
| Table of Contents |
MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common shares are quoted on the OTC markets under the symbol “CSSI”. The following quotations, obtained from OTC Markets Inc., reflect the high and low bids for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
The high and low bid prices of our common stock for the periods indicated below are as follows:
| Quarter Ended (1) |
| High |
|
| Low |
| ||
| September 30, 2022 |
|
| 0.015 |
|
|
| 0.0055 |
|
| June 30, 2022 |
|
| 0.0355 |
|
|
| 0.121 |
|
| March 31, 2022 |
|
| 0.04 |
|
|
| 0.0102 |
|
| December 31, 2021 |
|
| 0.055 |
|
|
| 0.0141 |
|
| September 30, 2021 |
|
| 0.0788 |
|
|
| 0.0038 |
|
| June 30, 2021 |
|
| 0.0393 |
|
|
| 0.015 |
|
| March 31, 2021 |
|
| 0.074 |
|
|
| 0.0125 |
|
| December 31, 2020 |
|
| 0.0375 |
|
|
| 0.0065 |
|
| September 30, 2020 |
|
| 0.0257 |
|
|
| 0.003 |
|
| June 30, 2020 |
|
| 0.0296 |
|
|
| 0.01 |
|
| March 31, 2020 |
|
| 0.0839 |
|
|
| 0.02 |
|
NOTES:
| (1) | The quotations above reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. |
On December 19, 2022, the last closing price for one share of our common stock as reported by the OTC was $0.008. This closing price reflects an inter-dealer price, without retail mark-up, mark-down or commission, and may not represent an actual transaction.
Our common shares are issued in registered form. Our independent stock transfer agent is Transfer Online, 512 SE Salmon Street, Portland, Oregon, 97214-3444 (Telephone: 503-227-2950; Facsimile: 503-227-6874) is the transfer agent for our common shares.
Dividend Policy
We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.
Equity Compensation Plan Information
We have no long-term incentive plans.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
We did not purchase any of our shares of common stock or other securities during our fiscal year ended December 31, 2021.
| 31 |
| Table of Contents |
This Prospectus includes the following financial statements:
|
| · | Unaudited interim condensed financial statements for the nine months ended September 30, 2022; and |
|
| · | Audited financial statements of our company for fiscal years ended December 31, 2021 and 2020. |
|
| · | Audited financial statements of Prime Dental Labs LLC for the fiscal years ended December 31, 2021 and 2020 |
Our financial statements are prepared in accordance with United States generally accepted accounting principles and are stated in United States Dollars ($). The financial statements appear beginning on page F-1.
| 32 |
| Table of Contents |
TABLE OF CONTENTS FOR UNAUDITED
CONDENSED
FINANCIAL STATEMENTS
September 30, 2022
| Page | |
| F-2 | |
|
| |
| F-3 | |
|
| |
| F-4 | |
|
| |
| F-5 | |
|
| |
| F-6 to F-14 |
| F-1 |
| Table of Contents |
Condensed Balance Sheets
(Unaudited)
|
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
|
|
|
|
|
|
|
| ||
| Assets |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Current assets: |
|
|
|
|
|
| ||
| Cash and cash equivalents |
| $ | 78,513 |
|
| $ | - |
|
| Total current assets |
|
| 78,513 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 76,241 |
|
|
|
|
|
| Intangible assets |
|
| 104,103 |
|
|
| - |
|
| Total assets |
| $ | 258,857 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Liabilities and Stockholders’ Equity (Deficit) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities |
| $ | 153,713 |
|
| $ | 75,809 |
|
| Accounts payable – related party |
|
| - |
|
|
| 15,000 |
|
| Advances Payable – related party |
|
| 34,037 |
|
|
| 16,532 |
|
| Convertible notes |
|
| 39,816 |
|
|
| - |
|
| Convertible note – shareholder, net |
|
| 447,797 |
|
|
| 25,682 |
|
| Other current liability |
|
| 140,000 |
|
|
| - |
|
| Total current liabilities |
|
| 815,363 |
|
|
| 133,023 |
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
| 815,363 |
|
|
| 133,023 |
|
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Stockholders’ (deficit): |
|
|
|
|
|
|
|
|
| Common stock, 2,000,000,000 shares authorized, $0.001 par value, 445,728,363 and 413,314,603 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively |
|
| 445,728 |
|
|
| 413,315 |
|
| Additional Paid in Capital |
|
| 14,545,075 |
|
|
| 14,333,185 |
|
| Accumulated deficit |
|
| (15,547,309 | ) |
|
| (14,879,523 | ) |
| Stockholders’ (deficit) |
|
| (556,506 | ) |
|
| (133,023 | ) |
| Total Liabilities and Stockholders’ Deficit |
| $ | 258,857 |
|
| $ | - |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-2 |
| Table of Contents |
Condensed Statements of Operations
(Unaudited)
|
|
| For the Three Months Ended |
|
| For the Nine Months Ended |
| ||||||||||
|
|
| September 30, |
|
| September 30, |
| ||||||||||
|
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
| Revenue |
| $ | 44,770 |
|
| $ | - |
|
| $ | 44,770 |
|
| $ | - |
|
| Costs of goods sold |
|
| 28,004 |
|
|
| - |
|
|
| 28,004 |
|
|
| - |
|
| Gross profit |
|
| 16,766 |
|
|
| - |
|
|
| 16,766 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling and marketing expenses |
|
| 18,585 |
|
|
| - |
|
|
| 18,585 |
|
|
| - |
|
| General and administrative expenses |
|
| 15,181 |
|
|
| 1,122 |
|
|
| 83,800 |
|
|
| 15,546 |
|
| Professional Fees |
|
| 28,230 |
|
|
| 25,166 |
|
|
| 53,823 |
|
|
| 28,163 |
|
| Total Operating Expenses |
|
| 61,996 |
|
|
| 26,288 |
|
|
| 156,208 |
|
|
| 43,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Loss from Operating |
|
| (45,230 | ) |
|
| (26,288 | ) |
|
| (139,442 | ) |
|
| (43,709 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other Income (Expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gain on Settlement of Debt |
|
| - |
|
|
| - |
|
|
| 6,884 |
|
|
| - |
|
| Interest Expense |
|
| (336,190 | ) |
|
| (14,908 | ) |
|
| (535,227 | ) |
|
| (44,244 | ) |
| Total Other (expense) |
|
| (336,190 | ) |
|
| (14,908 | ) |
|
| (528,343 | ) |
|
| (44,244 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net (Loss) |
| $ | (381,420 | ) |
| $ | (41,196 | ) |
| $ | (667,785 | ) |
| $ | (87,953 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss per share attributable to common shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic and diluted |
|
| 445,214,776 |
|
|
| 43,314,603 |
|
|
| 422,936,188 |
|
|
| 43,314,603 |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-3 |
| Table of Contents |
Condensed Statements of Stockholders’ Equity
(Unaudited)
|
|
| Common Stock |
|
| Additional |
|
| Accumulated |
|
| Stockholders’ |
| ||||||||
|
|
| Shares |
|
| Amount ($) |
|
| Paid-in Capital ($) |
|
| (Deficit) ($) |
|
| (Deficit) ($) |
| |||||
| Balance, December 31, 2020 |
|
| 43,314,603 |
|
|
| 43,615 |
|
|
| 3,191,458 |
|
|
| (4,625,396) |
|
| (1,390,623) | ||
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (26,766) |
|
| (26,766) | ||
| Balance, March 31, 2021 |
|
| 43,314,603 |
|
|
| 43,615 |
|
|
| 3,191,458 |
|
|
| (4,652,162) |
|
| (1,417,389) | ||
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (19,991) |
|
| (19,991) | ||
| Balance, June 30, 2021 |
|
| 43,314,603 |
|
|
| 43,615 |
|
|
| 3,191,458 |
|
|
| (4,672,153) |
|
| (1,437,380) | ||
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (41,196) |
|
| (41,196) | ||
| Balance, September 30, 2021 |
|
| 43,314,603 |
|
|
| 43,615 |
|
|
| 3,191,458 |
|
|
| (4,713,349) |
|
| (1,478,576) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
| Additional |
|
| Accumulated |
| Stockholders’ |
| |||||||||
|
|
| Shares |
|
| Amount ($) |
|
| Paid-in Capital ($) |
|
| (Deficit) ($) |
|
| (Deficit) ($) |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance, December 31, 2021 |
|
| 413,314,603 |
|
|
| 413,315 |
|
|
| 14,333,185 |
|
|
| (14,879,523) |
|
| (133,023) | ||
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (119,044) |
|
| (119.044) | ||
| Balance, March 31, 2022 |
|
| 413,314,603 |
|
|
| 413,315 |
|
|
| 14,333,185 |
|
|
| (14,998,567) |
|
| (252,067) | ||
| Shares issued under acquisition agreement |
|
| 31,663,760 |
|
|
| 31,663 |
|
|
| - |
|
|
| - |
|
|
| 31,663 |
|
| Beneficial conversion features |
|
| - |
|
|
| - |
|
|
| 62,000 |
|
|
| - |
|
|
| 62,000 |
|
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (167,322) |
|
| (167,322) | ||
| Balance, June 30, 2022 |
|
| 444,978,363 |
|
|
| 444,978 |
|
|
| 14,395,185 |
|
|
| (15,165,889) |
|
| (325,725) | ||
| Shares issued for asset acquisition agreement |
|
| 750,000 |
|
|
| 750 |
|
|
| 9,750 |
|
|
| - |
|
|
| 10,500 |
|
| Beneficial conversion features |
|
| - |
|
|
| - |
|
|
| 140,140 |
|
|
| - |
|
|
| 140,140 |
|
| Net Loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| (381,420) |
|
| (381,420) | ||
| Balance, September 30, 2022 |
|
| 445,728,363 |
|
|
| 445,728 |
|
|
| 14,545,075 |
|
|
| (15,547,309) |
|
| (556,506) | ||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-4 |
| Table of Contents |
Condensed Statements of Cash Flows
(Unaudited)
|
|
| Nine Months Ended September 30, |
| |||||
|
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
|
| ||
| Cash flows from operating activities: |
|
|
|
|
|
| ||
| Net loss |
| $ | (667,785 | ) |
| $ | (87,953 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
| 1,819 |
|
|
|
|
|
| Amortization of debt discount |
|
| 461,931 |
|
|
| - |
|
| Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable – related party |
|
| (15,000 | ) |
|
| 8,775 |
|
| Accounts payable and other liabilities |
|
| 77,903 |
|
|
| 65,162 |
|
| Net cash (used in) operating activities |
|
| (141,132 | ) |
|
| (14,016 | ) |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Net cash provided by investing activities |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from convertible notes |
|
| 202,140 |
|
|
| - |
|
| Advances payable – related party |
|
| 17,505 |
|
|
| 14,016 |
|
| Net cash provided by financing activities |
|
| 219,645 |
|
|
| 14,016 |
|
|
|
|
|
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
|
| 78,513 |
|
|
| - |
|
| Cash and cash equivalents, beginning of year |
|
| - |
|
|
| - |
|
| Cash and cash equivalents, end of period |
| $ | 78,513 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Supplement Non-Cash Investing and Financing Activities |
|
|
|
|
|
|
|
|
| Property and equipment acquired under assets purchase agreement |
| $ | 78,060 |
|
| $ | - |
|
| Intangible assets acquired under acquisition agreement |
| $ | 31,664 |
|
| $ | - |
|
| Other current liability under assets purchase agreement |
| $ | 140,000 |
|
| $ | - |
|
| Common stock issued under assets purchase agreement |
| $ | 10,500 |
|
| $ | - |
|
| Beneficial conversion feature associated with convertible notes |
| $ | 202,140 |
|
| $ | - |
|
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F-5 |
| Table of Contents |
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS
Historical Information
The Company was originally organized as Costas, Inc. under the corporate laws of the State of Nevada on December 10, 1998. On July 1,2010, the Company purchased the technology assets of eJob Resource, Inc. The purchase included eJob Resources’ online job search and posting site to provide a virtual bridge between the Indian and U.S. technology job markets; all job search technology, which aggregates job posting from many sites, and make them available via XML, API.
On July 17, 2014, the Company amended its Articles of Incorporation by approving a 25 for 1 reverse split.
On January 21, 2015, the Company entered into an agreement with Mr. James Brooks to provide certain services to the Company in exchange for a salary of $10,000 per month and 2,550,000 common shares of the Company.
In January 2016 the Company purchased 48% of AuthentaTradeLtd, a Seychelles based corporation, with operations in Cyprus whose function was building a digital currency exchange platform. The remaining 52% was purchased in January 2018.
On September 20, 2017, Mr. James Brooks, a creditor of the Company was granted a Judgment against the Issuer in the principal amount of $1,114,500 with respect to unpaid salary and non-issuance of common shares as required under the original 2015 agreement.
In November 2018, the Company changed its business model to participate in on-line gaming, which operations ceased during the three months period ended March 31, 2019.
On May 20, 2019, the Company announced the completion of the acquisition of Nano Creaciones Sapi de C.V., a Mexican company. The Company issued a total of 25,000,000 shares as consideration for the acquisition. The Company has not received sufficient support from the vendors to confirm ownership of this Mexican entity, and therefore has not included its operations in these condensed financial statements.
Current Information
On October 21, 2020, Mr. James Brooks, the creditor of the Company holding a judgment in the principal amount of $1,114,500 filed a motion requesting the appointment of a Receiver over the Company. By order filed on November 7, 2020, the Eighth Judicial District Court for Clark County, Nevada appointed Frederick P. Waid as Receiver for the Company in Case No. A-17-749977-B. Notice of entry of that order was filed on November 9, 2020. Mr. Waid became the sole officer and director of the Company. The Receiver was not provided any historical accounting documents from former management as part of the proceedings. As a result of the aforementioned actions, the Court approved an amended opening balance sheet for the Company as of December 31, 2019 which reflects the debt owing to Mr. Brooks, previously omitted, including accrued interest as well as any other approved amounts while eliminating any outstanding debts not approved during the receivership.
On March 25, 2021, the Receiver filed a motion with the Court requesting approval to appoint Mr. Brooks as an officer and director of the Company and to increase the authorized capital of the Company and subsequently to issue sufficient common and preferred shares on terms to be finalized between the Receiver and Mr. Brooks, to settle a total of $175,000 of outstanding debt. Further, subsequent to the March 25, 2021, order, the Receiver sought and received approval from the Court to eliminate certain unsupported assets, outstanding payables and convertible loans on the financial statements of the Company as at December 31, 2019. The Receiver further placed an administrative hold on a total of 26,500,000 shares issued in 2019 for the acquisition of Nano Creaciones Sapi de C.V., a Mexican company, and as consideration for services purported to be rendered, due to the fact that there was no verifiable support for the completion of the acquisition or the provision of services.
| F-6 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 1 - NATURE OF OPERATIONS (Continued)
Current Information (cont’d)
On January 26, 2022, with an effective date of December 23, 2021, three hundred million (300,000,000) shares of the Company’s common stock were issued to Mr. James Brooks pursuant to a Court Order entered in the Eighth District Judicial Court, Clark County, Nevada, Case No. A-17-749977-B, resulting in a change of control of the Company. The issuance of 300,000,000 shares to Mr. Brooks was issued in partial settlement of debt owed to Mr. Brooks. On December 30, 2021, Mr. Brooks was named the sole officer and director of the Company. On February 9, 2022, an Order was entered in the Eighth Judicial District Judicial Court, Clark County, Nevada, Case No. A-17-749977D by the Appointed Receiver of the Company, Frederick Waid, terminating the receivership for the Company. Concurrently, the Company changed its operating address to 424 E Central Blvd, Suite 308, Orlando, Florida 32801.
On May 6, 2022, the Company entered into a formal acquisition agreement with Standard Dental Labs Inc. (“SDL”), a Wyoming corporation controlled by the Company’s CEO, James Brooks, in order to acquire certain assets including: (i) a ready to implement business model and platform for the identification and acquisition of small to medium sized dental labs in the United States, and (ii) a fully developed branding package created under SDL, including logo, website, presentation materials and corporate name. Under the terms of the acquisition agreement, assets valued at $75,900 was acquired through the issuance of a total of 31,663,760 shares of the Company’s unregistered, restricted common stock to SDL. With the conclusion of this acquisition, the Company intends to operate in the dental lab industry, paving the way for future acquisitions and consolidations in the industry. The assets acquired from SDL will allow the Company to immediately facilitate the acquisition of small to medium sized dental labs, of which there are thousands in the United States.
On August 15, 2022 the Company completed of a definitive agreement to acquire the assets of Prime Dental Lab, LLC. ("Prime Dental"), an Orlando-based dental lab in operation since 2012. Total consideration was paid to the shareholders of Prime Dental in a combination of cash and registered shares for the assets, which includes all equipment, customer relationships, and associated revenue. The Company commenced operations in the dental lab business effective September 1, 2022.
On August 17, 2022 the Company’s board of directors and majority shareholder increased the Company’s authorized share capital from 1.25bn to 2bn shares of common stock.
NOTE 2 – GOING CONCERN
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company has recently acquired assets including branding and a detailed business plan to facilitate the acquisition of small to medium sized dental labs, as well as its first dental lab operation. Presently the Company does not have a source of revenue sufficient to cover all of its operating costs. While we have recently commenced revenue generating operations, the Company’s sole officer and director is currently providing capital for operational shortfalls as needed by the Company, and we continue to raise proceeds from the sale of convertible notes having received gross proceeds of $202,140 through September 30, 2022, there remains substantial doubt about our ability to continue as a going concern. As at September 30, 2022, the Company has $78,513 cash on hand, and substantial debt. As we continue to implement our business plan, the Company may continue to be dependent upon financing from our sole officer and director, and the raising of additional capital through placement of our common stock or debt financing. There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.
The ability of the Company to continue as a going concern is dependent on attaining profitable operations. There are no assurances that the Company will be able to meet its obligations, raise funds or conclude additional acquisitions of identified businesses. Further upon acquisition of any target businesses there is no guarantee these operations will reach profitability. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
| F-7 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 2 – GOING CONCERN (continued)
COVID-19
While the COVID-19 pandemic has subsided, COVID-19 could continue to have an adverse impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which could impact the Company’s ability to obtain materials necessary for its dental lab operations, experience staffing shortfalls or create difficulty raising capital to fund future acquisitions as the global economy continues to recover. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. The Company is not able to estimate the effects the recent COVID-19 outbreak may have on its financial condition in the next 12 months.
NOTE 3 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year End
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Beneficial Conversion Feature
For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount. When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Property and Equipment
Property and equipment are recorded at cost. Depreciation on property and equipment are determined using the straight-line method over the one to eight year estimated useful lives of the assets.
Intangible Assets
During the nine months ended September 30, 2022, the Company has acquired (i) a ready to implement business model and platform for the identification and acquisition of small to medium sized dental labs in the United States, and (ii) a fully developed branding package including logo, website, presentation materials and corporate name. A total of $31,663 has been capitalized in respect to these assets. The Company has also recognized assets for customer relationships in the amount of $72,440 in respect to a recent asset purchase agreement with Prime Dental Labs, whereunder we acquired assets to commence operation of our first dental lab. The Company will review these intangible assets for impairment at a minimum of once per year or whenever events or changes in circumstances suggest a need for evaluation. There is no impairment expense for the intangible assets in the period ended September 30, 2022.
| F-8 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Impairment
Our long-lived assets are subject to an impairment test if there is an indicator of impairment. The carrying value and ultimate realization of these assets is dependent upon our estimates of future earnings and benefits that we expect to generate from their use. If our expectations of future results and cash flows are significantly diminished, other long-lived assets may be impaired and the resulting charge to operations may be material. When we determine that the carrying value of intangibles or other long-lived assets may not be recoverable based upon the existence of one or more indicators of impairment, we use the projected undiscounted cash flow method or realizable value to determine whether an impairment exists, and then measure the impairment using discounted cash flows.
Revenue Recognition
The Company applies ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sales of products by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when the earnings process is complete and persuasive evidence of an arrangement exists. This generally occurs when a purchased product has been delivered to a customer from our lab facility, at which time both title and the risks and rewards of ownership are transferred to and accepted by the customer, and the selling price has been collected.
Inventory
Inventories, if maintained, consist of work-in-progress inventory or replacement parts on hand in order to complete customer orders.
Warranty
We do not record warranty liabilities at the time of sale for the estimated costs that may be incurred under the terms of the applicable limited warranty as all component parts are covered by our respective industry suppliers. Our products are custom created for the individual client, and therefore we have no formal return policy or money back guarantee, however, if a product is determined to be defective, we will deliver a replacement unit to meet expected customer service terms. We assess the need for warranty and return liabilities at each report date.
Cost of Sales
Cost of sales includes actual product cost, labor, and allocated overheard, which is applied on a per unit basis.
Accounts Receivable
Accounts receivable is trade related. The Company’s management has established an allowance for bad debt based upon accounts receivable that are more than one year past due. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the necessary for reserves for bad debt. Reserves, if required, are recorded on management’s best estimate of collection. At September 30, 2022 there were no outstanding accounts receivable.
Basic and Diluted Loss Per Share
The Company computed basic and diluted loss per share amounts pursuant to the ASC 260 “Earnings per Share.” There are no potentially dilutive shares outstanding and, accordingly, dilutive per share amounts have not been presented in the accompanying statements of operations.
Potential common stock consists of the incremental common stock issuable upon the exercise of convertible notes (using the if-converted method). The table below reflects the potentially dilutive securities at each reporting period, which have not been included in the computation of diluted net loss per share due to their anti-dilutive effect:
| F-9 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES (continued)
Basic and Diluted Loss Per Share (cont’d)
|
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||
| Convertible notes (principal balance) |
|
| 1,373,867,310 |
|
|
| 1,171,727,310 |
|
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new guidance, among other things, simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share (“EPS”) guidance by requiring that an entity use the if-converted method when calculating diluted EPS for convertible instruments. ASU 2020-06 is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company plans to adopt the new guidance effective January 1, 2024.
NOTE 5 – ASSET PURCHASE AGREEMENTS
| (1) | On May 6, 2022, the Company entered into a formal acquisition agreement with Standard Dental Labs Inc. (“SDL”), a Wyoming corporation controlled by the Company’s CEO, James Brooks, to acquire certain assets including: (i) a ready to implement business model and platform for the identification and acquisition of small to medium sized dental labs in the United States, and (ii) a fully developed branding package created under SDL, including logo, website, presentation materials and corporate name. Under the terms of the acquisition agreement, assets valued at $75,900 were acquired through the issuance of a total of 31,663,760 shares of the Company’s unregistered, restricted common stock to SDL. The transaction occurred under common control and as a result, the issued shares were valued at par value, or $0.001 per share, and a total of $31,663 was recorded as intangible assets on the Company’s balance sheet. |
|
|
|
| (2) | On August 15, 2022 the Company (the “Acquiror”) announced the completion of a definitive agreement to acquire the assets of Prime Dental Lab, LLC. ("PDL"), an Orlando-based dental lab in operation since 2012. The Purchased Assets consisted of: all client contracts for existing PDL clients; certain physical assets of PDL including all dental lab equipment, furniture, computers and other office equipment; the assumption of certain contracts, equipment leases and office leases (if any); certain employees and management of PDL as determined by the Acquiror to be retained and/or contracted by the Acquiror; and specifically the right to continue to use the name “Prime Dental Lab LLC” along with certain other rights, trademarks, intellectual property and intangible assets of the Seller. The Purchase Price consisted of 750,000 unregistered, restricted Common Shares (the “Consideration Shares”) of the Acquiror (the “Share Consideration) plus additional cash consideration in the amount of $140,000.00 (the “Cash Consideration”) payable in two (2) equal instalments of seventy thousand ($70,000.00) dollars (each a “Cash Instalment”). The first Cash Instalment shall be paid by the Acquiror to PDL no later than fifteen (15) calendar days after receipt by the Acquiror of a Notice of Effect from the Securities and Exchange Commission of a Form S-1 Registration Statement (the “First Cash Instalment”). The second Cash Instalment of seventy thousand ($70,000.00) dollars shall be paid by the Acquiror to PDL on the date that is no later than ninety (90) calendar days subsequent to the payment of the First Cash Instalment (the “Second Cash Instalment”). |
| F-10 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 5 – ASSET PURCHASE AGREEMENTS (continued)
The Share Consideration is subject to a lock-up agreement for a term of twenty-four months from the issuance date, whereunder PDL shall be entitled to a release of 12.5% of the total Consideration Shares each quarter (93,750 shares) provided certain minimum quarterly revenue targets are achieved. Further, the Company has agreed to include such Consideration Shares in any registration statement filed, and in the event that the Company decides to approve and complete a share consolidation or share rollback within twelve (12) months after the date of the issuance of the Consideration Shares, such shares shall be protected from such share consolidation action (on a one-time basis).
The Company allocated the acquired assets on the Company’s balance sheets as of the date of closing as Property and Equipment and Intangible Assets at fair market value. Assets acquired were as follows:
| 750,000 shares of common stock |
| $ | 10,500 |
|
| Cash consideration – other current liability |
|
| 140,000 |
|
| Total consideration purchase cost |
| $ | 150,500 |
|
|
|
|
|
|
|
| Allocation: |
|
|
|
|
| Property and equipment |
| $ | 78,060 |
|
| Customer relationships |
|
| 72,440 |
|
| Total purchased assets |
| $ | 150,500 |
|
The purchase accounting for the acquisition of assets from PDL includes an analysis of all available information as at the acquisition date. Management may continue to evaluate information about circumstances that existed as of the acquisition date and recognize measurement period adjustments prospectively. The measurement period is not to exceed 12 months from the respective date of acquisition.
NOTE 6 – SUBCONTRACTOR AGREEMENT
Concurrent with the closing of the acquisition of certain assets from Prime Dental Lab, LLC (“PDL”) (see Note 5(2)) on August 31, 2022, the Company entered into a subcontractor agreement with PDL for the provision of certain services including labor, materials, supplies and manufacturing expertise with respect to the servicing of the Company’s client list for dental prosthetics and orthotics. PDL shall have available for its exclusive use certain acquired assets in order to facilitate the provision of finished products. As consideration under the terms of the agreement, PDL shall be entitled to retain all gross profits from the sale of such finished goods, net the cost of use of the production equipment, as management fees.
NOTE 7 – JUDGMENT PAYABLE AND CONVERTIBLE NOTE
During fiscal 2017, Mr. James Brooks (“Brooks”), a creditor of the Company, obtained a judgment in the principal amount of $1,114,500. Previously, on January 21, 2015, the Company entered into an agreement with Mr. Brooks whereunder he would provide certain services to the Company in exchange for a salary of $10,000 per month and 2,550,000 common shares of the Company. Under the terms of this contract, Mr. Brooks was owed $120,000 in salary and 2,550,000 shares, which consideration was not provided by the Company in accordance with the contract terms. On January 23, 2017 Mr. Brooks filed a complaint in respect to amounts payable and applicable damages. The Company failed to respond to the action, and on August 2, 2017, Mr. Brooks filed a motion for entry of default judgment. On September 6, 2017, the court determined the unpaid 2,550,000 common shares had a market value of $994,500 at the time they were originally deliverable to Mr. Brooks. In addition to the value of the unpaid shares, unpaid salary of $120,000 resulted in a judgment of $1,114,500. Concurrently, the court granted post-judgment interest pursuant to Nevada Revised Statute 17.130 which provides that when there is no express contract in writing, interest must be allowed at a rate equal to the prime rate at the largest bank in Nevada, as ascertained by the Commissioner of Financial Institution on January 1 or July 1 as the case may be, immediately preceding the date of
| F-11 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 7 – JUDGMENT PAYABLE AND CONVERTIBLE NOTE (continued)
the transaction, plus 2 percent. The rate must be adjusted accordingly on each January 1 and July 1 thereafter until the judgment is satisfied.
As a result, interest applied on the judgment over the applicable periods was as follows:
| January 1, 2021 | 5.25% |
| July 1, 2020 | 5.25% |
| January 1, 2020 | 6.75% |
|
On March 25, 2021, the Court approved the first proposed settlement of a portion of Brooks’ debt, in the amount of One Hundred Seventy-Five Thousand Dollars ($175,000) (the “Settlement Debt”) to be paid via the issuance of certain common shares of the Company. On December 6, 2021, Brooks entered into certain Debt Assignment and Purchase Agreements with several third parties in the accumulated amount of $70,000. (See Note 9). On December 23, 2021, the Company entered into an 8% Convertible Promissory Note with Brooks, our then sole officer and director, in the amount of $1,171,727. Concurrently, three hundred million (300,000,000) shares of the Company’s common stock were issued to Brooks pursuant to a Court Order entered in the Eighth District Judicial Court, Clark County, Nevada, Case No. A-17-749977-B. The Company valued the 300,000,000 shares at the closing price of the Company’s stock as traded on the OTCMarkets on the date of issuance and recorded a loss on the extinguishment of debt of $10,025,000.
The convertible promissory note bears interest rate at 8% per annum for a period of 12 months. The holder has the right to convert any or all of the outstanding principal into shares of the Company’s common stock at a conversion price of $0.001 per share. The beneficial conversion feature associated with the note and realized on issuance date totaled $1,171,727, which amount is being amortized over the term of the note, or 12 months.
Interest payable included in accounts payable and the principal outstanding balance of the debt as at each period-end are as follows:
|
|
| Interest Payable |
|
| Shareholder Loan |
|
| Convertible Note |
|
| Total |
| ||||
| Balance, December 31, 2020 |
|
| 247,564 |
|
|
| 1,114,500 |
|
|
| - |
|
|
| 1,362,064 |
|
| Interest expense on shareholder loan |
|
| 54,663 |
|
|
| - |
|
|
| - |
|
|
| 54,663 |
|
| Interest expense on convertible note |
|
| 2,054 |
|
|
| - |
|
|
| - |
|
|
| 2,054 |
|
| Debt assignment and purchase agreements |
|
| - |
|
|
| (70,000 | ) |
|
| - |
|
|
| (70,000 | ) |
| Issuance of 300,000,000 shares |
|
|
|
|
|
| (175,000 | ) |
|
|
|
|
|
| (175,000 | ) |
| Debt reclassification |
|
| (302,227 | ) |
|
| (869,500 | ) |
|
| 1,171,727 |
|
|
| - |
|
| Subtotal |
|
| 2,054 |
|
|
| - |
|
|
| 1,171,727 |
|
|
| 1,173,781 |
|
| Unamortized debt discount |
|
| - |
|
|
| - |
|
|
| (1,146,045 | ) |
|
| (1,146,045 | ) |
| Balance December 31, 2021 |
|
| 2,054 |
|
|
| - |
|
|
| 25,682 |
|
|
| 27,736 |
|
| Interest expense on convertible note |
|
| 70,111 |
|
|
| - |
|
|
| - |
|
|
| 70,111 |
|
| Amortized Debt Discount |
|
| - |
|
|
| - |
|
|
| 422,115 |
|
|
| 422,115 |
|
| Balance, September 30, 2022 |
| $ | 72,165 |
|
| $ | - |
|
| $ | 447,797 |
|
| $ | 519,962 |
|
NOTE 8 – CONVERTIBLE NOTES
During the nine months ended September 30, 2022, the company issued convertible promissory notes in the principal amount of $202,140 to several investors bearing interest at 8% per annum for a period of 12 months. The holders have the right to convert any or all of the outstanding principal into shares of the Company’s common stock at a conversion price of $0.001 per share. The beneficial conversion feature associated with the note and realized on issuance date totaled $202,140, which amount is being amortized over the term of the note, or 12 months.
| F-12 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 8 – CONVERTIBLE NOTES (continued)
|
|
| Interest Payable |
|
| Convertible Note |
|
| Total |
| |||
| Balance, December 31, 2021 |
| $ | - |
|
| $ | - |
|
| $ | - |
|
| Proceeds |
|
| - |
|
|
| 202,140 |
|
|
| 202,140 |
|
| Unamortized debt discount |
|
| - |
|
|
| (202,140 | ) |
|
| (202,140 | ) |
| Subtotal |
|
| - |
|
|
| - |
|
|
| - |
|
| Interest expense on convertible note |
|
| 3,185 |
|
|
| - |
|
|
| 3,185 |
|
| Amortized Debt Discount |
|
| - |
|
|
| 39,816 |
|
|
| 39,816 |
|
| Balance, September 30, 2022 |
| $ | 3,185 |
|
| $ | 39,816 |
|
| $ | 43,001 |
|
NOTE 9 – DEBT ASSIGNMENTS AND PURCHASE AGREEMENT
On December 6, 2021, Mr. James Brooks, a creditor of the Company entered into certain Debt Assignment and Purchase Agreements with third parties in the accumulated amount of $70,000. Subsequent to the Debt Assignment and Purchase Agreements, these third parties entered into non-interest-bearing convertible notes with the Company whereunder the debt may be converted into shares of the Company’s common stock at par value or, $0.001 per share. The total discount recognized as a result of the beneficial conversion feature realized on the date of the notes was $70,000, which amount was fully amortized on issuance date, and recorded as interest expenses.
On December 13 and December 14, 2021, the Company received Notices of Conversion from the aforementioned third parties, and debt in the amount of $70,000 was converted into 70,000,000 shares of common stock.
NOTE 10 – RELATED PARTY TRANSACTIONS
Fred Waid, former sole officer and director
During the year ended December 31, 2020, Intermountain Fiduciary Services Inc., a company of which Fred Waid, the former Receiver and our former sole officer and director, is also director and officer (“IFSI”), advanced a total of $1,725 for legal and professional which remained unpaid at December 31, 2020.
During the fiscal year ended December 31, 2021, IFSI incurred an additional $13,275 in legal and professional fees, respectively. The Company made cash payment in the amount of $15,000 to Intermountain and no additional invoices received during the period ended September 30, 2022. At September 30, 2022 and December 31, 2021, $0 and $15,000 is reflected on the balance sheet as accounts payable – related party.
James Brooks, sole officer and director, controlling shareholder
On December 30, 2021, Mr. James Brooks was appointed the Company’s sole officer and director in place of Mr. Fred Waid. Immediately prior Mr. Brooks became the Company’s controlling shareholder upon issuance of 300,000,000 shares of common stock for certain debt in the amount of $175,000. Concurrently the Company and Mr. Brooks entered into a convertible note with respect to amounts payable totaling an accumulated $1,171,727 (Note 7 above).
During the year ended December 31, 2021, Mr., Brooks and companies controlled by him advanced a total of $16,532 for operating expenses.
During the nine months ended September 30, 2022, Mr. Brooks and companies controlled by him advanced a further $101,257 for operating expenses and the Company made cash payments to reduce the balance in the amount of $83,752.
As at September 30, 2022, the amount owing to Mr. Brooks for advances for operations is $34,037 (December 31, 2021 - $16,532) which amounts are reflected on the balance sheets as advances payable – related party.
| F-13 |
| Table of Contents |
Costas, Inc.
Notes to Unaudited Condensed Financial Statements
For the Nine Months Ended September 30, 2022 and 2021
NOTE 10 – RELATED PARTY TRANSACTIONS (continued)
James Brooks, sole officer and director, controlling shareholder (continued)
These amounts do not include the interest expense owing to Mr. Brooks on his convertible note (see Note 7 above) which is reflected on the balance sheet in accounts payable and totals $72,165 at September 30, 2022.
During the nine months ended September 30, 2022, the Company acquired certain assets by way of issuance of 31,663,760 common shares of the Company’s restricted, unregistered common stock to a company controlled by Mr. Brooks. (see Note 5 (1)).
NOTE 11 – COMMON STOCK
The Company has authorized a total of 2,000,000,000 shares of common stock, $0.001 par value.
During the year ended December 31, 2021, 70,000,000 shares were issued upon conversion of certain convertible notes. (see Note 9).
During the year ended December 31, 2021, 300,000,000 shares were issued pursuant to a court order in settlement of $175,000 payable to our sole officer and director, Mr. James Brooks. (see Note 7)
On May 6, 2022, 31,663,760 shares were issued in respect to an asset purchase agreement. (see Note 5 (1)).
On August 31, 2022, 750,000 shares were issued in respect to an asset purchase agreement. (see Note 5(2)).
At September 30, 2022 and December 31, 2021, there was a total of 445,728,363 and 413,314,603 shares issued and outstanding, respectively.
NOTE 12 - SUBSEQUENT EVENTS
Subsequent to September 30, 2022, the Company issued a convertible promissory note in the principal amount of $10,000 to one investor bearing interest at 8% per annum for a period of 12 months. The holder has the right to convert any or all of the outstanding principal into shares of the Company’s unregistered common stock at a conversion price of $0.001 per share.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.
| F-14 |
| Table of Contents |
COSTAS, INC.
Audited Financial Statements for the years ended
December 31, 2021, and 2020
| F-15 |
TABLE OF CONTENTS FOR AUDITED
FINANCIAL STATEMENTS
| F-16 |
| Table of Contents |
Report of Independent Public Accounting Firm
To the shareholders and the board of directors of Costas Inc
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Costas Inc (the "Company") as of December 31, 2021, and 2020 and the related statements of operations, changes in shareholders' equity and cash flows, for the years ended December 31, 2021 and 2020, 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 as of December 31, 2021 and 2020 and the results of its operations and its cash flows for the years ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Going Concern
The accompanying financial statements have been prepared assuming the company will continue as a going concern as disclosed in Note 3 to the financial statement, the Company incurred a net loss of $(10,254,127) for the year ended December 31, 2021 and working capital deficiency of $(133,023) and accumulated deficit of $(14,879,523) The continuation of the Company as a going concern through December 31, 2021, is dependent upon improving the profitability and the continuing financial support from its stockholders. Management believes the existing shareholders or external financing will provide additional cash to meet the Company’s obligations as they become due.
These factors raise substantial doubt about the company’s ability to continue as a going concern. These financial statements do not include any adjustments that might result from the outcome of the uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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. 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. 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.
OLAYINKA OYEBOLA & CO.
(Chartered Accountants)
We have served as the Company's auditor since August 2022.
September 8th, 2022.
Lagos Nigeria
| F-17 |
| Table of Contents |
Balance Sheets
|
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
| ASSETS |
|
|
|
|
|
| ||
| Current asset: |
|
|
|
|
|
| ||
| Cash |
| $ | – |
|
| $ | – |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL ASSETS |
| $ | – |
|
| $ | – |
|
|
|
|
|
|
|
|
|
|
|
| LIABILTIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable and accrued liabilities |
| $ | 75,809 |
|
| $ | 274,398 |
|
| Account payable related party |
|
| 31,532 |
|
|
| 1,725 |
|
| Convertible note-Shareholders, net |
|
| 25,682 |
|
|
| - |
|
| Convertible loans |
|
| - |
|
|
| 1,114,500 |
|
| Total current liabilities |
|
| 133,023 |
|
|
| 1,390,623 |
|
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES |
|
| 133,023 |
|
|
| 1,390,623 |
|
|
|
|
|
|
|
|
|
|
|
| STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Common stock, 1,250,000,000 shares authorized, $0.001 par value, 413,314,603 and 43,314,603 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively |
|
| 413,315 |
|
|
| 43,315 |
|
| Additional paid-in capital |
|
| 14,333,185 |
|
|
| 3,191,458 |
|
| Accumulated deficit |
|
| (14,879,523 | ) |
|
| (4,625,396 | ) |
|
|
|
|
|
|
|
|
|
|
| Stockholders’ deficit |
|
| (133,023 | ) |
|
| (1,390,623 | ) |
|
|
|
|
|
|
|
|
|
|
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
| $ | – |
|
| $ | – |
|
The accompanying notes are an integral part of these audited financial statements.
| F-18 |
| Table of Contents |
Statements of Operations
|
|
| Years ended December 31, |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Net Revenues |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
| General and administrative |
|
| 20,053 |
|
|
| 12,969 |
|
| Professional fees |
|
| 56,674 |
|
|
| 8,342 |
|
| Total operating expenses |
|
| 76,727 |
|
|
| 21,311 |
|
|
|
|
|
|
|
|
|
|
|
| Other (expense) |
|
|
|
|
|
|
|
|
| Interest expenses |
|
| (152,400 | ) |
|
| (67,740 | ) |
| Loss on extinguishment of debt |
|
| (10,025,000 | ) |
|
| - |
|
| Total other (Expense) |
|
| (10,177,400 | ) |
|
| (67,740 | ) |
|
|
|
|
|
|
|
|
|
|
| Net (Loss) |
| $ | (10,254,127 | ) |
| $ | (89,051 | ) |
|
|
|
|
|
|
|
|
|
|
| Net loss per share attributable to common shares: |
|
|
|
|
|
|
|
|
| Basic and diluted |
| $ | (0.21 | ) |
| $ | (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
| Basic and diluted |
|
| 49,177,617 |
|
|
| 43,314,603 |
|
The accompanying notes are an integral part of these financial statements.
| F-19 |
| Table of Contents |
Statements of Stockholders’ Deficit For the years ended
December 31, 2021, and 2020
|
|
| Common stock |
|
| Additional paid-in |
|
| Accumulated |
|
| Total stockholders’ |
| ||||||||
|
|
| No. of shares |
|
| Amount |
|
| capital |
|
| deficit |
|
| deficit |
| |||||
| Balance as of January 1, 2020 |
|
| 43,314,603 |
|
| $ | 43,315 |
|
| $ | 3,184,432 |
|
| $ | (4,536,345 | ) |
| $ | (1,308,598 | ) |
| Contributed Capital |
|
| - |
|
|
| - |
|
|
| 7,026 |
|
|
| - |
|
|
| 7,026 |
|
| Net Loss for the year |
|
| – |
|
|
| – |
|
|
| – |
|
|
| (89,051 | ) |
|
| (89,051 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as of December 31, 2020 |
|
| 43,314,603 |
|
| $ | 43,315 |
|
| $ | 3,191,458 |
|
| $ | (4,625,396 | ) |
| $ | (1,390,623 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as of January 1, 2021 |
|
| 43,314,603 |
|
| $ | 43,315 |
|
| $ | 3,191,458 |
|
| $ | (4,625,396 | ) |
| $ | (1,390,623 | ) |
| Beneficial conversion feature associated with convertible notes |
|
| - |
|
|
| - |
|
|
| 1,241,727 |
|
|
| - |
|
|
| 1,241,727 |
|
| Shares issued for debt |
|
| 370,000,000 |
|
|
| 370,000 |
|
|
| - |
|
|
| - |
|
|
| 370,000 |
|
| Net loss for the year |
|
| – |
|
|
| – |
|
|
| – |
|
|
| (10,254,127 | ) |
|
| (10,254,127 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance as of December 31, 2021 |
|
| 413,314,603 |
|
| $ | 413,315 |
|
| $ | 14,333,185 |
|
| $ | (14,879,523 | ) |
| $ | (133,023 | ) |
The accompanying notes are an integral part of these financial statements.
| F-20 |
| Table of Contents |
Statements of Cash Flow
|
|
| Years ended December 31, |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| Cash flows from operating activities: |
|
|
|
|
|
| ||
| Net loss |
| $ | (10,254,127 | ) |
| $ | (89,051 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Contribution to paid in capital |
|
| - |
|
|
| 7,026 |
|
| Loss on extinguishment of debt |
|
| 10,025,000 |
|
|
| - |
|
| Non-cash interest |
|
| 95,682 |
|
|
| - |
|
| Changes in certain assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable – related party |
|
| 13,275 |
|
|
| 1,725 |
|
| Accounts payable and other liabilities |
|
| 103,638 |
|
|
| 80,300 |
|
| Net cash used in operating activities |
|
| (16,532 | ) |
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Net cash provided by investing activities |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Advances payable – related party |
|
| 16,532 |
|
|
| - |
|
| Net cash provided by financing activities |
|
| 16,532 |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net decrease in cash and cash equivalents |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents, beginning of year |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents, end of the year |
| $ | - |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
|
| Supplemental Disclosure of Cash Flows Information: |
|
|
|
|
|
|
|
|
| Shares issued to settle shareholder loans |
| $ | 245,000 |
|
| $ | - |
|
| Accounts payable classified to convertible note |
| $ | 302,227 |
|
| $ | - |
|
| Shareholder loan classified to convertible note |
| $ | 869,500 |
|
| $ | - |
|
| Beneficial conversion feature associated with debt discount |
| $ | 1,241,727 |
|
| $ | - |
|
The accompanying notes are an integral part of these audited financial statements.
| F-21 |
| Table of Contents |
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 1 - NATURE OF OPERATIONS
Historical Information
The Company was originally organized as Costas, Inc. under the corporate laws of the State of Nevada on December 10, 1998. On July 1,2010, the Company purchased the technology assets of eJob Resource, Inc. The purchase included eJob Resources’ online job search and posting site to provide a virtual bridge between the Indian and U.S. technology job markets; all job search technology, which aggregates job posting from many sites, and make them available via XML, API.
On July 17, 2014, the Company amended its Articles of Incorporation by approving a 25 for 1 reverse split.
On January 21, 2015, the Company entered into an agreement with Mr. James Brooks to provide certain services to the Company in exchange for a salary of $10,000 per month and 2,550,000 common shares of the Company.
In January 2016 the Company purchased 48% of AuthentaTradeLtd, a Seychelles based corporation, with operations in Cyprus whose function was building a digital currency exchange platform. The remaining 52% was purchased in January 2018.
On September 20, 2017, Mr. James Brooks, a creditor of the Company was granted a Judgment against the Issuer in the principal amount of $1,114,500 with respect to unpaid salary and non-issuance of common shares as required under the original 2015 agreement.
In November 2018, the Company changed its business model to participate in on-line gaming, which operations ceased during the three months period ended March 31, 2019.
On May 20, 2019, the Company announced the completion of the acquisition of Nano Creaciones Sapi de C.V., a Mexican company. The Company issued a total of 25,000,000 shares as consideration for the acquisition. The Company has not received sufficient support from the vendors to confirm ownership of this Mexican entity, and therefore has not included its operations in these financial statements.
Current Information
On October 21, 2020, Mr. James Brooks, the creditor of the Company holding a judgment in the principal amount of $1,114,500 filed a motion requesting the appointment of a Receiver over the Company. By order filed on November 7, 2020, the Eighth Judicial District Court for Clark County, Nevada appointed Frederick P. Waid as Receiver for the Company in Case No. A-17-749977-B. Notice of entry of that order was filed on November 9, 2020. Mr. Waid became the sole officer and director of the Company. The Receiver was not provided any historical accounting documents from former management as part of the proceedings. As a result of the aforementioned actions, the Court approved an amended opening balance sheet for the Company as of December 31, 2019 which reflects the debt owing to Mr. Brooks, previously omitted, including accrued interest as well as any other approved amounts while eliminating any outstanding debts not approved during the receivership.
On March 25, 2021, the Receiver filed a motion with the Court requesting approval to appoint Mr. Brooks as an officer and director of the Company and to increase the authorized capital of the Company and subsequently to issue sufficient common and preferred shares on terms to be finalized between the Receiver and Mr. Brooks, to settle a total of $175,000 of outstanding debt. Further, subsequent to the March 25, 2021, order, the Receiver sought and received approval from the Court to eliminate certain unsupported assets, outstanding payables and convertible loans on the financial statements of the Company as at December 31, 2019. The Receiver further placed an administrative hold on a total of 26,500,000 shares issued in 2019 for the acquisition of Nano Creaciones Sapi de C.V., a Mexican company, and as consideration for services purported to be rendered, due to the fact that there was no verifiable support for the completion of the acquisition or the provision of services.
| F-22 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 2 – GOING CONCERN
As at December 31, 2021, the Company has no cash on hand, and substantial debt as a result of a judgment secured by a creditor of the Company. The Company has negative working capital of $133,023 at December 31, 2021. The Company has relied on financing provided by its primary creditor to fund the Receivership and any required operations. The Company is dependent on this financing to fund its operations. If the appointed Receiver cannot negotiate suitable terms with this creditor in regard to his debt, the Company may be placed into bankruptcy. Even if the Receiver is successful in reaching an agreement with the Creditor and the Receivership is terminated, there can be no assurance that the Company will be able to find a suitable acquisition or to raise sufficient funds for ongoing operations. As a result, there is substantial doubt about the Company’s ability to continue.
The ability of the Company to continue as a going concern is dependent on attaining profitable operations accordingly, there remains substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amount and classification of liabilities that might cause results from this uncertainty.
COVID-19
While the Company presently has no operations, the recent COVID-19 pandemic could have an adverse impact on the Company going forward. COVID-19 has caused significant disruptions to the global financial markets, which may severely impact the Company’s ability to raise capital and to fund future acquisitions. The Company may be required to cease operations if it is unable to finance its’ operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report and is highly uncertain and subject to change. Management is actively monitoring the situation but given the daily evolution of the ongoing COVID-19 outbreak, the Company is not able to estimate the effects of the COVID-19 outbreak on its financial condition in the next 12 months. There are no assurances that the Company will be able to meet its obligations, raise funds or conclude the acquisition of identified businesses. Further upon acquisition of any target businesses there is no guarantee these operations will reach profitability.
NOTE 3 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of these financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| F-23 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 4 – SUMMARY OF ACCOUNTING POLICIES
Fiscal Year End
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles (US GAAP). In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Beneficial Conversion Feature
For conventional convertible debt where the rate of conversion is below market value, the Company records any “beneficial conversion feature” (“BCF”) intrinsic value as additional paid in capital and related debt discount. When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument. The discount is amortized over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Basic and Diluted Loss Per Share
The Company computed basic and diluted loss per share amounts pursuant to the ASC 260 “Earnings per Share.” There are no potentially dilutive shares outstanding and, accordingly, dilutive per share amounts have not been presented in the accompanying statements of operations.
Potential common stock consists of the incremental common stock issuable upon the exercise of convertible notes (using the if-converted method). The table below reflects the potentially dilutive securities at each reporting period, which have not been included in the computation of diluted net loss per share due to their anti-dilutive effect:
|
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
| Convertible notes (principal balance) |
|
| 1,171,727,310 |
|
|
| - |
|
Income Taxes
Income taxes are recognized in accordance with ASC 740, “Income Taxes”, whereby deferred income tax liabilities or assets at the end of each period are determined using the tax rate expected to be in effect when the taxes are actually paid or recovered. A valuation allowance is recognized on deferred tax assets when it is more likely than not that some or all of these deferred tax assets will not be realized.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new guidance, among other things, simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share (“EPS”) guidance by requiring that an entity use the if- converted method when calculating diluted EPS for convertible instruments. ASU 2020-06 is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company plans to adopt the new guidance effective January 1, 2024.
| F-24 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 5 – JUDGMENT PAYABLE AND CONVERTIBLE NOTE
During fiscal 2017, Mr. James Brooks (“Brooks”), a creditor of the Company, obtained a judgment in the principal amount of $1,114,500. Previously, on January 21, 2015, the Company entered into an agreement with Mr. Brooks whereunder he would provide certain services to the Company in exchange for a salary of $10,000 per month and 2,550,000 common shares of the Company. Under the terms of this contract, Mr. Brooks was owed $120,000 in salary and 2,550,000 shares, which consideration was not provided by the Company in accordance with the contract terms. On January 23, 2017 Mr. Brooks filed a complaint in respect to amounts payable and applicable damages. The Company failed to respond to the action, and on August 2, 2017, Mr. Brooks filed a motion for entry of default judgment. On September 6, 2017, the court determined the unpaid 2,550,000 common shares had a market value of
$994,500 at the time they were originally deliverable to Mr. Brooks. In addition to the value of the unpaid shares, unpaid salary of $120,000 resulted in a judgment of $1,114,500. Concurrently, the court granted post-judgment interest pursuant to Nevada Revised Statute 17.130 which provides that when there is no express contract in writing, interest must be allowed at a rate equal to the prime rate at the largest bank in Nevada, as ascertained by the Commissioner of Financial Institution on January 1 or July 1 as the case may be, immediately preceding the date of the transaction, plus 2 percent. The rate must be adjusted accordingly on each January 1 and July 1 thereafter until the judgment is satisfied.
As a result, interest applied on the judgment over the applicable periods was as follows:
| January 1, 2021 |
|
| 5.25 | % |
| July 1, 2020 |
|
| 5.25 | % |
| January 1, 2020 |
|
| 6.75 | % |
On March 25, 2021, the Court approved the first proposed settlement of a portion of Brooks’ debt, in the amount of One Hundred Seventy-Five Thousand Dollars ($175,000) (the “Settlement Debt”) to be paid via the issuance of certain common shares of the Company.
On December 6, 2021, Brooks entered into certain Debt Assignment and Purchase Agreements with several third parties in the accumulated amount of $70,000. (See Note 6)
On December 23, 2021, the Company entered into an 8% Convertible Promissory Note with Brooks, our then sole officer and director, in the amount of $1,171,727. Concurrently, three hundred million (300,000,000) shares of the Company’s common stock were issued to Brooks pursuant to a Court Order entered in the Eighth District Judicial Court, Clark County, Nevada, Case No. A-17-749977-B.
The Company valued the 300,000,000 shares at the closing price of the Company’s stock as traded on the OTC Markets on the date of issuance and recorded a loss on the extinguishment of debt of $10,025,000.
The convertible promissory note bears interest rate at 8% per annum for a period of 12 months. The holder has the right to convert any or all of the outstanding principal into shares of the Company’s common stock at a conversion price of $0.001 per share. The beneficial conversion feature associated with the note and realized on issuance date totaled $1,171,727, which amount is being amortized over the term of the note, or 12 months.
| F-25 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 5 – JUDGMENT PAYABLE AND CONVERTIBLE NOTE (continued)
Interest payable included in accounts payable and the principal outstanding balance of the debt as at each period-end are as follows:
|
|
| Interest Payable |
|
| Shareholder Loan |
|
| Convertible Note |
|
| Total |
| ||||
| Balance, December 31, 2019 |
| $ | 179,824 |
|
| $ | 1,114,500 |
|
| $ | - |
|
| $ | 1,294,324 |
|
| Interest expense on shareholder loan |
|
| 67,740 |
|
|
| - |
|
|
| - |
|
|
| 67,740 |
|
| Balance, December 31, 2020 |
|
| 247,564 |
|
|
| 1,114,500 |
|
|
| - |
|
|
| 1,362,064 |
|
| Interest expense on shareholder loan |
|
| 54,663 |
|
|
| - |
|
|
| - |
|
|
| 54,663 |
|
| Interest expense on convertible note |
|
| 2,054 |
|
|
| - |
|
|
| - |
|
|
| 2,054 |
|
| Debt assignment and purchase agreements |
|
| - |
|
|
| (70,000 | ) |
|
| - |
|
|
| (70,000 | ) |
| Issuance of 300,000,000 shares |
|
|
|
|
|
| (175,000 | ) |
|
|
|
|
|
| (175,000 | ) |
| Debt reclassification |
|
| (302,227 | ) |
|
| (869,500 | ) |
|
| 1,171,727 |
|
|
| - |
|
| Subtotal |
|
| 2,054 |
|
|
| - |
|
|
| 1,171,727 |
|
|
| 1,173,781 |
|
| Unamortized debt discount |
|
| - |
|
|
| - |
|
|
| (1,146,045 | ) |
|
| (1,146,045 | ) |
| Balance, December 31, 2021 |
| $ | 2,054 |
|
| $ | - |
|
| $ | 25,682 |
|
| $ | 27,736 |
|
NOTE 6 – DEBT ASSIGNMENTS AND PURCHASE AGREEMENT
On December 6, 2021, Mr. James Brooks, a creditor of the Company entered into certain Debt Assignment and Purchase Agreements with third parties in the accumulated amount of $70,000. Subsequent to the Debt Assignment and Purchase Agreements, these third parties entered into non-interest-bearing convertible notes with the Company whereunder the debt may be converted into shares of the Company’s common stock at par value or, $0.001 per share. The total discount recognized as a result of the beneficial conversion feature realized on the date of the notes was
$70,000, which amount was fully amortized on issuance date, and recorded as interest expenses.
On December 13 and December 14, 2021, the Company received Notices of Conversion from the third parties, and debt in the amount of $70,000 was converted into 70,000,000 shares of common stock.
NOTE 7 – RELATED PARTY TRANSACTIONS
Fred Waid, former sole officer and director
During the year ended December 31, 2020, Intermountain Fiduciary Services Inc., a company of which Fred Waid, the former Receiver and our former sole officer and director, is also director and officer (“IFSI”), advanced a total of $1,725 for legal and professional which remained unpaid at December 31, 2020.
During the fiscal year ended December 31, 2021, IFSI incurred an additional $13,275 in legal and professional fees, respectively. There were no payments made to Intermountain and no additional invoices received during the period ended December 31, 2021. At December 31, 2021, $15,000 is reflected on the balance sheet as accounts payable – related party.
| F-26 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 7 – RELATED PARTY TRANSACTIONS (continued)
James Brooks, sole officer, and director, controlling shareholder
On December 30, 2021, Mr. James Brooks was appointed the Company’s sole officer and director in place of Mr. Fred Waid. Immediately prior Mr. Brooks became the Company’s controlling shareholder upon issuance of 300,000,000 shares of common stock for certain debt in the amount of $175,000. Concurrently the Company and Mr. Brooks entered into a convertible note with respect to amounts payable totaling an accumulated $1,171,727 (Note 5 above).
During the year ended December 31, 2021, Mr, Brooks and companies controlled by him advanced a total of $16,532 for operating expenses, which amount remained payable at December 31, 2021 and is reflected on the balance sheet as advances payable – related party.
NOTE 8 – COMMON STOCK
The Company has authorized a total of 1,250,000,000 shares of common stock, $0.001 par value.
During the year ended December 31, 2021, 70,000,000 shares were issued upon conversion of certain convertible notes. (See Note 6).
During the year ended December 31, 2021, 300,000,000 shares were issued pursuant to a court order in settlement of $175,000 payable to our current sole officer and director, Mr. James Brooks. (See Note 5). There were no common shares issued during the year ended December 31, 2020.
At December 31, 2021 and December 31, 2020, there was a total of 413,314,603 and 43,314,603 shares issued and outstanding, respectively.
| F-27 |
| Table of Contents |
Costas, Inc.
Notes to Financial Statements
For the years Ended December 31, 2021 and 2020
NOTE 9 - SUBSEQUENT EVENTS
On March 2, 2022, the Company announced it has made an offer to the shareholders of Standard Dental Labs Inc. (SDL), a company incorporated in Wyoming in 2019, to purchase all of its shares by way of a share exchange agreement. SDL's business plan, which includes a strong executive team, is to purchase existing dental labs in the private sector, and to consolidate those labs regionally into one larger facility. Mr. Brooks is a controlling shareholder of each of the Company and SDL.
On March 9, 2022 the Company filed a lawsuit against Pacific Stock Transfer Company, a Nevada corporation, in the Eighth Judicial District Court for Clark County, Nevada. Costas alleged that Pacific Stock transfer entered into a renewed services agreement in April of 2021 with Costas while the company was in receivership, and subsequently breached that agreement. The complaint alleged that Costas is seeking damages above $15,000, a threshold minimum in Nevada district court. The complaint also alleged that Pacific Stock Transfer has caused “substantial and irreparable financial harm” to the Company and intends to seek relief from the court. On March 21, 2022, the Company and Pacific Stock Transfer Company entered into a settlement agreement and the action under which the action will dismissed.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events to disclose.
| F-28 |
| Table of Contents |
Prime Dental Lab, LLC
Audited Financial Statements for the years ended
December 31, 2021, and 2020
| F-29 |
TABLE OF CONTENTS FOR AUDITED
FINANCIAL STATEMENTS
| Page | |
| F-31 | |
| F-32 | |
| Statements of Operations for the years ended December 31, 2021, and 2020 | F-33 |
| Statements of Cash Flows for the years ended December 31, 2021, and 2020 | F-34 |
| F-35 to F-38 |
| F-30 |
| Table of Contents |
Report of Independent Registered Public Accounting Firm
To the Members of Prime Dental Lab, LLC.
We have audited the accompanying balance sheets of Prime Dental Lab, LLC (the “Company”) as of December 31, 2021, and 2020, the related statements of operations and cash flows, for each of the two years in the period ended December 31, 2021, and 2020, 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 as of December 31, 2021, and 2020, and the results of its operations and its cash flows for the year ended December 31, 2021, and 2020, in conformity with U.S. generally accepted accounting principles.
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. 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. 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.
OLAYINKA OYEBOLA & CO.
(Chartered Accountants)
We have served as the Company's auditor since August 2022.
December 29th, 2022.
| F-31 |
| Table of Contents |
(Stated in U.S. Dollars)
|
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
|
|
|
|
|
|
|
| ||
| ASSETS |
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
| Current Assets |
|
|
|
|
|
| ||
| Cash and cash equivalents |
| $ | 32,736 |
|
| $ | 45,131 |
|
| Accounts receivable |
|
| 46,469 |
|
|
| 45,480 |
|
| Other current assets |
|
| - |
|
|
| 8,710 |
|
| Total Current Assets |
|
| 79,205 |
|
|
| 99,321 |
|
|
|
|
|
|
|
|
|
|
|
| Property and equipment, net |
|
| 12,758 |
|
| 17,950 |
| |
| Total Assets |
| $ | 91,963 |
|
| $ | 117,271 |
|
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND MEMBERS’ EQUITY (DEFICIT) |
|
|
|
|
|
|
|
|
| Current Liabilities |
|
|
|
|
|
|
|
|
| Accounts payable and accrued expenses |
|
| 6,451 |
|
|
| 33,974 |
|
| Loan payable |
|
| 152,500 |
|
|
| 153,900 |
|
| Total Current Liabilities |
|
| 158,951 |
|
|
| 187,874 |
|
|
|
|
|
|
|
|
|
|
|
| Total Liabilities |
|
| 158,951 |
|
|
| 187,874 |
|
|
|
|
|
|
|
|
|
|
|
| Members’ Equity (Deficit) |
|
|
|
|
|
|
|
|
| Members Capital |
|
| 100 |
|
|
| 100 |
|
| Accumulated Deficit |
|
| (67,088 | ) |
|
| (70,703 | ) |
| Total Members’ Equity (Deficit) |
|
| (66,988 | ) |
|
| (70,603 | ) |
| Total Liabilities and Stockholders’ Equity (Deficit) |
| $ | 91,963 |
|
| $ | 117,271 |
|
The accompanying notes are an integral part of these financial statements
| F-32 |
| Table of Contents |
Statements of Operations and Comprehensive Loss
(Stated in U.S. Dollars)
|
|
| For the year ended December 31, |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
| Revenues |
| $ | 627,894 |
|
| $ | 464,359 |
|
| Cost of revenues |
|
| 438,161 |
|
|
| 339,220 |
|
| Gross profit |
|
| 189,733 |
|
|
| 125,139 |
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses |
|
|
|
|
|
|
|
|
| General and Administrative |
|
| 221,838 |
|
|
| 249,323 |
|
| Total operating expenses |
|
| 221,838 |
|
|
| 249,323 |
|
|
|
|
|
|
|
|
|
|
|
| Loss from Operations |
|
| (32,105 | ) |
|
| (124,184 | ) |
|
|
|
|
|
|
|
|
|
|
| Other Income |
|
|
|
|
|
|
|
|
| PPP forgiveness |
|
| 35,720 |
|
|
| 29,790 |
|
| Total Other Income |
|
| 35,720 |
|
|
| 29,790 |
|
|
|
|
|
|
|
|
|
|
|
| Provisions for income taxes |
|
| - |
|
|
| - |
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
| $ | 3,615 |
|
| $ | (94,394 | ) |
The accompanying notes are an integral part of these financial statements
| F-33 |
| Table of Contents |
Statements of Cash Flows
(Stated in U.S. Dollars)
|
|
| For the year ended December 31, |
| |||||
|
|
| 2021 |
|
| 2020 |
| ||
|
|
|
|
|
|
|
| ||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
| Net income (loss) |
| $ | 3,615 |
|
| $ | (94,394 | ) |
| Adjustments to reconcile net (loss) to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation |
|
| 14,102 |
|
|
| 4,187 |
|
| PPP forgiveness |
|
| (35,720 | ) |
|
| (29,790 | ) |
| Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
| (989 | ) |
|
| (11,870 | ) |
| Other current assets |
|
| 8,710 |
|
|
| - |
|
| Accounts payable and accrued expenses |
|
| (27,523 | ) |
|
| (1,858 | ) |
| Net Cash used in operating activities |
|
| (37,805 | ) |
|
| (133,725 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
| Purchase property and equipment |
|
| (8,910 | ) |
|
| (8,837 | ) |
| Net Cash used in financing activities |
|
| (8,910 | ) |
|
| (8,837 | ) |
|
|
|
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Proceeds from loan payable |
|
| 40,720 |
|
|
| 183,690 |
|
| Payment to loan payable |
|
| (6,400 | ) |
|
| - |
|
| Net Cash provided by financing activities |
|
| 34,320 |
|
|
| 183,690 |
|
|
|
|
|
|
|
|
|
|
|
| INCREASE (DECREASE) IN CASH |
|
| (12,395 | ) |
|
| 41,128 |
|
| CASH AT BEGINNING OF YEAR |
|
| 45,131 |
|
|
| 4,003 |
|
| CASH AT END OF YEAR |
| $ | 32,736 |
|
| $ | 45,131 |
|
|
|
|
|
|
|
|
|
|
|
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
|
|
|
|
|
|
|
|
| Interest Paid |
| $ | - |
|
| $ | - |
|
| Taxes Paid |
| $ | - |
|
| $ | - |
|
The accompanying notes are an integral part of these financial statements
| F-34 |
| Table of Contents |
Notes to the Financial Statements
December 31, 2021 and 2020
NOTE 1. DESCRIPTION OF BUSINESS
Prime Dental Lab, LLC. (the “Company”) is an Orlando-based dental lab in operation since 2012.
The business purpose of the company is currently manufacturing dental prosthetics for dentists and dental clinics at its operational lab facility. The Company’s founder and sole director and officer is Jongpil (John) Kim.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal year
The Company has selected December 31 as its fiscal year end.
Basis of Presentation
The accompanying financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of these consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.
Revenue Recognition
The Company applies ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the sales of products by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
The Company recognizes revenue when the earnings process is complete and persuasive evidence of an arrangement exists. This generally occurs when a purchased product has been delivered to a customer from our lab facility, at which time both title and the risks and rewards of ownership are transferred to and accepted by the customer, and the selling price has been collected.
| F-35 |
| Table of Contents |
Prime Dental Lab, LLC.
Notes to the Financial Statements
December 31, 2021 and 2020
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory
Inventories, if maintained, consist of work-in-progress inventory or replacement parts on hand in order to complete customer orders.
Warranty
We do not record warranty liabilities at the time of sale for the estimated costs that may be incurred under the terms of the applicable limited warranty as all component parts are covered by our respective industry suppliers. Our products are custom created for the individual client, and therefore we have no formal return policy or money back guarantee, however, if a product is determined to be defective, we will deliver a replacement unit to meet expected customer service terms. We assess the need for warranty and return liabilities at each report date.
Cost of Sales
Cost of sales includes actual product cost, labor, and allocated overheard, which is applied on a per unit basis.
Accounts receivable
Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts.
The Company determines the adequacy of reserves for doubtful accounts based on general and individual account analysis and historical collection trend. The Company establishes general and specific allowance when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimate of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivable balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of December 31, 2021 and 2020, allowance for uncollectible balances amounted to $0.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy prioritizes the inputs used to measure fair value. The hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:
|
| ● | Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. |
|
| ● | Level 2 — inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
|
| ● | Level 3 — inputs to the valuation methodology are unobservable. |
Unless otherwise disclosed, the fair value of the Company’s financial instruments, including cash, accounts receivable, and prepaid expenses, short-term borrowings, accounts payable, due to related parties, and other payables and other current liabilities, approximate the fair value of the respective assets and liabilities as of December 31, 2021 based upon the short-term nature of the assets and liabilities.
| F-36 |
| Table of Contents |
Prime Dental Lab, LLC.
Notes to the Financial Statements
December 31, 2021 and 2020
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment
At December 31, 2021 and 2020, property and equipment consists of laboratory building improvements, lab equipment and computers, stated at cost. The Company depreciates the cost of property and equipment using the straight-line method for financial reporting purposes at rates based on the following estimated useful lives:
|
|
| Years |
| |
| Lab equipment |
| 3-15 |
| |
| Computers |
|
| 3 |
|
| Building Improvements |
|
| 5 |
|
Expenditures for maintenance and repairs are expensed as incurred.
Income Taxes
The Company has adopted ASC Topic 740 – Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Recent accounting pronouncements
Certain new accounting pronouncements that have been issued are not expected to have a material effect on the Company’s financial statements.
Covid-19 Pandemic
COVID-19 has caused significant disruptions to the global financial markets over the past several years, which impacted our ability to raise additional capital. Management is actively monitoring the situation but given the daily evolution of the COVID-19 outbreak, the Company is not able to fully estimate the effects of the COVID-19 outbreak on its planned operations or financial condition in the next 12 months. While significant uncertainty remains as the global pandemic appears to be on the decline, the Company believes it is possible that the COVID-19 outbreak will continue to have a negative impact on its ability to raise additional financing and may result in delays in fully implementing our plan of operations.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
|
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||
| Office equipment |
| $ | 13,288 |
|
| $ | 4,378 |
|
| Leasehold improvements |
|
| 102,175 |
|
|
| 102,175 |
|
| Lab equipment |
|
| 55,837 |
|
|
| 55,837 |
|
| Total |
|
| 171,300 |
|
|
| 162,390 |
|
| Less: accumulated depreciation and amortization |
|
| (158,542 | ) |
|
| (144,440 | ) |
| Total property and equipment, net |
| $ | 12,758 |
|
| $ | 17,950 |
|
Depreciation expense amounted to $14,102 and $4,187 for the years ended December 31, 2021 and 2020, respectively.
| F-37 |
| Table of Contents |
Prime Dental Lab, LLC.
Notes to the Financial Statements
December 31, 2021 and 2020
NOTE 4: LOANS PAYABLE
Loans payable consists of the following:
|
|
| Paycheck Protection Program (“PPP loan”) |
|
| SBA loan |
| ||
| December 31, 2019 |
| $ | - |
|
| $ | - |
|
| Proceeds from PPP |
|
| 29,790 |
|
|
| - |
|
| Proceeds from SBA |
|
| - |
|
|
| 153,900 |
|
| PPP forgiveness |
|
| (29,790 | ) |
|
| - |
|
| Balance, December 31, 2020 |
|
| - |
|
|
| 153,900 |
|
| Proceeds from PPP |
|
| 35,720 |
|
|
|
|
|
| Proceeds from SBA |
|
| - |
|
|
| 5,000 |
|
| Payment to SBA |
|
| - |
|
|
| (6,400 | ) |
| PPP forgiveness |
|
| (35,720 | ) |
|
|
|
|
| Balance, December 31, 2021 |
| $ | - |
|
| $ | 152,500 |
|
NOTE 5: RELATED PARTY TRANSACTIONS
| Jongpil (John) Kim, Sole officer and director |
| December 31, 2021 |
|
| December 31, 2020 |
| ||
| Cost of revenue, services provided |
| $ | 238,990 |
|
| $ | 206,980 |
|
| General and Administrative, services provided |
|
| 59,746 |
|
|
| 102,175 |
|
| Total |
| $ | 298,736 |
|
| $ | 258,725 |
|
| Yung Kim (Spouse of Jongpil (John) Kim) |
| December 31, 2021 |
|
| December 31, 2020 |
| ||
| General and Administrative, services provided |
| $ | 81,855 |
|
| $ | 91,410 |
|
NOTE 6: SUBSEQUENT EVENTS
On August 15, 2022 the assets of Prime Dental Lab, LLC. was acquired by Costas, Inc. (“Acquiror”) The Purchased Assets consisted of: all client contracts for existing PDL clients; certain physical assets of PDL including all dental lab equipment, furniture, computers and other office equipment; the assumption of certain contracts, equipment leases and office leases (if any); certain employees and management of PDL as determined by the Acquiror to be retained and/or contracted by the Acquiror; and specifically the right to continue to use the name “Prime Dental Lab LLC” along with certain other rights, trademarks, intellectual property and intangible assets of the Seller. The Purchase Price consisted of 750,000 unregistered, restricted Common Shares (the “Consideration Shares”) of the Acquiror (the “Share Consideration) plus additional cash consideration in the amount of $140,000.00 (the “Cash Consideration”) payable in two (2) equal instalments of seventy thousand ($70,000.00) dollars (each a “Cash Instalment”). The first Cash Instalment shall be paid by the Acquiror to PDL no later than fifteen (15) calendar days after receipt by the Acquiror of a Notice of Effect from the Securities and Exchange Commission of a Form S-1 Registration Statement (the “First Cash Instalment”). The second Cash Instalment of seventy thousand ($70,000.00) dollars shall be paid by the Acquiror to PDL on the date that is no later than ninety (90) calendar days subsequent to the payment of the First Cash Instalment (the “Second Cash Instalment”). The Share Consideration is subject to a lock-up agreement for a term of twenty-four months from the issuance date, whereunder PDL shall be entitled to a release of 12.5% of the total Consideration Shares each quarter (93,750 shares) provided certain minimum quarterly revenue targets are achieved. Further, the Company has agreed to include such Consideration Shares in any registration statement filed, and in the event that the Company decides to approve and complete a share consolidation or share rollback within twelve (12) months after the date of the issuance of the Consideration Shares, such shares shall be protected from such share consolidation action (on a one-time basis).
| F-38 |
| Table of Contents |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This registration statement contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, ‘should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our industry’s 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in United States Dollars ($) except as otherwise indicated and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our unaudited interim consolidated financial statements and the related notes that appear elsewhere in this registration statement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this registration statement, particularly in the section entitled “Risk Factors” of this registration statement.
In this registration statement, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
Plan of Operation
During the next twelve-month period (beginning January 1, 2023), we intend to identify and secure sources of equity and/or debt financing for additional acquisitions.
We anticipate that we will incur the following operating expenses during this period:
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| Table of Contents |
Estimated Funding Required During the 12 Months beginning January 1, 2023
| Expense |
| Amount ($) |
| |
| Improvements to planned corporate facility |
|
| 300,000 |
|
| Executive salaries, including new hires |
|
| 540,000 |
|
| Administrative support |
|
| 150,000 |
|
| Professional fees |
|
| 240,000 |
|
| General and administrative expense including rent, transfer agent, travel, office and sundry |
|
| 300,000 |
|
| Advertising, marketing, and website costs |
|
| 80,000 |
|
| Total operating expense |
|
| 1,610,000 |
|
| Cash required for lab acquisitions |
|
| 250,000 |
|
| Total |
|
| 1,860,000 |
|
As at the date of this prospectus, we do not have sufficient cash on hand to finance our entire potential and estimated $1,860,000 cash obligation to the proposed spending for the 12 months beginning January 1, 2023. Based on our current cash position of $3,188 we anticipate that we will require approximately $1,800,000 in additional cash to execute our business plan. In the event that we are unable raise sufficient cash we intend to reduce our planned expenditures to accommodate our means with a view toward prioritizing revenue generating activity and fulfilling our public reporting obligations. As at the date of this registration statement we have no financing arrangements in place.
Results of Operations – Three Months Ended September 30, 2022, and September 30, 2021
The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended September 30, 2022, which are included herein.
Our operating results for the three months ended September 30, 2022, for the three months ended September 30, 2021 and the changes between those periods for the respective items are summarized as follows:
|
|
| Three Months Ended September 30, 2022 |
|
| Three Months Ended September 30, 2021 |
|
| Change Between Three Month Period Ended September 30, 2022 and September 30, 2021 |
| |||
| Revenue |
| $ | 44,770 |
|
|
| - |
|
|
| 44,770 |
|
| Cost of product sales |
|
| 28,004 |
|
|
| - |
|
|
| 28,004 |
|
| Gross profit |
|
| 16,766 |
|
|
| - |
|
|
| 16,766 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling and marketing expenses |
|
| 18,585 |
|
|
| - |
|
|
| 18,585 |
|
| Professional fees |
|
| 28,330 |
|
|
| 25,166 |
|
|
| 3,064 |
|
| General and administrative costs |
|
| 15,181 |
|
|
| 1,122 |
|
|
| 14,059 |
|
| Total operating expenses |
|
| 61,996 |
|
|
| 26,288 |
|
|
| 35,678 |
|
| Other expenses |
|
| 336,190 |
|
|
| 14,908 |
|
|
| 321,282 |
|
| Net loss |
|
| 381,420 |
|
|
| 41,196 |
|
|
| 340,224 |
|
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| Table of Contents |
During the three-month periods ended September 30, 2022 and 2021, respectively the Company reported gross revenue of $44,700 and $0 and costs of sales of $28,004 and $0, respectively, and reported net losses of $381,420 and $41,196, respectively. Losses from operations in the three months ended September 30, 2022 consist of professional fees of $23,330 and general and administrative expenses of $15,181, including amounts paid to the transfer agent, rent, consultants and filing fees. Losses from operations in the three months ended September 30, 2021 consist of professional fees of $25,166 and general and administrative expenses, including amounts paid to the transfer agent, rent, consultants and filing fees of $1,122. The increases to both professional fees and administrative costs relate to the Company’s efforts continue current reporting obligations on OTCPINK markets and expenses incurred with respect to the acquisition of certain operating assets in the quarter.
During the comparative three months ended September 30, 2022 and 2021 the Company incurred interest expenses of $336,190 and $14,908 respectively as a result of interest accruing on a judgment payable in favor of our sole officer and director, Mr. James Brooks and certain convertible promissory notes entered into during fiscal 2022. Further during the three months ended September 30, 2022, included in interest expenses is $295,841 in respect to the amortization of the debt discount related to certain of these convertible promissory notes.
Results of Operations – Nine months Ended September 30, 2022 and September 30, 2021
The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended September 30, 2022, which are included herein.
Our operating results for the nine months ended September 30, 2022, for the nine months ended September 30, 2021 and the changes between those periods for the respective items are summarized as follows:
|
|
| Nine months Ended September 30, 2022 |
|
| Nine months Ended September 30, 2021 |
|
| Change Between Three Month Period Ended September 30, 2022 and September 30, 2021 |
| |||
| Revenue (cost recovery) |
| $ | 44,770 |
|
|
| - |
|
|
| 44,770 |
|
| Cost of product sales |
|
| 28,004 |
|
|
| - |
|
|
| 28,004 |
|
| Gross Profit |
|
| 16,766 |
|
|
| - |
|
|
| 16,766 |
|
| Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| Selling and marketing expense |
|
| 18,585 |
|
|
| - |
|
|
| 18,585 |
|
| Professional fees |
|
| 53,823 |
|
|
| 28,163 |
|
|
| 25,660 |
|
| General and administrative costs |
|
| 83,800 |
|
|
| 15,546 |
|
|
| 68,254 |
|
| Total operating expenses |
|
| 156,208 |
|
|
| 43,709 |
|
|
| 112,499 |
|
| Other expenses |
|
| 528,343 |
|
|
| 44,244 |
|
|
| 484,099 |
|
| Net loss (income) |
|
| 667,785 |
|
|
| 87,953 |
|
|
| 579,832 |
|
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| Table of Contents |
During the nine month periods ended September 30, 2022 and 2021, respectively the Company reported gross revenue of $44,700 and $0 and costs of sales of $28,004 and $0, respectively, and reported net operating losses of $667,785 and $87,953, respectively. Losses from operations in the nine months ended September 30, 2022 consist of professional fees of $53,823 and general and administrative expenses of $83,800, including amounts paid to the transfer agent, rent, depreciation, consultants and filing fees. Losses from operations in the nine months ended September 30, 2021 consist of professional fees of $28,163 and general and administrative expenses, including amounts paid to the transfer agent, rent, consultants and filing fees of $15,546. The increases to both professional fees and administrative costs relate to the Company’s efforts continue current reporting obligations on OTCPINK markets, audit fees and legal fees incurred with respect to the acquisition of certain operating assets in the current nine month period.
During the comparative three months ended September 30, 2022 and 2021 the Company incurred interest expenses of $535,227 and $44,244 respectively as a result of interest accruing on a judgment payable in favor of our sole officer and director, Mr. James Brooks and certain convertible promissory notes entered into during fiscal 2022. Further during the nine months ended September 30, 2022, included in interest expenses is $461,931 in respect to the amortization of the debt discount related to certain of these convertible promissory notes.
Results of Operations for our Years Ended December 31, 2021 and 2020
Our net income (loss) and comprehensive income (loss) for our year ended December 31, 2021, for our year ended December 31, 2020, and the changes between those periods for the respective items are summarized as follows:
|
|
| Year Ended December 31, 2021 ($) |
|
| Year Ended December 31, 2020 ($) |
|
| Change Between Year Ended December 31, 2021 and Year Ended December 31, 2020 ($) |
| |||
| Revenue |
|
| - |
|
|
| - |
|
|
| - |
|
| Cost of Goods Sold |
|
| - |
|
|
| - |
|
|
| - |
|
| Gross Profit |
|
| - |
|
|
| - |
|
|
| - |
|
| Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
| General and administrative costs |
|
| 20,053 |
|
|
| 12,969 |
|
|
| 7,084 |
|
| Professional Fees |
|
| 56,674 |
|
|
| 8,342 |
|
|
| 48,332 |
|
| Total |
|
| 76,727 |
|
|
| 21,311 |
|
|
| 55,416 |
|
|
|
| Year Ended December 31, 2021 ($) |
|
| Year Ended December 31, 2020 ($) |
|
| Change Between Year Ended December 31, 2021 and Year Ended December 31, 2020 ($) |
| |||
| Other (income) expense |
|
|
|
|
|
|
|
|
| |||
| Interest expenses |
|
| 152,400 |
|
|
| 67,740 |
|
|
| 84,660 |
|
| Loss on extinguishment of debt |
|
| 10,025,000 |
|
|
| - |
|
|
| 10,025,000 |
|
| Net (income) loss |
|
| 10,254,127 |
|
|
| 89,051 |
|
|
| 10,165,076 |
|
During the fiscal years ended December 31, 2021 and 2020, respectively the Company had no revenue and reported net operating losses of $76,727 and $21,311, respectively. Losses from operations in the year ended December 31, 2021 consist of professional fees of $56,674 and general and administrative expenses, including amounts paid to the transfer agent, rent, consultants and filing fees of $20,053. Losses from operations in the year ended December 31, 2020 consist of professional fees of $8,342 and general and administrative expenses, including amounts paid to the transfer agent, rent, consultants and filing fees of $12,969. The increases to both professional fees and administrative costs relate to the Company’s efforts to becoming current in our OTCPINK markets listing and recommence operations after a change of control.
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During the comparative years ended December 31, 2021 and 2020 the Company incurred interest expenses of $152,400 and $67,740 respectively as a result of interest accruing on a judgment payable in favor of our sole officer and director, Mr. James Brooks and an underlying convertible promissory note in the principal amount of $1,171,727. Further in the year ended December 31, 2021 the Company issued 300,000,000 shares to Mr. Brooks in order to extinguish debt in the amount of $175,000 which shares were valued at the closing price of the Company’s stock as traded on the OTC Markets on the date of issuance and recorded as a loss on the extinguishment of debt of $10,025,000, with no similar expense in the year ended December 31, 2020.
Liquidity and Financial Condition
| Working Capital |
| At |
|
| At |
| ||
|
|
| September 30 |
|
| December 31 |
| ||
|
|
| 2022 |
|
| 2021 |
| ||
| Current assets |
| $ | 78,513 |
|
|
| - |
|
| Current liabilities |
|
| 815,363 |
|
|
| 133,023 |
|
|
|
|
|
|
|
|
|
|
|
| Working capital surplus/(deficit) |
| $ | (736,850 | ) |
|
| (133,023 | ) |
| Cash Flows |
| Nine Months ended |
|
| Year Ended |
| ||||||||||
|
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| December 31, 2021 |
|
| December 31, 2020 |
| ||||
|
|
|
|
|
|
|
| ||||||||||
| Cash flows (used in) operating activities |
| $ | (141,132 | ) |
| $ | (14,016 | ) |
| $ | (16,532 | ) |
| $ | - |
|
| Cash flows from investing activities |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
| Cash flows from financing activities |
|
| 219,645 |
|
|
| 14,016 |
|
|
| 16,532 |
|
|
| - |
|
| Net increase (decrease) in cash during year |
| $ | 78,513 |
|
| $ | - |
|
| $ | - |
|
| $ | - |
|
Cash Provided by (Used in) Operating Activities
During the nine months ended September 20, 2022, net cash used in operating activities totaled $141,132, which consists of our net loss of $667,785, offset by noncash adjustments of $461,931 in non-cash interest expenses and $1,819 of depreciation expense. Changes in operating assets included an increase to accounts payable and accrued liabilities of $77,903 and a decrease to accounts payable, related party of $15,000. During the nine months ended September 30, 2021 cash used in operating expenses was $14,016, and consisted of our net loss of $87,953 offset by increases to accounts payable and accrued liabilities of $65,162 and accounts payable, related party of $8,775.
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| Table of Contents |
During the year ended December 31, 2021, net cash used in operating activities totaled $16,532, which consists of our net loss of $10,254,127, offset by noncash adjustments of $10,025,000 as a result of a loss on extinguishment of debt, and $95,682 in non-cash interest expenses. Changes in operating assets included an increase to accounts payable and accrued liabilities of $103,638 and in increase to accounts payable, related party of $13,275. During the year ended December 31, 2020 cash used in operating expenses was $0, and consisted of our net loss of $89,051 offset by a contribution to paid in capital of $7,026, and increases to accounts payable and accrued liabilities of $80,300 and accounts payable, related party of $1,725
Cash Provided by Investing Activities
There was no cash used in investing activities in the nine months ended September 30, 2022 and 2021 or the years ended December 31, 2021, and 2020.
Cash Provided by Financing Activities
Cash provided by financing activities totaled $219,645 in the nine months ended September 30, 2022 including proceeds from convertible notes payable of $202,140 and advances from related parties of $17,505, and $14,016 in the nine months ended September 30, 2021 consisting of related party advances of $14,016.
Cash provided by financing activities totaled $16,532 in the year ended December 31, 2021, and $0 in the year ended December 31, 2020.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States of America. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financials.
Going Concern
We have suffered recurring losses from operations. The continuation of our Company as a going concern is dependent upon our Company attaining and maintaining profitable operations and/or raising additional capital. The financial statements do not include any adjustment relating to the recovery and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should our Company discontinue operations.
The continuation of our business is dependent upon us raising additional financial support and/or attaining and maintaining profitable levels of internally generated revenue. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.
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Recently Issued Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The new guidance, among other things, simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments, and amends existing earnings-per-share (“EPS”) guidance by requiring that an entity use the if converted method when calculating diluted EPS for convertible instruments. ASU 2020-06 is effective for public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company plans to adopt the new guidance effective January 1, 2024.
Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.
As of September 30, 2022, the end of the third quarter covered by the comparative information of this prospectus, we carried out an evaluation, under the supervision and with the participation of our president (also our principal executive officer) and our secretary, treasurer and chief financial officer (also our principal financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (also our principal executive officer) and who is also our secretary, treasurer and chief financial officer (also our principal financial and accounting officer) concluded that our disclosure controls and procedures were effective in providing reasonable assurance in the reliability of our financial reports as of the end of the period.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2022, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
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| Table of Contents |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have not had any changes in or disagreements with our independent public accountants since our inception.
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
All directors of our company hold office until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:
| Name | Position Held with our Company | Age | Date First Elected Or Appointed |
| James Brooks | President, Secretary and Treasurer, Director | 52 | December 30, 2021 |
Our directors will serve in that capacity until our next annual shareholder meeting or until his successor is elected or appointed and qualified. Officers hold their positions at the will of our Board of Directors.
There are no arrangements, agreements or understandings between non-management security holders and management under which non-management security holders may directly or indirectly participate in or influence the management of our affairs.
James Brooks, President, Secretary, Treasurer and Director
Mr. Brooks was appointed as president and director on December 30, 2021.
James Brooks, first began working with public companies in 1998, and has founded and exited from two substantial companies in the transportation logistics sector since. Urban Dispatch, a Canadian logistics company, employed more than 250 people and operated in 4 provinces in Western Canada. He has acted as CEO, COO, and a board member with public and private corporations. Mr. Brooks also has a clear vision of the acquisition target companies for SDL, and how to execute on the Company’s business vision. Mr. Brooks has been responsible for pushing the agenda, and for financing the efforts made to date for both Costas, Inc., as its largest creditor, and for SDL as its founder and CEO.
Mr. Brooks has devoted approximately 90% of his professional time to the business and intends to continue to devote this amount of time in the future, or more as required.
Our company believes that all of our directors” respective educational background, operational and business experience give them the qualifications and skills necessary to serve as directors and officers, respectively, of our company. Our board of directors consists solely of Mr. Brooks.
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Significant Employees
Other than the foregoing named officers and directors, we have no employees whose services are materially significant to our business and operations who is employed by Costas. We have certain contractors providing services under the terms of a subcontractor agreement entered into August 31, 2022 with Prime Dental Lab, LLC for services including labor and manufacturing expertise with respect to the servicing of the Company’s client list for dental prosthetics and orthotics, including Mr. Jongpil Kim, which we consider significant to our current operations.
Family Relationships
There are no family relationships between any of our directors and officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our directors or executive officers has, during the past ten years:
1. been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
2. 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;
3. 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;
4. been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
5. 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
6. 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 (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
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Compliance with Section 16(a) of the Securities Exchange Act of 1934
When we have a class of securities registered under the Securities Exchange Act of 1934, Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.
Code of Ethics
We have not adopted a code of ethics that applies to our officers, directors and employees. When we do adopt a code of ethics, we will disclose it in a Current Report on Form 8-K.
Audit Committee and Audit Committee Financial Expert
Our board of directors (currently consisting of one member) also acts as the audit committee and has determined that it does not have a member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934, as amended.
We believe that our board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee charter. Our directors do not believe that it is necessary to have such committees because they believe the functions of such committees can be adequately performed by the members of our board of directors.
The particulars of the compensation paid to the following persons:
(a) our principal executive officers;
(b) each of our two most highly compensated executive officers who were serving as executive officers at the end of the years ended December 31, 2021, and 2020; and
c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the years ended December 31, 2021 and 2020, who we will collectively refer to as the named executive officers of our Company, are set out in the following summary compensation table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose total compensation did not exceed
$100,000 for the respective fiscal year:
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SUMMARY COMPENSATION TABLE
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation | Non-Qualified Deferred Compensation Earnings ($) | All Other Compensation | Total ($) |
| Fred Waid(1) | 2021 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
| President and Director | 2020 | Nil | Nil | Nil | Nil | Nil | Nil | Nil | Nil |
Notes:
| (1) | On December 30, 2021, Mr. Brooks was appointed as our President and as a director, replacing Mr. Waid who held those positions due to the company’s receivership proceedings as appointed by the court. |
Employment/Consulting Agreements
Other than as set out herein we have not entered into any employment or consulting agreements with any of our current officers, directors or employees.
Grants of Plan-Based Awards Table
None
Outstanding Equity Awards at Fiscal Year End
Not applicable.
Option Exercises
During our fiscal year ended December 31, 2021 there were no options exercised by our named officers.
Compensation of Directors
Except as otherwise disclosed, we do not have any agreements for compensating our directors for their services in their capacity as directors, although such directors are expected in the future to receive stock options to purchase shares of our common stock as awarded by our board of directors.
Pension, Retirement or Similar Benefit Plans
There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit-sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
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Indebtedness of Directors, Senior Officers, Executive Officers and Other Management
None of our directors or executive officers or any associate or affiliate of our Company during the last two fiscal years is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 19, 2022, certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
| Name and Address of Beneficial Owner | Amount and Nature of Beneficial Ownership | Percentage of Class(1) |
| James Brooks 12 S Osceola Ave. Orlando, Florida, 32801 | 300,000,000 (Direct) | 67.4% |
| Directors and Executive Officers as a Group | 300,000,000 | 67.4% |
| Standard Dental Labs Inc. 19735 Seacliff Lane, Huntington Beach, CA, 92648 | 31,663,760 (Direct)(2) | 7% |
| Total | 331,663,760 | 74.4% |
NOTES
| (1) | Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding on December 19, 2022. As of December 19, 2022, there were 445,728,363 shares of our company’s common stock issued and outstanding. |
| (2) | Of the shares held by Standard Dental Labs Inc., Mr. Brooks has an indirect ownership interest in 20,000,000 of the shares held. |
Changes in Control
We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change in control of our company.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Except as disclosed herein, no director, executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2021, in which the amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for the last two completed fiscal years.
Fred Waid, former sole officer and director
During the year ended December 31, 2020, Intermountain Fiduciary Services Inc., a company of which Fred Waid, the former Receiver and our former sole officer and director, is also director and officer (“IFSI”), advanced a total of $1,725 for legal and professional which remained unpaid at December 31, 2020.
During the fiscal year ended December 31, 2021, IFSI incurred an additional $13,275 in legal and professional fees, respectively. The Company made cash payment in the amount of $15,000 to Intermountain and no additional invoices received during the period ended September 30, 2022. At September 30, 2022 and December 31, 2021, $0 and $15,000 is reflected on the balance sheet as accounts payable – related party.
James Brooks, sole officer and director, controlling shareholder
On December 30, 2021, Mr. James Brooks was appointed the Company’s sole officer and director in place of Mr. Fred Waid. Immediately prior Mr. Brooks became the Company’s controlling shareholder upon issuance of 300,000,000 shares of common stock for certain debt in the amount of $175,000. Concurrently the Company and Mr. Brooks entered into a convertible note with respect to amounts payable totaling an accumulated $1,171,727.
During the year ended December 31, 2021, Mr, Brooks and companies controlled by him advanced a total of $16,532 for operating expenses.
During the nine months ended September 30, 2022, Mr. Brooks and companies controlled by him advanced a further $101,257 for operating expenses. And the Company made cash payment in the amount of $83,752 to him.
As at September 30, 2022, the amount owing to Mr. Brooks for advances for operations is $34,037 (December 31, 2021 - $16,532) which amounts are reflected on the balance sheets as advances payable – related party.
These amounts do not include the interest expense owing to Mr. Brooks on his convertible note which is reflected on the balance sheet in accounts payable and totals $72,165 at September 30, 2022.
Director Independence
We currently act with one director, consisting of James Brooks. We have determined that James Brooks is not an “independent director” as defined in NASDAQ Marketplace Rule 4200(a)(15).
Currently our audit committee consists of all of our sole member of our board of directors. We currently do not have nominating, compensation committees or committees performing similar functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination for directors.
Our board of directors has determined that it does not have a member of its audit committee who qualifies as an “audit committee financial expert” as defined in as defined in Item 407(d)(5)(ii) of Regulation S-K.
From inception to present date, we believe that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting.
We do not have a standing compensation or nominating committee. We believe that our directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. Our directors do not believe that it is necessary to have an audit committee because we believe that the functions of an audit committee can be adequately performed by the board of directors. In addition, we believe that retaining additional independent directors who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development.
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DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES
Our bylaws provide that we indemnify our directors and officers to the fullest extent not prohibited by Nevada law.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making us responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or control persons pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
We are incorporated under the laws of the State of Nevada. Section 78.138 of the Nevada Revised Statutes (“ NRS ”) provides that neither a director nor an officer of a Nevada corporation can be held personally liable to the corporation, its stockholders or its creditors unless the director or officer committed both a breach of fiduciary duty and such breach was accompanied by intentional misconduct, fraud, or knowing violation of law. Nevada does not exclude breaches of the duty of loyalty or instances where the director has received an improper personal benefit.
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, 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 is not liable under NRS 78.138 (see above), acted in “good faith” and in a manner he reasonably believed to be in and 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. However, with respect to actions by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. A director or officer who is successful, on the merits or otherwise, in defense of any proceeding subject to the Nevada corporate statutes” indemnification provisions must be indemnified by the corporation for reasonable expenses incurred in connection therewith, including attorneys” fees.
Our company’s bylaws provide that the corporation shall, to the maximum extent and in the manner permitted by the NRS, indemnify and hold harmless any and all persons whom it shall have power to indemnify under said provisions from and against any and all liabilities (including expenses) imposed upon or reasonably incurred by him or her in connection with any action, suit or other proceeding in which he or she may be involved or with which he or she may be threatened, or other matters referred to in or covered by said provisions both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director or officer of the corporation. Our company’s bylaws do not modify Nevada law in this respect.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and persons controlling us pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
We have no liability insurance.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until a date, which is 90 days after 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 dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
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PART II – INFORMATION NOT REQUIRED IN PROSPECTUS
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
No expenses will be borne by the Selling Security Holders. Our estimated expenses in connection with the issuance and distribution of the securities being registered in this Prospectus are as follows:
| Commission filing fee |
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| Legal fees and expenses |
| $ | 20,000 |
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| Accounting fees and expenses |
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| 30,000 |
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| Total |
| $ | 50,000 |
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INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.138 of the NRS provides that a director or officer will not be individually liable unless it is proven that (i) the director’s or officer’s acts or omissions constituted a breach of his or her fiduciary duties, and (ii) such breach involved intentional misconduct, fraud or a knowing violation of the law.
Section 78.7502 of NRS permits a company to indemnify its directors and officers against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with a threatened, pending or completed action, suit or proceeding if the officer or director (i) is not liable pursuant to NRS 78.138 or (ii) acted in good faith and in a manner the officer or director reasonably believed to be in or not opposed to the best interests of the corporation and, if a criminal action or proceeding, had no reasonable cause to believe the conduct of the officer or director was unlawful.
Section 78.751 of NRS permits a Nevada company to indemnify its officers and directors against expenses incurred by them in defending a civil or criminal action, suit or proceeding as they are incurred and in advance of final disposition thereof, upon receipt of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that such officer or director is not entitled to be indemnified by the company. Section 78.751 of NRS further permits the company to grant its directors and officers additional rights of indemnification under its articles of incorporation or bylaws or otherwise.
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Section 78.752 of NRS provides that a Nevada company may purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise, for any liability asserted against him and liability and expenses incurred by him in his capacity as a director, officer, employee or agent, or arising out of his status as such, whether or not the company has the authority to indemnify him against such liability and expenses.
Our Articles of Incorporation provide that no director or officer of our company will be personally liable to our company or any of its stockholders for damages for breach of fiduciary duty as a director or officer; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of law, or (ii) the unlawful payment of dividends. In addition, our bylaws permit for the indemnification and insurance provisions in Chapter 78 of the NRS.
Insofar as indemnification by us for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling our company pursuant to provisions of our articles of incorporation and bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us 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 offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding, which may result in a claim for such indemnification.
Further, in the normal course of business, we may have in our contracts indemnification clauses, written as either mutual where each party will indemnify, defend, and hold each other harmless against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made against certain parties; or single where we have agreed to hold certain parties harmless against losses etc.
Our Bylaws
Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law.
The general effect of the foregoing is to indemnify a control person, officer or director from liability, thereby making us responsible for any expenses or damages incurred by such control person, officer or director in any action brought against them based on their conduct in such capacity, provided they did not engage in fraud or criminal activity.
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RECENT SALES OF UNREGISTERED SECURITIES
On September 1, 2022 the Company issued 750,000 shares to Mr. Jongpil Kim in consideration for the purchase of certain assets under an asset purchase agreement.
During the nine months ended September 30, 2022, the company issued convertible promissory notes in the principal amount of $202,140 to several investors bearing interest at 8% per annum for a period of 12 months. The holders have the right to convert any or all of the outstanding principal into shares of the Company’s common stock at a conversion price of $0.001 per share.
On May 6, 2022, 31,663,760 shares were issued in respect to a certain asset purchase agreement.
During the year ended December 31, 2021, 70,000,000 shares were issued upon conversion of certain convertible notes.
During the year ended December 31, 2021, 300,000,000 shares were issued pursuant to a court order in settlement of $175,000 payable to our current sole officer and director, Mr. James Brooks and valued at the fair market value on the date of issue or $10,200,000.
On December 23, 2021, the Company entered into an 8% Convertible Promissory Note with Mr. James Brooks, our then sole officer and director, in the amount of $1,171,727. The convertible promissory note bears interest rate at 8% per annum for a period of 12 months. The holder has the right to convert any or all of the outstanding principal into shares of the Company’s common stock at a conversion price of $0.001 per share.
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*Filed herewith
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The 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:
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| (i) | To include any prospectus required by section 10(a)(3) of the Securities Act; |
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| (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% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
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| (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; |
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2. That for the purpose of determining liability under the Securities Act, each 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 of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
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| (i) | Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424; |
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| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant; |
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| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the registrant or its securities provided by or on behalf of the registrant; and |
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| (iv) | Any other communication that is an offer in the offering made by the registrant to the purchaser. |
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other than the payment by the 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 and will be governed by the final adjudication of such issue.
Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
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Signatures
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Orlando, Florida on December 29, 2022.
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| COSTAS, INC. |
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| By: | //Signed// James Brooks |
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| James Brooks President and Director |
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In accordance with the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates stated.
| SIGNATURES |
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| //signed// James Brooks |
| Director and President |
| December 29, 2022 |
| James Brooks |
| (Principal Executive and Accounting Officer) |
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EXHIBIT 3.2
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EXHIBIT 3.3
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EXHIBIT 3.5
EXHIBIT 3.6
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EXHIBIT 3.7
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EXHIBIT 3.8
EXHIBIT 3.9
EXHIBIT 3.10
EXHIBIT 3.11
EXHIBIT 5.1
| 641 Lexington Avenue, 13th Floor New York, NY 10022 Tel: (212) 271-4272
|
CORPORATE AND SECURITIES LAWYERS |
December 29, 2022
Costas, Inc.
# 424 E Central Blvd, Suite 308
Orlando, FL, 32801
Dear :
| Re: | Common shares of Costas, Inc., Registered on Form S-1, filed on December 29, 2022 |
We have acted as counsel to Costas, Inc. (the “Company”), a corporation incorporated under the laws of the State of Nevada, in connection with the filing, on December 23, 2022, of a registration statement on Form S-1 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”) relating to the proposed resale of up to 221,223,333 shares of the Company’s common stock, par value $0.001 per share (the “Registered Shares”) by the selling stockholders identified in the Registration Statement. This opinion letter is furnished to you at your request to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. § 229.601(b)(5), in connection with the Registration Statement.
In connection with rendering the opinion set forth below, we have reviewed: (a) the Registration Statement and exhibits thereto; (b) the Company's Articles of Incorporation; (c) the Company's Bylaws; (d) certain records of the proceedings of the Board of Directors of the Company relating to the proposed issuance of the Shares; and (e) such statutes, records and other documents and matters as we have deemed necessary.
We have also examined the originals or copies of such corporate records of the Company and/or public officials and such other documents and have made such other factual and legal investigations as we have deemed relevant and necessary as the basis for the opinion set forth below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies or as facsimiles of copies or originals, which assumptions we have not independently verified.
We have made such inquiries with respect thereto as we consider necessary to render this opinion with respect to a Nevada corporation. This opinion letter is opining upon and is limited to the current federal laws of the United States, including the statutory provisions, all applicable provisions of Nevada law and reported judicial decisions interpreting those laws, as such laws presently exist and to the facts as they presently exist. We express no opinion with respect to the effect or applicability of the laws of any other jurisdiction. We assume no obligation to revise or supplement this opinion letter should the laws of such jurisdiction be changed after the date hereof by legislative action, judicial decision or otherwise.
Based upon the foregoing and the examination of such legal authorities as we have deemed relevant, and subject to the qualifications and further assumptions set forth herein, we are of the opinion that the Registered Shares have been duly authorized by all requisite corporate action and have been, or will be, legally issued, fully paid and non-assessable.
The opinions expressed herein are with respect to, and limited to, the corporate laws of the State of Nevada and the federal laws of the United States, in each case as currently in effect, and we express no opinion as to the effect of the laws of any other jurisdiction.
We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the General Rules and Regulations of the Securities and Exchange Commission.
| Very truly yours, | |||
| /s/ William Macdonald | |||
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| On the behalf of | |
| W.L. Macdonald Law Corporation | |||
Macdonald Tuskey is an association of law corporations with lawyers called in
the Province of British Columbia and the State of New York.
EXHIBIT 10.1
AGREEMENT FOR PURCHASE OF ASSETS
This Agreement for Purchase of Assets (“Agreement”) is entered into on May 6th, 2022, (the “Effective Date”) by and between Standard Dental Labs Inc. (“SDL”), a corporation incorporated under the laws of the State of Wyoming, (the “Seller”) and Costas, Inc. (“CSSI”), a publicly traded company incorporated under the laws of the State of Nevada, (the “Buyer”), (collectively herein referred to as the “Parties”).
I. RECITALS
WHEREAS, Seller owns and holds right, title and interest in certain Assets (as defined below);
AND WHEREAS, Seller utilizes and exploits such Assets for purposes of operating its business, which is operated pursuant to all applicable statutes, rules, regulations, orders and other requirements of governmental authorities;
AND WHEREAS, the parties have agreed to effectuate the aforementioned Acquisition of SDL through the issuance of Thirty-One Million, Six Hundred Sixty-Three Thousand, Seven Hundred Sixty (31,663,760) shares of CSSI’s Common Stock in exchange for substantially all of the assets of SDL as listed on Schedule 1 of Exhibit A attached hereto;
AND WHEREAS, upon the terms and conditions set forth herein, Seller desires to sell and Buyer desires to purchase the Assets, as defined below. Buyer does not desire nor intend to assume any of Seller’s liabilities, except as specifically set forth below.
In consideration of the above representations as being true and to be relied upon, and the mutual promises of the Parties as stated below, Buyer and Seller agree as follows:
II. AGREEMENT
| A. | Sale of Assets. At the closing of the sale of the Assets to the Buyer, and the transactions contemplated hereby (the “Closing”), Seller shall sell, assign, transfer and deliver to Buyer free and clear of all Liens (as defined in Exhibit A hereto) other than Liens caused by the Buyer, and Buyer shall purchase and accept from Seller, in accordance with the terms of this Agreement, all of Seller's right, title and interest, whether legal or equitable, in and to substantially all of the assets of SDL as listed on Schedule 1 of Exhibit A attached hereto (the “Assets”): |
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| B. | Purchase Price. The purchase price of the Assets shall be Seventy-Five Thousand, Nine Hundred ($75,900.00) dollars (the “Purchase Price”) which shall be payable by the Buyer to the Seller at the Closing through the issuance of Thirty-One Million, Six Hundred Sixty-Three Thousand, Seven Hundred Sixty (31,663,760) shares of CSSI’s Common Stock of the Buyer to the Seller (the “Purchase Consideration”). |
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| C. | Conditions of Closing. Payment of the Purchase Consideration to satisfy the Purchase Price and consummation and Closing of the transaction specified herein shall be subject to the satisfaction of the following conditions precedent: |
| Buyer Seller |
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| 1. | Assignment Agreement. The execution and delivery of the Assignment and Bill of Sale substantially in the form attached hereto as Exhibit A by the Parties thereto. |
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| 2. | Possession of Assets. Assets listed in Schedule 1 to Exhibit A shall have been transferred to Buyer concurrently with the Closing, subject to the terms and conditions of this Agreement. |
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| 3. | Representations and Warranties True and Correct. The representations and warranties of Seller set forth in this Agreement shall be true and correct in all material respects as of the date of this Agreement and as if made at and as of the Closing Date, including without limitation that Seller can convey good and marketable title to the Assets, free and clear of any Lien, claim or encumbrance. |
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| 4. | No Material Adverse Change. There is no material adverse change of or relating to the Assets prior to Closing. |
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| 5. | Performance. Seller shall have performed in all material respects all obligations required to be performed by them under this Agreement prior to the Closing Date. |
| D. | Closing Date. The Closing Date shall take place as promptly as practicable after satisfaction or waiver or satisfaction of the conditions set forth in Paragraph C. |
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| E. | Failure to Close. If the Parties are unable to complete the Closing as provided herein, Seller shall continue to be the sole and exclusive owner of the Assets, and all other documents, instruments and agreements contemplated anywhere herein or otherwise to be entered into or effectuated as part of this Agreement (including, but not limited to, any agreements or documents reflected as exhibits hereto) shall have no force or effect and shall not, in such event, be binding or applicable to any of the Parties hereto or thereto. Unless this Agreement is properly terminated on its terms by either Party, Seller shall hold the Assets for the benefit of the Buyer, shall not sell or encumber the Assets in any manner and shall proceed to promptly sell and transfer such Assets to Buyer at the earliest time permissible. |
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| F. | Representations, Warranties and Covenants of Seller. Seller represents, warrants and covenants to Buyer as follows: |
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| 1. | Title to Assets. Seller has and at the time of Closing will have valid title to the Assets and has the absolute right to sell, assign, and transfer those Assets to Buyer free and clear of all Liens, pledges, security interests, mortgages, deeds of trust, claims or other encumbrances of any kind. |
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| 2. | Organization/Authority. The Seller is a corporation duly organized, validly existing and in good standing under the Laws of State of Wyoming and has all requisite power and authority to own, lease and operate its properties and carry on its business relating to the Assets as it is now conducting that business. The Seller is duly licensed or qualified to transact business and in good standing to do business in each jurisdiction in which the nature of its current operations related to its current business, including its ownership of any of the Assets used in connection with its business, makes such qualification necessary, except to the extent that the Seller’s failure to be so licensed or qualified and in good standing would not have a material adverse effect on the operation of the business of the Seller after the Closing. The signing, delivery and performance (including all required deliveries) of this Agreement by Seller have been duly and validly authorized and will not violate any applicable laws or regulations. This Agreement and all documents required to be delivered by Seller constitute a valid, binding and enforceable obligation of Seller. |
| Buyer Seller |
|
| 2 |
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| 3. | No Changes. From the Effective Date, and up through the time of Closing, there have not been and will not be any transactions or operations by Seller except in the ordinary course of business, nor any changes in the condition of the Assets, nor any other event or condition that has or might have a material and/or adverse effect on the same. |
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| 4. | Records. To the best of Seller’s knowledge, all documents provided by the Seller evidencing Seller’s ownership of the Assets and all prior transactions are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with prudent and customary business practices. |
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| 5. | Compliance. Seller represents that no operation or activity of Seller violates any applicable federal, state, or local statute, law, ordinance or regulation. All business activities of Seller at its present location as set forth above are permitted by and are in compliance with all current applicable zoning, health, fire, environmental, licensing and other similar or related laws and regulations. Seller has not violated any federal, state, or local environmental statutes, regulations, laws or ordinances, at any time in the operation of the business of the Seller. Seller is not aware of any potential or actual investigations or enforcement actions by any local licensing authority affecting the Assets. |
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| 6. | Condition of Purchased Assets. All Assets purchased pursuant to this Agreement shall be in compliance with and fit for sale pursuant to all applicable regulations. |
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| 7. | No Breach. The execution and delivery of this Agreement, and the completion of the transactions contemplated by this Agreement by Seller, will not result in or constitute a breach of or an event of default under any agreement to which Seller is a party. Seller has not been threatened with any civil lawsuit by any third-party. This paragraph is not subject to a materiality standard, that is, all matters covered by this paragraph, regardless of the size, scope, or age of the matter, are included. |
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| 8. | Contracts. Seller is not, and at the time of Closing, will not be, a party to any contracts that would in any way adversely affect Seller’s ability to transfer the Assets. |
| G. | Liabilities of Seller. Buyer is not assuming any debts, obligations, and liabilities of Seller. All debts, obligations and liabilities of Seller, whether liquidated or unliquidated, fixed or contingent, known or unknown, (collectively the “Unassumed Liabilities”), shall remain the sole and separate obligation of Seller. |
| Buyer Seller |
|
| 3 |
| H. | Indemnity. |
|
| 1. | Indemnification from the Seller. The Seller shall indemnify, defend and hold harmless (with legal counsel reasonably acceptable to Buyer) and hold the Buyer, its affiliates, successors and assigns, and the officers, directors, shareholders, managers, members, partners, trustees, subsidiaries, employees, contractors, subcontractors, attorneys, intermediaries, brokers, or other agents or representatives of any of the foregoing (collectively, the “Buyer Group”), from and against and in respect of any and all actions, suits, claims, demands, debts, liabilities, obligations, losses, damages, costs, expenses, penalties or injury (whether or not involving a third part claim, and including settlement, costs of investigation and reasonable attorneys’ fees and expenses) whenever arising or incurred (collectively, “Claims”) arising out of or relating to, or in connection with: (a) any inaccuracy, or breach of any representation, warranty, covenant or agreement of the Seller contained in this Agreement, or any exhibit, certificate, or other instrument furnished or to be furnished by the Seller contained in this Agreement or any related document to which Seller is a party (or any facts constituting any such untruth, inaccuracy or breach), (b) the Assets prior to the Closing; (c) the Unassumed Liabilities; or (d) Seller’s conduct or operation of its business prior to the Closing. |
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| 2. | Indemnification from Buyer. The Buyer agrees to and shall indemnify, defend and hold harmless (with legal counsel reasonably acceptable to the Seller) and hold the Seller, its affiliates, successors and assigns, and its respective officers, directors, shareholders, managers, members, partners, trustees, subsidiaries, employees, contractors, subcontractors, attorneys, intermediaries, brokers, or other agents or representatives of any of the foregoing (collectively, the “Seller Group”) from and against and in respect of any and all claims arising out of or relating to, or in connection with (a) any inaccuracy, or breach of any representation, warranty, covenant or agreement of the Buyer contained in this Agreement, or any exhibit, certificate, or other instrument furnished or to be furnished by the Buyer contained in this Agreement or any related document to which Buyer is a party (or any facts constituting any such untruth, inaccuracy or breach), (b) the Assets after the Closing Date; or (c) arising from or related to Buyer’s conduct or operation of its business after the Closing, other than those claims relating to assets or liabilities retained by the Seller. |
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| 3. | Limitations on Indemnification. The right to indemnification hereunder shall not exceed, the maximum amount of liabilities, if any, actually incurred. |
| I. | Default. In the event either Party, prior to Closing, fails to timely perform any of its obligations under this Agreement, the Party claiming that the other Party is in breach shall notify the other Party in writing that it is in default. The alleged default shall be described in reasonable detail. If the Party who receives that notice: (a) has not cured the default within five (5) business days, or (b) if the default cannot reasonably be cured within five (5) business days and that Party has not commenced efforts to cure the default or is not pursing those efforts in a reasonable manner (but in any event once such breach remains occurring for thirty (30) days), the Party claiming the breach shall have the option of terminating this Agreement and pursuing a claim for damages against the breaching Party, or enforcing this Agreement through an action for specific performance and pursuing a claim for damages against the breaching Party. |
| Buyer Seller |
|
| 4 |
| J. | Notice to Parties. All notices required or desired to be given pursuant to this Agreement shall be delivered personally, mailed by UPS or FedEx for next day delivery, sent via certified mail, return receipt requested, postage pre-paid, or transmitted by facsimile, e-mail or functionally equivalent electronic means of transmission, charges (if any) prepaid, addressed as follows: |
To Seller:
Standard Dental Labs Inc.
11845 W Olympic Blvd., Suite 1100
Los Angeles, California 90064
Attention: James Brooks
Email: James.brooks@standarddentallabs.com
To Buyer:
Costas, Inc.
424 E Central Blvd, Suite 308
Orlando, FL 32801
Attention: James Brooks
Email: admin@costas-inc.com
Or to any other address that a party provides to the other by written notice, served as provided above. If the notice is personally delivered, it shall be deemed delivered as of the date of delivery. If delivered by certified mail, return receipt requested, notice shall be deemed delivered two days after the mailing of the notice by certified mail. If delivered by UPS or FedEx, notice shall be deemed delivered one day after the mailing of the notice via UPS or FedEx. Any communication transmitted by facsimile, e-mail or other functionally equivalent electronic means of transmission will be deemed to have been given or made and received on the day on which it is transmitted; but if the communication is transmitted on a day which is not a business day or after 5:00 p.m. (local time of the recipient), the communication will be deemed to have been given or made and received on the next business day.
| K. | Miscellaneous. |
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| 1. | Survival. All terms in this Agreement shall survive the Closing of this Agreement. |
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| 2. | Entire Agreement. This Agreement supersedes all prior agreements and constitutes the entire agreement between the Parties with regard to the subject matter. This Agreement may not be modified except in a writing dated and signed by both Parties. |
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| 3. | Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective legal representatives, successors and assigns. |
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| 4. | Severability. The invalidity or unenforceability of any provision of this Agreement in a particular respect shall not affect the validity and enforceability of any other provision of this Agreement or the same provision in any other respect. |
| Buyer Seller |
|
| 5 |
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| 5. | Headings. Paragraph headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. |
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| 6. | Non-waiver. The failure of a party to exercise any right under this Agreement shall not be deemed a waiver of the right of that party to enforce that provision or any other provision of this Agreement in the future. |
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| 7. | Time of Essence. Time is of the essence as to all provisions of this Agreement. |
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| 8. | Assignment. Buyer shall have the right to assign this Agreement to an affiliate of Buyer. Seller’s consent to such assignment shall not be necessary. |
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| 9. | Attorney Fees. Each party shall be responsible for their own attorney’s fees and costs associated with the execution of this Agreement. |
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| 10. | Execution. This Agreement can be executed in counterparts. Fax, electronic, and scanned signatures are binding on the Parties. |
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| 11. | Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. |
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| 12. | Dispute Resolution. Except to the extent prohibited by law, any dispute or controversy or claim between the Parties arising out of or relating to this Agreement, or the breach thereof, shall be submitted to arbitration in accordance with the commercial rules of the American Arbitration Association. The site of the arbitration shall be in Las Vegas, Nevada. The arbitration shall be conducted in accordance with the commercial Rules of the American Arbitration Association prevailing at the time the demand for arbitration is made hereunder. Judgment upon any award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction and shall be binding and final. The costs of the arbitration, including administrative and arbitrator’s fees, shall be fully paid by the Buyer. Notwithstanding the foregoing, the Parties shall bear the expense of their own attorneys’ fees in accordance with this section. |
Signature Page to Follow
| Buyer Seller |
|
| 6 |
IN WITNESS WHEREOF, the Parties have executed this Agreement intending to be legally bound as of the date set forth above.
| SELLER: STANDARD DENTAL LABS INC. a Wyoming corporation | BUYER: COSTAS, INC. a Nevada corporation | ||
|
/s/ James Brooks | /s/ James Brooks | ||
| By: James Brooks | By: James Brooks | ||
| Buyer Seller |
|
| 7 |
EXHIBIT A
ASSIGNMENT AND BILL OF SALE
This Assignment and Bill of Sale (this “Assignment”) is effective as of May 6th, 2022, by and between Standard Dental Labs Inc., a Wyoming corporation, (the “Seller”) and Costas, Inc., a Nevada corporation, (“Buyer”). Buyer and Seller are sometimes referred to individually herein as a “Party” and collectively as the “Parties”.
RECITALS
Seller and Buyer entered into an Asset Purchase Agreement dated May 6th, 2022 (the “Purchase Agreement”). The Purchase Agreement provides for the purchase by Buyer from Seller of the Assets (as defined in the Purchase Agreement).
AGREEMENT
Seller hereby warrants, covenants and agrees as follows:
1. Assignment. In accordance with the terms and conditions of the Purchase Agreement, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Seller does hereby sell, transfer, convey, assign and deliver unto Buyer, its successors and assigns, all of the Assets as defined in the Purchase Agreement, including, without limitation, all of the items set forth on Schedule 1 attached hereto, free and clear of any and all options, liens, security interests, encumbrances, mortgages, deeds of trust, liabilities, financing statements, pledges, charges, conditions, equitable claims, covenants, title defects, restrictions or claims of any kind, nature or description whatsoever (collectively, “Liens”), to have and to hold said Assets unto Buyer, its successors and assigns, to and for its and/or their use forever.
2. Title. Seller has good and marketable title to the Assets hereby sold, transferred, conveyed, assigned and delivered to Buyer, free and clear of all Liens, and Buyer will receive hereby such good and marketable title thereto.
3. Warranty. Seller will warrant and defend the sale, transfer, conveyance, assignment and conveyance of the Assets hereunder against each and every person or persons claiming against any or all of the same.
4. Power of Attorney. Seller hereby constitutes and appoints Buyer the true and lawful agent and attorney in fact of Seller, with full power of substitution and resubstitution, in whole or in part, in the name and stead of Seller but on behalf and for the benefit of Buyer and its successors and assigns, from time to time to:
(a) demand, receive and collect any and all of the Assets and to give receipts and releases for and with respect to the same, or any part thereof;
| Buyer Seller |
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| 8 |
(b) institute and prosecute, in the name of Seller or otherwise, any and all proceedings at law, in equity or otherwise, that Buyer or its successors and assigns may deem proper in order to collect or reduce to possession any of the Assets and in order to collect or enforce any claim or right of any kind hereby assigned or transferred, or intended so to be; and
(c) do all things legally permissible, required or reasonably deemed by Buyer to be required to recover and collect the Assets and to use Seller’s name in such manner as Buyer may reasonably deem necessary for the collection and recovery of same;
Seller hereby declares that the foregoing powers are coupled with an interest and are and shall be irrevocable by Seller.
5. Further Assurances. Seller will take all reasonable steps necessary to put Buyer or its successors and assigns in actual possession and operating control of the Assets, to carry out the intent of the Purchase Agreement and this Assignment, or to more effectively sell, transfer, convey, assign and reduce to possession and record to title any of the Assets, including by executing and delivering, or causing to be executed and delivered, such further instruments or documents of transfer, assignment and conveyance, or by taking such other actions as may be requested by Buyer before or after Closing.
6. Independent Covenants. This Assignment is subject in all respects to the terms and conditions of the Purchase Agreement. Nothing contained in this Assignment shall be deemed to supersede, modify, replace, amend, change, rescind, diminish, waive, limit, extend, expand, enlarge, or in any way affect any of the obligations, agreements, covenants, representations, or warranties of Seller contained in the Purchase Agreement nor shall this Assignment extend, expand or enlarge any remedies under the Purchase Agreement including without limitation any limits on indemnification specified therein. This Assignment is intended only to affect the transfer of certain property assumed pursuant to the Purchase Agreement and shall be governed entirely in accordance with the terms and conditions of the Purchase Agreement.
7. Interpretation. Unless otherwise defined herein, capitalized terms used herein shall have the meanings given such terms in the Purchase Agreement. Also, the recitals above are incorporated by reference into this Assignment.
8. Governing Law; Amendment. This Assignment shall be governed in all respects by the laws of the State of Nevada (without regards to the conflict of law principles thereof). Seller submits to the jurisdiction of the courts in and for the State of Nevada. No change in or amendment to this Assignment shall be valid unless set forth in a writing signed by both Buyer and Seller. In the event that a dispute arises under this Assignment, such dispute shall be settled by in accordance with the dispute resolutions provisions set forth in the Purchase Agreement.
9. Counterparts. This Assignment may be executed in counterparts, each of which shall be deemed an original, and all of which when affixed together shall constitute but one and the same instrument. Signatures exchanged by facsimile shall be deemed original signatures for all purposes.
| Buyer Seller |
|
| 9 |
This Assignment and Bill of Sale is entered into effective as of the date first above written.
| SELLER:
STANDARD DENTAL LABS INC., a Wyoming corporation |
| BUYER:
COSTAS, INC. a Nevada corporation |
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| /s/ James Brooks |
| /s/ James Brooks |
| By: James Brooks |
| By: James Brooks |
| Buyer Seller |
|
| 10 |
Schedule 1
To
Assignment and Bill of Sale
ASSETS
| 1. | The following Assets of the Seller: |
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| · | Website Development and Server Infrastructure |
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| · | Webserver Setup and Hosting Infrastructure |
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| · | DNS and 360/24 Redundancy |
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| · | Internal Business Admin Console |
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| · | PBX Communications Platform |
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| · | Business URL |
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| · | Generational Logo Development |
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| · | Brand Development |
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| · | Business Concept and Opportunity Development |
| 2. | All customer goodwill related to the Assets; and |
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| 3. | All contracts for the sale or transfer of the Assets unless excluded by Buyer. |
Proposed Asset Purchase Price Allocation
Estimated Asset Values
Website Development and Server Infrastructure:
| · | Webserver Setup and Hosting with Bluehost |
| $ | 2,700.00 |
|
| · | DNS and 360/24 Redundancy |
| $ | 1,800.00 |
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| · | Business Admin Console |
| $ | 1,800.00 |
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| · | PBX Communications Platform |
| $ | 3,600.00 |
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| Business URL |
| $ | 1,000.00 |
| |
| Generational Logo Development |
| $ | 10,000.00 |
| |
| Business Plan, Materials and Brand Development |
| $ | 55,000.00 |
| |
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| |
| Total |
| $ | 75,900.00 |
| |
| Buyer Seller |
|
| 11 |
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
between
PRIME DENTAL LAB LLC
(as Seller)
and
COSTAS, INC.
(D/B/A STANDARD DENTAL LABS INC.)
(as Acquiror)
Dated as of August 15, 2022
| i |
TABLE OF CONTENTS
| ARTICLE I PURCHASE AND SALE OF ASSETS; SALES TAXES; DEFINITIONS |
| 1 |
| |
| 1.1 | Transfer of Purchased Assets. |
| 1 |
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| 1.2 | Excluded Assets. |
| 2 |
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| 1.3 | Assignment of Contracts, Rights Etc. |
| 3 |
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| 1.4 | Further Assurances. |
| 3 |
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| 1.5 | Sales Tax. |
| 3 |
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| 1.6 | Defined Terms. |
| 3 |
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| ARTICLE II LIABILITIES |
| 4 |
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| 2.1 | Liabilities Being Assumed. |
| 4 |
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| 2.2 | Liabilities Not Being Assumed. |
| 4 |
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| ARTICLE III CONSIDERATION |
| 5 |
| |
| 3.1 | Purchase Price. |
| 5 |
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| 3.2 | Quarterly Revenue Targets. |
| 7 |
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| 3.3 | Allocation of Purchase Price. |
| 7 |
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| 3.4 | Tax Consequences. |
| 8 |
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| ARTICLE IV CLOSING |
| 8 |
| |
| 4.1 | Closing. |
| 8 |
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| ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLER |
| 8 |
| |
| 5.1 | Organization; Good Standing; Qualification and Power. |
| 8 |
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| 5.2 | Authority; Noncontravention; Consents. |
| 9 |
|
| 5.3 | Title to Purchased Assets. |
| 9 |
|
| 5.4 | Transferred Intellectual Property. |
| 9 |
|
| 5.5 | Agreements, No Defaults. |
| 10 |
|
| 5.6 | Litigation Etc. |
| 10 |
|
| 5.7 | Compliance; Permits. |
| 11 |
|
| 5.8 | Taxes. |
| 11 |
|
| 5.9 | Warranties. |
| 11 |
|
| 5.10 | Books and Records. |
| 11 |
|
| 5.11 | Financial Information. |
| 11 |
|
| 5.12 | Brokers. |
| 12 |
|
| 5.13 | Environmental Matters. |
| 12 |
|
| 5.14 | Bankruptcy Etc. |
| 12 |
|
| 5.15 | No Purchased Assets Held by Affiliates. |
| 12 |
|
| 5.16 | Equipment and Property |
| 12 |
|
| 5.17 | Contracts and Commitments. |
| 13 |
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| 5.18 | Securities Law Matters. |
| 13 |
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| 5.19 | Relationship with Affiliates. |
| 14 |
|
| 5.20 | Material Adverse Effect. |
| 14 |
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| 5.21 | Undisclosed Liabilities. |
| 15 |
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| 5.22 | Compliance with OFAC. |
| 15 |
|
| ii |
| ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR |
| 15 |
| |
| 6.1 | Organization; Good Standing. |
| 15 |
|
| 6.2 | Authority, Noncontravention; Consents. |
| 16 |
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| 6.3 | Valid Issuance. |
| 16 |
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| 6.4 | Brokers. |
| 16 |
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| ARTICLE VII CLOSING DELIVERIES |
| 16 |
| |
| 7.1 | The Seller’s Deliveries. |
| 16 |
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| 7.2 | The Acquiror’s Deliveries. |
| 17 |
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| ARTICLE VIII INDEMNIFICATION |
| 18 |
| |
| 8.1 | Indemnification Generally; Etc. |
| 18 |
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| 8.2 | Assertion of Claims. |
| 19 |
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| 8.3 | Limitations on Indemnification. |
| 19 |
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| 8.4 | Notice and Defense of Third Person Claims. |
| 20 |
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| 8.5 | Survival of Representations and Warranties and Covenants. |
| 21 |
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| 8.6 | Right of Setoff. |
| 21 |
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| 8.7 | Exclusive Remedy. |
| 22 |
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| |
| ARTICLE IX POST-CLOSING COVENANTS AND OTHER AGREEMENTS |
| 22 |
| |
| 9.1 | Transfer of Purchased Assets. |
| 22 |
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| |
| ARTICLE X MISCELLANEOUS PROVISIONS |
| 22 |
| |
| 10.1 | No Third Party Beneficiaries. |
| 22 |
|
| 10.2 | Entire Agreement. |
| 22 |
|
| 10.3 | Successors and Assigns. |
| 23 |
|
| 10.4 | Amendment; Waiver. |
| 23 |
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| 10.5 | Fees and Expenses. |
| 23 |
|
| 10.6 | Notices. |
| 23 |
|
| 10.7 | Governing Law; Arbitration. |
| 24 |
|
| 10.8 | Interpretation; Construction. |
| 24 |
|
| 10.9 | Incorporation of Exhibits. |
| 25 |
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| 10.10 | Independence of Covenants and Representations and Warranties. |
| 25 |
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| 10.11 | Counterparts; Electronic Signatures |
| 25 |
|
| iii |
ANNEX AND EXHIBITS
| iv |
INDEX OF DEFINED TERMS
| TERM |
| Defined on Page |
|
|
|
|
|
|
| Acquiror |
| 1 |
|
| Acquisition |
| 1 |
|
| Affiliate |
| I-1 |
|
| Agreement |
| 24 |
|
| Assigned Contracts |
| 2 |
|
| Assumed Liabilities |
| 4 |
|
| Business |
| I-1 |
|
| Business Day |
| I-1 |
|
| Cap |
| 19 |
|
| Closing |
| 8 |
|
| Closing Date |
| 8 |
|
| Code |
| I-1 |
|
| Competing Business |
| 15 |
|
| Contract |
| 1 |
|
| Control |
| I-1 |
|
| Deductible |
| 20 |
|
| Encumbrances |
| I-1 |
|
| Environmental, Health and Safety Laws |
| 1 |
|
| Excluded Assets |
| 2 |
|
| Excluded Liabilities |
| 4 |
|
| Financial Statements |
| 12 |
|
| Fraud |
| I-1 |
|
| Fundamental Documents |
| I-2 |
|
| Fundamental Representations |
| 20 |
|
| GAAP |
| I-2 |
|
| Governmental Entity |
| I-2 |
|
| Hazardous Materials |
| I-2 |
|
| Indemnified Persons |
| I-2 |
|
| Indemnifying Persons |
| I-2 |
|
| v |
| Intellectual Property |
| I-2 |
|
| Intellectual Property Rights |
| I-2 |
|
| Inventory |
| I-2 |
|
| Knowledge |
| 25 |
|
| Law |
| I-2 |
|
| Liability |
| I-2 |
|
| Litigation Expense |
| I-2 |
|
| Losses |
| I-3 |
|
| Material Adverse Effect |
| I-3 |
|
| Non-Fundamental Representations |
| 20 |
|
| OFAC |
| 16 |
|
| Orders |
| I-3 |
|
| Parties |
| 1 |
|
| Party |
| 1 |
|
| Patents |
| I-3 |
|
| Permits |
| I-3 |
|
| Person |
| I-3 |
|
| Proceedings |
| I-3 |
|
| Products |
| I-3 |
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| Purchased Assets |
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| Purchaser Indemnified Persons |
| I-3 |
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| Purchaser Indemnifying Persons |
| I-3 |
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| Purchaser Losses |
| I-3 |
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| Related Documents |
| 17 |
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| Representatives |
| I-4 |
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| Sanction |
| 15 |
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| Securities Act |
| 13 |
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| Seller |
| 1 |
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| Seller Indemnified Persons |
| I-4 |
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| Seller Indemnifying Persons |
| I-4 |
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| Seller Losses |
| I-4 |
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| Shareholder |
| I-4 |
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| Stock Consideration |
| I-4 |
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| Survival Date |
| 21 |
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| Tax |
| I-4 |
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| Tax Return |
| I-4 |
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| Taxes |
| I-4 |
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| Taxing Authority |
| I-4 |
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| Third Person Claim |
| 20 |
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| Trade Names |
| I-4 |
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| Trademarks |
| I-4 |
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| Trading Price |
| I-4 |
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| Transaction Taxes |
| 3 |
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| Transferred Permits |
| 2 |
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| vi |
ASSET PURCHASE AGREEMENT, dated as of August 15, 2022, between Prime Dental Labs LLC., a Florida limited liability company (“PDL” or the “Seller”); and Costas, Inc. (d/b/a Standard Dental Labs Inc.), a Nevada corporation (“SDL” or the “Acquiror”). The Acquiror and Seller are sometimes individually referred to herein as a “Party”, and collectively as the “Parties”.
PREAMBLE
The Acquiror wishes to acquire from Seller, and Seller wishes to transfer to Acquiror certain assets of Seller in consideration for the Purchase Price as a combination of Acquiror’s Class A Common Shares and certain cash or other consideration as otherwise outlined herein (the “Acquisition”).
ARTICLE I
PURCHASE AND SALE OF ASSETS; SALES TAXES; DEFINITIONS
1.1 Transfer of Purchased Assets.
On the terms and subject to the conditions contained in this Agreement, at the Closing the Seller shall sell, transfer, convey and assign to the Acquiror, free and clear of all Encumbrances, and the Acquiror shall purchase and acquire from Seller, all of Seller’s right, title and interest in, to and under substantially all of Seller’s assets, properties, interests in properties and rights, whether tangible or intangible and whether real, personal or mixed, as the same shall exist immediately prior to the Closing, but excluding the Excluded Assets (collectively, the “Purchased Assets”).
The Purchased Assets shall include, but are not limited to: all client contracts for existing PDL clients; certain physical assets of the Seller including all dental lab equipment, furniture, computers and other office equipment; the assumption of certain contracts, equipment leases and office leases; certain employees and management of the Seller as determined to be retained by the Acquiror; and specifically the right to continue to use the name “Prime Dental Lab LLC” along with certain other rights, trademarks, intellectual property and intangible assets of the Seller. More specifically and subject to Section 1.2, the Purchased Assets include, but are not limited to the following assets, properties and rights of the Seller as of the Closing Date:
(a) all Accounts Receivable of the Seller, as listed on Schedule 1.1(a);
(b) all Inventory of the Seller, as listed on Schedule 1.1(b), other than Excluded Assets of the Seller as listed on Schedule 1.2;
(c) all deposits, advances, pre-paid expenses and credits relating to prepaid packages;
(d) all furniture, fixtures, machinery, equipment, computer hardware and software, and all other tangible assets and personal property of the Seller as listed on Schedule 1.1(d);
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(e) all rights and benefits of the Seller under the Contracts as listed on Schedule 1.1(e) (the “Assigned Contracts”);
(f) all goodwill, going concern value, patents, patent applications, patent rights, copyrights, copyright applications, Websites, URL’s, domain names, methods, know-how, software, technical documentation, computer programs, engineering drawings, product concepts, and ideas under development, processes, process charts, procedures, inventions, trade secrets, trademarks, trade names, trade dress, logos, business names (and specifically the right to continue to use the name “Prime Dental Lab LLC”), telephone numbers, confidential information, franchises, customer lists, customer files, , marketing materials, advertising records, advertising rights with respect to all media, service marks, service names, registered user names, technology, research records, data, designs, plans, drawings, manufacturing know-how and formulas, whether patentable or unpatentable, and other intellectual or proprietary rights (and all rights thereto and applications therefor), including the Intellectual Property;
(g) all rights to causes of action, lawsuits, judgments, claims, and demands of any nature available to or being pursued by the Seller, including all rights and claims against manufacturers and vendors of the Seller, relating to the subject matter of this Agreement, whether arising by way of counterclaim or otherwise;
(h) all rights in and under all express or implied guarantees, warranties, representations, covenants, indemnities, and similar rights in favor of the Seller related to the subject matter of this Agreement;
(i) all Permits, licenses or similar rights to the extent that they are assignable, including those listed on Schedule 1.1(i) (the “Transferred Permits”); and
(j) all information, files, databases, correspondence, records, data, plans, reports, and Contracts, including any and all information and records relating to investment, insurance and other current and past customers, client files, customer, supplier, price and mailing lists, business contacts, and investment, underwriting, and claims files together with all usual and customary records in connection therewith, and all accounting or other books and records of Seller in whatever media retained or stored, including computer programs and disks.
1.2 Excluded Assets.
The Purchased Assets exclude, and the Acquiror shall not purchase or acquire hereunder, any right, title or interest in, to and under any of the excluded assets of the Seller as outlined on Schedule 1.2 (collectively, the “Excluded Assets”).
(a) all ownership and other rights with respect to Seller employee benefit plans;
(b) all rights of Seller under any excluded Contracts listed on Schedule 1.2;
(c) all accounts payable outstanding;
(d) any Permit or license that by its terms is not transferable to Acquiror;
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(e) the charter documents, minute books, stock ledgers, Tax Returns, books of account and other constituent records relating to the corporate organization of the Seller; and
(f) any other items listed on Schedule 1.2.
1.3 Assignment of Contracts and Rights.
Notwithstanding anything in this Agreement to the contrary, this Agreement does not constitute an agreement or an attempted agreement to sell, transfer, sublease or assign any Assigned Contract (or any claim or right or any benefit arising thereunder or resulting therefrom) if the attempted transfer, sublease or assignment thereof, without the consent of any other party thereto, would constitute a breach thereof or in any way affect the rights of the Acquiror or the Seller thereunder. The Seller shall use its commercially reasonable efforts to obtain the consent of the other party to any Assigned Contract to the transfer, sublease or assignment thereof to the Acquiror in all cases in which such consent is required for the transfer, sublease or assignment of any such Assigned Contract. If any such consent is not obtained and the Closing occurs, the Seller shall use its commercially reasonable efforts to provide for the Acquiror the benefits of such Assigned Contract.
1.4 Further Assurances.
The Seller shall, from time to time after the Closing, upon the request of Acquiror, do, execute, acknowledge and deliver, and cause to be done, executed, acknowledged or delivered, all such further acts, deeds, assignments, transfers, conveyances or assurances as may be reasonably required to transfer, assign, convey, grant and confirm to the Acquiror, or to aid and assist in the reducing to possession by the Acquiror of the Purchased Assets, or to vest in the Acquiror good and marketable title to the Purchased Assets.
1.5 Sales Tax.
The Seller shall pay to applicable Taxing Authorities any and all sales Taxes, use Taxes, transfer Taxes, license Taxes, documentary charges, recording fees or similar Taxes, charges or fees (other than income Taxes of the Seller) that may become payable in connection with the sale, transfer and conveyance of the Purchased Assets to the Acquiror (the “Transaction Taxes”). The Seller and the Acquiror shall coordinate with each other the filing of any forms required in connection with such Taxes, charges or fees. The parties shall reasonably cooperate to minimize the amount of any Transaction Taxes imposed in connection with the sale of the Purchased Assets to the Acquiror.
1.6 Defined Terms.
Certain capitalized terms used in this Agreement are defined on Annex I attached hereto.
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ARTICLE II
LIABILITIES
2.1 Liabilities Being Assumed.
On the terms and subject to the conditions contained in this Agreement, effective as of the Closing, and from and after the Closing, the Acquiror shall pay or assume, perform and discharge when due, the following Liabilities of the Seller (collectively, the “Assumed Liabilities”):
(a) All liabilities accruing after the Closing Date relating to or arising out of the operation or conduct of the Business, including any liabilities accruing under each Assigned Contract.
2.2 Liabilities Not Being Assumed.
The Acquiror is not assuming and shall not be obligated to pay or satisfy, and the Seller shall remain responsible for, any Liabilities other than the Assumed Liabilities (collectively, the “Excluded Liabilities”), including the following:
(a) any Liabilities relating to or arising out of the operation or conduct of the Business;
(b) any accounts or notes payable of the Seller;
(c) any Liabilities accruing under any Assigned Contract on or prior to the Closing Date;
(d) any Liabilities arising out of any claim, irrespective of the legal theory asserted, related to the development, commercialization, manufacture, packaging, import, marketing, distribution, sale or use of the Products or the use of the Purchased Assets;
(e) any Liabilities arising out of any claim, irrespective of the legal theory asserted, related to the operation of the Business (specifically identified as a liability not being assumed by the Acquiror is all of the Seller’s interest and any potential liabilities in the pending litigation filed in the County Court of the Ninth Circuit Court in and for Orange County, Prime Dental Lab, LLC v. Richard S. Rogers, D.D.S., P.A. (CASE NO.: 2020-CC-013501-O));
(f) any Liabilities related to Taxes payable in connection with the operation of the Business, the ownership, leasing, possession or use of the Purchased Assets or the sale of Products;
(g) any Liabilities for pollution or contamination of the environment or damage to natural resources arising out of or related to the conduct of the Business, including any manufacture, generation, refining, processing, distribution, use, sale, treatment, recycling, receipt, storage, disposal, transportation, handling, emission, discharge, leaching, release or threatened release of any Hazardous Material in connection with the conduct of the Business;
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(h) any Liabilities under any Environmental, Health and Safety Laws arising out of or related to the conduct of the Business;
(i) any Liabilities of the Seller to the employees of the Seller, including deferred compensation, and any Liabilities of the Seller to such employees arising from the termination of such employees’ employment with the Seller; and
(j) any Liabilities of the Seller based upon Seller’s acts or omission occurring after the Closing.
ARTICLE III
CONSIDERATION
3.1 Purchase Price.
The Purchase Price is $700,000.00 (the "Gross Consideration"), consisting of 750,000 Class A Common Shares of the Acquiror (the “Share Consideration) PLUS additional cash consideration in the amount of $140,000.00 (the “Cash Consideration”) payable as described herein, and which total Gross Consideration is payable as described herein.
Share Consideration – The Share Consideration of 750,000 Common Shares shall be issued and payable by the Acquiror to the Seller on the Closing Date (as defined below). Provided however, while all Share Consideration shall be validly issued by the Acquiror to the Seller on the Closing Date, the Share Consideration shall be subject to certain additional lock-up restrictions for first twenty-four (24) months subsequent to the Closing Date.
These additional lock-up restrictions shall be governed by the lock-up-leak-out agreement appended hereto as Exhibit “A” (the “Lock-Up Agreement”). Specifically, the Share Consideration shall be released to Seller in eight (8) equal quarterly instalments, further subject to the Revenue Earn-Out described in Section 3.1(b) below being satisfied in each quarter respectively, therefore resulting in 93,750 Common Shares being released to Seller (the “Quarterly Lock-Up”), until the total Share Consideration is fully released from the Quarterly Lock-Up.
The Parties recognize that the Company currently has a substantial number of shares outstanding and, in the event that the Company decides to validly approve and complete a share consolidation or share rollback within twelve (12) months after the date of this Agreement, the Share Consideration issued in this transaction to the Seller shall be protected from such share consolidation action (on a one time basis) and the total number of shares issued as Share Consideration in this transaction shall remain as outlined herein.
Provided however, the timing of issuance, the pricing, and the number of shares to be authorized and issued as Share Consideration shall, as appropriate, also be determined in accordance with the various regulations restricting the issuance of shares by a public company, including but not limited to, any further restrictions imposed by the Securities Exchange Commission (the “SEC”), the OTC Markets (or any subsequent stock exchange as applicable) (the "Exchange") and any other regulatory authorities as appropriate.
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Cash Consideration – The Cash Consideration shall be payable in two (2) equal instalments of seventy thousand ($70,000.00) dollars (each a “Cash Instalment”). The first Cash Instalment shall be paid by the Acquiror to the Seller no later than fifteen (15) calendar days after receipt by the Acquiror of the Notice of Effect from the SEC of its Form S-1 filing (the “First Cash Instalment”).
The second Cash Instalment of seventy thousand ($70,000.00) dollars shall be paid by the Acquiror to the Seller on the date that is no later than ninety (90) calendar days subsequent to the payment of the First Cash Instalment (the “Second Cash Instalment”).
For clarity, the sum of the Cash Consideration and the Share Consideration is collectively known as the Gross Consideration.
a. Closing Conditions. The Closing (as defined below) shall occur on September 1, 2022, or any such other date mutually agreed in writing by the parties, upon the satisfactory completion of the various closing terms and conditions outlined in this Agreement, including but not limited to, the satisfactory completion of the Acquiror’s due diligence of the Seller’s assets and operations and completion of the certified audit of the Seller’s financial statements. Upon Closing, the Acquiror shall issue the Share Consideration to the Seller less, if applicable, any Gross Consideration previously provided by Acquiror to Seller, including any deposits or other advance payments, and any funds owed in connection with prior agreements between the Parties. Irrespective of any contrary terms and conditions outlined in this Agreement, at the time of issuance, the Share Consideration shall be subject to any regulations restricting the issuance of shares by a public company, including but not limited to, any restrictions imposed by the SEC, the Exchange and any other regulatory authorities as appropriate.
b. Quarterly Revenue Targets. The Quarterly Lock-Up restrictions on the Share Consideration are removable quarterly if, and only if, the applicable Quarterly Revenue Targets (defined in Section 3.2) have been satisfied.
c. Statutory Share Lock-Up. Seller acknowledges that all Share Consideration issued pursuant to this Agreement may be subject to a statutory hold on the sale of shares or other restrictions imposed by the SEC, the Exchange or any other regulatory authorities as appropriate, which may restrict any transfer of the Share Consideration during any such lock-up period (the “Statutory Lock-Up”). For clarity, other than as outlined herein, any Share Consideration issued to the Seller pursuant to this Agreement shall be subject to both the Quarterly Lock-Up and the Statutory Lock-Up restrictions as respectively defined herein.
d. Asset Verification. Seller shall provide such tags or other information as necessary or reasonably requested for Acquiror's auditors to verify the existence and location of all of Seller's tangible assets as well as to confirm ownership of all of Seller's intellectual property and intangible assets. The Parties reaffirm that the agreement will be for the purchase of all of Seller's assets, tangible and intangible, except those assets, contracts, and agreements that are specifically excluded as elected by the Acquirors, and such excluded assets and obligations shall remain the separate property and/or separate obligation of Seller. If required, the Seller hereby agrees to provide full access to its books and records related to the Assets in order for the Acquiror to discharge its continuous disclosure obligations under applicable securities laws.
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e. Contractor Period. For a certain period to be determined after the Closing, the Managing Member of the Seller (the “Contractor”) shall continue to receive as compensation substantially all (up to one hundred (100%) percent) of the revenues directly generated by the Seller’s client base provided that the Contractor continues to complete all contracted work. Any chargebacks or costs related to returns or repairs will be deducted accordingly from the total compensation to the Contractor as appropriate. This “Contractor Period” will continue until terminated in writing by the Acquiror, in its sole discretion, with no less than thirty (30) days written notice to the Contractor; provided however, the Acquiror may proceed in its sole discretion to negotiate employment contracts as appropriate with any employees of the Seller during such written notice period.
3.2 Quarterly Revenue Targets.
(a) The Seller shall be entitled to receive each quarterly release of the Share Consideration from the Quarterly Lock-Up restrictions based on confirmation that the quarterly revenues generated by the Seller’s Purchased Assets exceeds fifty (50%) percent of the Seller’s 2021 Annual Revenue (as defined below) divided by the four (4) quarters annually. For clarity, the Seller’s 2021 Annual Revenue will be divided by four (4) to determine the amount of each quarterly revenue target and then further reduced by fifty (50%) percent to establish the quarterly revenue milestone that must be satisfied to obligate the Acquiror to provide, respectively, that quarter’s release of Share Consideration from the Quarterly Lock-up restrictions (each, a "Quarterly Revenue Target").
(b) Upon completion of the independent audit providing confirmation of the Seller’s 2021 revenues and other financial information, the certified 2021 revenue amount will be extrapolated annually and will be used as the guideline revenue to determine if each Quarterly Revenue Target has been satisfied (the "Annual Revenue").
(c) [Intentionally Deleted].
(d) [Intentionally Deleted].
3.3 Allocation of Purchase Price.
The Parties agree that the Purchase Price shall be allocated, for Tax purposes, among the Purchased Assets in a manner consistent with the provisions of Section 1060 of the Code and all regulations promulgated thereunder. Within twelve (12) months after the Closing, the Seller shall:
(a) complete and execute Form 8594 Asset Acquisition Statement Under Section 1060, consistent with the Statement of Allocation; and
(b) deliver copies of such form to the Purchaser.
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The Parties shall file a copy of the above-referenced form applicable to it with its Tax Returns for the period which includes the Closing Date.
If there is an increase or decrease in consideration (the Purchase Price under this Agreement) within the meaning of Section 1.1060-1(e)(1)(ii)(B) of the Treasury Regulations after the parties have completed the Statement of Allocation or have filed their initial Form 8594 Asset Acquisition Statement, the Parties shall allocate such increase or decrease in consideration as required by and consistent with Section 1060 of the Code and the applicable Treasury Regulations.
3.4 Tax Consequences.
The Parties intend that the Acquisition will constitute a “reorganization” within the meaning of Section 368(a) of the Code, and that this Agreement constitutes a “plan of reorganization” within the meaning of Treasury Regulations Sections 1.368-2(g) and 1.368-3(a). Notwithstanding anything herein to the contrary, each Party hereby acknowledges and agrees that such Party is relying solely upon its own tax advisors and counsel for advice concerning the Tax consequences of the Acquisition, and that no Party provides assurances to any other Party concerning such Tax consequences.
ARTICLE IV
CLOSING
4.1 Closing.
The closing of the sale of the Purchased Assets to the Acquiror, and the transactions contemplated hereby (the “Closing”), shall take place at the offices of the Acquiror (or at any other location determined with the mutual agreement of the Parties) on September 1, 2022, or any other date mutually agreed in writing by the parties, following the full execution of this Agreement (the “Closing Date”). Provided however, if any extension of the Closing Date cannot be mutually agreed by the parties before December 15, 2022 (the “Outside Date”), either party may terminate this Agreement with written notice to the other party and this Agreement shall become null and void. The parties hereto and their respective Representatives may participate in the Closing via electronic means.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller hereby represents and warrants to the Purchaser as follows:
5.1 Organization; Good Standing; Qualification and Power.
The Seller is limited liability company duly organized, validly existing and in good standing under the Laws of State of Florida and has all requisite power and authority to own, lease and operate its properties and carry on its business relating to the Products and the Purchased Assets as it is now conducting that business. The Seller is duly licensed or qualified to transact business and in good standing to do business in each jurisdiction in which the nature of its current operations related to the Business, including its ownership of any of the Purchased Assets and ownership or leasing of properties used in connection with the Business, makes such qualification necessary, except to the extent that the Seller’s failure to be so licensed or qualified and in good standing would not have a Material Adverse Effect on the operation of the Business after the Closing or the transfer of the Purchased Assets to the Acquiror.
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5.2 Authority; Noncontravention; Consents.
(a) The Seller has all requisite power and authority to enter into this Agreement and each Related Document to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Seller of this Agreement and each Related Document to which the Seller is a party, and the performance by the Seller of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary action on the part of the Seller. This Agreement and each Related Document to which the Seller is a party have been duly and validly executed and delivered by the Seller and are the valid and binding obligations of the Seller, enforceable against the Seller in accordance with their terms.
(b) Neither the execution and delivery by the Seller of this Agreement and each Related Document to which the Seller is a party nor the performance by the Seller of its obligations hereunder and thereunder (i) materially conflicts with, or results in a material violation of, or causes a material breach or default (with or without notice or lapse of time, or both) under, or gives rise to a right of termination, amendment, cancellation or acceleration of any material obligation contained in or the loss of any material benefit under, or results in the creation of any Encumbrance upon any of the Purchased Assets under, any term, condition or provision of (y) the Seller’s Fundamental Documents or (z) any Assigned Contract or any other material Contract to which the Seller is a party or by which the Purchased Assets are bound, or (ii) violates any Laws applicable to the Seller or any of the Purchased Assets.
(c) No material (i) consent, (ii) approval, (iii) Order or authorization of, (iv) registration, declaration or filing with, or (v) notification to any Governmental Entity or any other third Person is required in connection with the execution and delivery by the Seller of this Agreement or the Related Documents to which the Seller is a party, the performance by it of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby or thereby.
5.3 Title to Purchased Assets.
The Seller has good title to all Purchased Assets free and clear of any Encumbrances.
5.4 Transferred Intellectual Property.
(a) The Seller owns, has the right to use, sell, license and dispose of, and has the right to bring actions for the infringement of, the Intellectual Property.
(b) Prior to Closing Seller shall provide to the Acquiror a complete list of all Intellectual Property held by Seller;
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(c) There are no royalties, honoraria, fees or other payments payable to any Person or claimed by any Person by reason of the ownership, use, license, sale or disposition of the Intellectual Property or the manufacture or sale of the Products.
(d) The Seller has not received from any Person in the past five (5) years any written notice, charge, complaint, claim or assertion that its activities or contemplated activities with respect to the Products infringe or would infringe any Intellectual Property Rights of any Person, and no such claim is impliedly threatened by an offer to license from another Person under a claim of use.
(e) The Seller has not sent to any Person in the past five (5) years, or otherwise communicated to any Person, any written notice, charge, complaint, claim or other assertion of any present, impending or threatened infringement by or misappropriation of, or other conflict with, any Intellectual Property by such other Person.
(f) The Seller has not licensed any of the Intellectual Property to any third Person, other than implied licenses granted by the Seller in connection with the sale of its products.
(g) Other than the Intellectual Property already disclosed to the Acquiror, the Seller does not own or license any Intellectual Property Rights.
5.5 Agreements, No Defaults.
(a) The Seller is not a party to any material Contracts other than the Assigned Contracts.
(b) Prior to closing Seller shall provide a complete and accurate list of all the Assigned Contracts.
(c) All Assigned Contracts are in full force and effect, constitute legal, valid and binding obligations of the Seller and, to the Knowledge of the Seller, the other parties thereto, and are, subject to bankruptcy and other laws relating to or generally affecting the enforcement of creditors’ rights, enforceable in accordance with their respective terms against the Seller, and to the Knowledge of the Seller, each other party thereto. The Seller has in all material respects performed all of the obligations required to be performed by it to date under each such Contract, and there exists no default by the Seller or, to the Knowledge of the Seller, any other party, or any event that upon the giving of notice or the passage of time, or both, would give rise to a claim of a default in the performance by the Seller or, to the Knowledge of the Seller, any other party, to any of their respective obligations thereunder. The Seller has made available to the Purchaser correct and complete copies of all written Assigned Contracts.
5.6 Litigation Etc.
Except as disclosed on Schedule 5.6 attached hereto, there are no (i) Proceedings pending or, to the Knowledge of the Seller, threatened against the Seller, whether at law or in equity, or before or by any Governmental Entity or arbitrator or (ii) Orders of any Governmental Entity or arbitrator naming the Seller.
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5.7 Compliance; Permits.
The Business is not being conducted in violation in any material respect of any Law, Order or Permit applicable in any jurisdiction in which the Seller operates the Business, including Environmental, Health and Safety Laws. To the Knowledge of the Seller, no investigation or review by any Governmental Entity with respect to the Products or the Business is pending or threatened, nor has any Governmental Entity notified the Seller of its intention to conduct the same. The Seller (a) possesses all Permits required under applicable Laws for the Seller’s conduct of the Business as it is currently conducted, a list of which shall be provided by Seller to the Acquiror prior to Closing, and each such Permit is valid and in full force and effect, (b) is in compliance, in all material respects, with each such Permit and (c) no Proceeding is pending or, to the Knowledge of the Seller, threatened to revoke, modify, suspend or limit any such Permit.
5.8 Taxes.
(a) All material Tax Returns that are required to be filed by or on behalf of the Seller with respect to the Business, the Purchased Assets and otherwise have been filed with the applicable Taxing Authorities and (b) all Taxes shown as due and payable on such Tax Returns have been paid. No Tax Return filed by the Seller is currently being examined by any Taxing Authority, and there are no outstanding agreements or waivers extending the statute of limitations applicable to any such Tax Return. The Seller is not a “foreign person” as that term is defined in Section 1445 of the Code.
(b) Seller has delivered to Acquiror copies of all Tax Returns filed since 2019.
5.9 Warranties.
Prior to closing Seller shall provide to the Acquiror a complete copy of each form of product warranty and guaranty issued by the Seller with respect to the Products that has not expired. No Person has asserted in the past five (5) years any Proceeding against the Seller under any Law relating to unfair competition, false advertising or other similar claims arising out of warranties, guarantees, specifications, manuals or brochures or other advertising materials used in connection with the Business.
5.10 Books and Records.
The books of account and other records of Seller, which have been made available to Purchaser, are complete and correct in all material respects.
5.11 Financial Information.
Prior to Closing, Seller shall provide to the Acquiror complete copies of (a) the unaudited balance sheets of Seller for the fiscal years ended December 31, 2020 and December 31, 2021 and the related statements of income for the fiscal years then ended and the related notes thereto, and (b) the unaudited balance sheets of Sellers as of May 31, 2022 and the statement of income for the five (5) month period ended May 31, 2022 (collectively, the “Financial Statements”). The Financial Statements (i) present fairly, in all material respects, the financial condition and results of operations of Sellers as of the dates thereof or for the periods covered thereby, as the case may be, and (ii) are in conformity with GAAP.
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5.12 Brokers.
Neither the Seller nor any of its officers, directors, equity owners or employees nor any other Person acting on its or their behalf has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated hereby. To the extent that the Seller has incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby, the Seller will be solely responsible for the payment of such commission or fee.
5.13 Environmental Matters.
(a) The Seller is not, subject to or the subject of any Order or Contract arising under any Environmental, Health and Safety Laws, nor, to the Knowledge of the Seller, is any Proceeding pending or threatened against the Seller under any Environmental, Health and Safety Laws.
(b) The Seller has not received written notice from any Person (i) that it is potentially responsible under any Environmental, Health and Safety Laws for Hazardous Material or response costs or natural resource damages, as those terms are defined under the Environmental, Health and Safety Laws, (ii) alleging that it is not in compliance with any Environmental, Health and Safety Laws or (iii) seeking penalties, damages or injunctive relief for past non-compliance with any Environmental, Health and Safety Laws, in each case related to the Business.
(c) The Seller is in Compliance with all environmental requirements of its Permits.
5.14 Bankruptcy.
The Seller is not involved in any Proceeding by or against it as a debtor before any Governmental Entity under Title 11 of the United States Bankruptcy Code or any other insolvency or debtors’ relief Law, whether state, federal or foreign, or for the appointment of a trustee, receiver, liquidator, assignee, sequestrator or other similar official for any part of the Seller’s property.
5.15 No Purchased Assets Held by Affiliates.
There are no assets, properties, interests in assets or properties or rights owned or held by any Affiliate of the Seller that would constitute Purchased Assets if owned or held by the Seller.
5.16 Equipment and Property
All equipment, property, and tangible assets purchased pursuant to this Agreement are in good repair and good operating condition, ordinary wear and tear excepted, is suitable for immediate use in the ordinary course of business and is free from latent and patent defects. No equipment, property, and tangible assets purchased pursuant to this Agreement are in need of repair or replacement other than as part of routine maintenance in the ordinary course of business.
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5.17 Contracts and Commitments.
The Seller is not a party to or otherwise obligated under any of the following Contracts, whether written or oral:
(a) Any revocable or irrevocable power of attorney relating to the Purchased Assets or the Business granted to any person, firm or corporation for any purpose whatsoever; or
(b) Any Contract or option relating to the acquisition or sale of any of the Purchased Assets.
5.18 Securities Law Matters.
(a) The Seller acknowledges and understands that it is acquiring the Stock Consideration under this Agreement under a private placement in reliance upon the exemption from the registration requirement of the U.S. Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(a)(2) of the Securities Act and Rule 506(b) thereunder and similar exemptions under applicable state securities laws.
(b) Seller is an “accredited investor,” as defined in Rule 501(a) of Regulation D under Section 4(a)(2) of the Securities Act.
(c) Seller is acquiring the Stock Consideration under this Agreement for its own account and not with a view to its distribution in violation of the Securities Act.
(d) The Seller acknowledges and understands that the shares of Acquiror’s stock are “restricted securities” as defined in Rule 144(a)(3) under the Securities Act, and the Seller will not offer, sell, pledge or otherwise transfer any of such securities, directly or indirectly, unless the offer, sale, pledge or transfer is in a transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws; or pursuant to an effective registration statement under the Securities Act.
(e) The Seller acknowledges and understands that until such time as the same is no longer required under the requirements of the Securities Act or applicable state securities laws, the certificates representing the Stock Consideration, and all certificates representing any securities issued in exchange thereof or in substitution therefor, will bear the following legend:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [NTD: INSERT END OF RESTRICTION DATE AFTER THE DISTRIBUTION DATE]."
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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF STANDARD DENTAL LABS INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY: (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT (“REGULATION S”), (C) IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (D) PURSUANT TO ANOTHER EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT, AND IN EACH CASE, IN ACCORDANCE WITH ALL APPLICABLE STATE SECURITIES LAWS, AFTER, IN THE CASE OF TRANSFERS PURSUANT TO CLAUSE (C)(2) OR (D) (OR IF REQUIRED BY THE CORPORATION, OR ITS TRANSFER AGENT, CLAUSE (B)) ABOVE, THE HOLDER HAS PROVIDED TO THE CORPORATION A LEGAL OPINION OF COUNSEL OF RECOGNIZED STANDING OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE CORPORATION, TO THE EFFECT THAT THE SALE OF SUCH SECURITIES IS NOT REQUIRED TO BE REGISTERED UNDER THE U.S. SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.”
5.19 Relationship with Affiliates.
Except as disclosed by Seller, neither Seller nor any Affiliates has, since the first date of the next to last completed fiscal year, had any interest in any property (whether real, personal or mixed and whether tangible or intangible) used in or pertaining to the Business. Neither Seller, nor any Shareholder nor any Affiliates of any of them owns, since the first date of the next to last completed fiscal year, has owned of record or as beneficial owner, an equity interest or any other financial or profit interest in any Person that has (a) had business dealings or a material financial interest in any transaction with Seller other than business dealings or transaction disclosed by Seller to the Acquiror, each of which has been conducted in the ordinary course of business with Seller at substantially prevailing market prices and on substantially prevailing market terms or (b) engaged in competition with Seller with respect to any line of products or services of Seller (“Competing Business”) in any market presently served by Seller, except for ownership of less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. Except as disclosed by Seller to the Acquiror, neither Seller nor any Shareholder nor any Affiliates of any of them is a party to any Contract with, or has any claim or right against, Seller.
5.20 Material Adverse Effect.
To the Knowledge of the Seller, since the date of the last balance sheet for the last fiscal year, no event or series of events has occurred that could have, or has had, a Material Adverse Effect on the Business or the Seller.
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5.21 Undisclosed Liabilities.
Seller has no Liability except for Liabilities reflected or reserved against in the balance sheets comprising the Financial Statements and current liabilities incurred in the Ordinary Course of Business of Seller since the date of the most recent balance sheet comprising the Financial Statements.
5.22 Compliance with OFAC.
Neither the Seller nor, to the Knowledge of the Seller, any director, manager, officer, agent, employee or Affiliate of the Seller is a Person that is, or is owned or controlled by a Person that is, currently the subject or target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”) or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, or other relevant sanctions authority (collectively, “Sanction”). No Seller has knowingly engaged in and is not now knowingly engaged in any dealings or transactions with any Person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any country or territory that is the subject or the target of Sanctions, including, without limitation, Cuba, Iran, North Korea, Sudan, and Syria.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror hereby represents and warrants to the Seller as follows:
6.1 Organization; Good Standing.
The Acquiror is a corporation duly organized, validly existing and in good standing under the Laws of State of Nevada.
6.2 Authority, Noncontravention; Consents.
(a) The Acquiror has all requisite corporate power and authority to enter into this Agreement and each Related Document to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by the Acquiror of this Agreement and each Related Document to which the Acquiror is a party, and the performance by the Acquiror of its obligations hereunder and thereunder, have been duly and validly authorized by all necessary corporate action on the part of the Acquiror. This Agreement and each Related Document to which the Acquiror is a party have been duly and validly executed and delivered by the Acquiror and are the valid and binding obligations of the Acquiror, enforceable against the Acquiror in accordance with their terms.
(b) Neither the execution and delivery by the Acquiror of this Agreement and each Related Document to which the Acquiror is a party nor the performance by the Acquiror of its obligations hereunder and thereunder (i) materially conflicts with, or results in a material violation of, or causes a material breach or default (with or without notice or lapse of time, or both) under, or gives rise to a right of termination, amendment, cancellation or acceleration of any material obligation contained in or the loss of any material benefit under, any term, condition or provision of (y) the Acquiror’s Fundamental Documents or (z) any material Contract to which the Acquiror is a party or by which its assets are bound, or (ii) violates any Laws applicable to the Acquiror or any of its assets.
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(c) No material (i) consent, (ii) approval, (iii) Order or authorization of, (iv) registration, declaration or filing with, or (v) notification to any Governmental Entity or any other third Person is required in connection with the execution and delivery by the Acquiror of this Agreement or the Related Documents to which the Purchaser is a party or the consummation by it of the transactions contemplated hereby or thereby.
6.3 Valid Issuance.
The shares of Stock Consideration to be issued to Seller pursuant to the terms of this Agreement, when issued as provided in this Agreement, will be duly authorized and validly issued, fully paid and nonassessable, and will be free of restrictions on transfer other than restrictions under applicable securities Laws in the United States.
6.4 Brokers.
Neither the Acquiror nor any of its officers, directors, equity owners or employees nor any other Person acting on its or their behalf has employed any broker or finder or incurred any Liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated hereby. To the extent that the Acquiror has incurred any Liability for any brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby, the Acquiror will be solely responsible for the payment of such commission or fee.
ARTICLE VII
CLOSING DELIVERIES
7.1 The Seller’s Deliveries.
(a) Related Documents. At the Closing, the Seller shall execute and deliver to the Acquiror each of the documents set forth below (collectively, the “Related Documents):
(i) Any document necessary for the completion of the transaction in the following categories: Bill of Sale, Assignment and Assumption Agreement;
(ii) any Trademarks owned by Seller to be attached as Exhibit A;
(iii) a copyright assignment for any copyright held by Seller;
(iv) a Patent assignment for any Patents held by Seller;
(v) a list of Seller Shareholders;
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(vi) all other documents required to be entered into by Seller pursuant to this Agreement or reasonably requested by Acquiror to convey the Purchased Assets to Acquiror or to otherwise consummate the transactions contemplated by this Agreement.
(b) Permits. The transferable permits held by Seller to be transferred to the Acquiror if applicable;
(c) Related Certificates. At the Closing, the Seller shall deliver the certificates set forth below to the Acquiror, executed by the Person set forth below:
(i) all written consents (or waivers with respect to thereto) for the assignment to Acquiror of the Assigned Contracts;
(ii) evidence of satisfaction of all obligations for the Indebtedness, including true, correct, and complete payoff letters or UCC termination statements with respect to the Indebtedness and satisfactory evidence that all Liens affecting the Purchased Assets have been released
(iii) a certificate of an officer of the Seller dated as of the Closing Date, certifying (A) as to the incumbency and genuineness of the signatures of each officer of the Seller executing this Agreement or any of the Related Documents on behalf of the Seller; and (B) the genuineness of the resolutions (attached thereto) of the Seller’s Board of Directors authorizing the execution, delivery and performance of this Agreement and the Related Documents to which the Seller is a party and the consummation of the transactions contemplated hereby and thereby; and
(iv) a certificate of the Florida Secretary of State certifying as to the good standing of the Seller, dated as of a date not more than five (5) Business Days prior to the Closing Date.
7.2 The Acquiror’s Deliveries.
(a) Related Documents. At the Closing, the Acquiror shall execute and deliver to the Seller each Related Document.
(b) Related Certificates. At the Closing, the Acquiror shall deliver the certificates set forth below to the Seller, executed by the Person set forth below:
(i) a certificate of an officer of the Acquiror dated as of the Closing Date, certifying (A) as to the incumbency and genuineness of the signatures of each officer of the Acquiror executing this Agreement or any of the Related Documents on behalf of the Acquiror; and (B) the genuineness of the resolutions (attached thereto) of the Acquiror’s Board of Directors or similar governing body authorizing the execution, delivery and performance of this Agreement and the Related Documents to which the Acquiror is a party and the consummation of the transactions contemplated hereby and thereby; and
(ii) a certificate of the Nevada Secretary of State certifying as to the good standing of the Acquiror, dated as of a date not more than five (5) Business Days prior to the Closing Date.
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(c) Cash Consideration. At the Closing or as otherwise outlined herein, the Acquiror shall deliver to the Seller the Cash Consideration in accordance with the terms of this Agreement, including Section 3.1 above.
(d) Share Consideration. At the Closing or as otherwise outlined herein, the Acquiror shall deliver to the Seller the Share Consideration in accordance with the terms of this Agreement.
(e) Stock Option Consideration. At the Closing or as otherwise outlined herein, the Acquiror shall deliver to the Seller the Stock Option Consideration in accordance with the terms of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification Generally; Etc.
(a) The Seller Indemnifying Persons shall indemnify, defend, and hold harmless the Purchaser Indemnified Persons from, against and in respect of any and all claims, Liabilities, losses (whether or not involving a third party claim), costs, expenses, penalties, fines and judgments (at equity or at law), and damages whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys' fees and expenses) arising out of, relating to or in connection with:
(i) the untruth, inaccuracy or breach of any representation or warranty of the Seller contained in this Agreement or in any Related Document to which the Seller is a party (or any facts or circumstances constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Seller contained in this Agreement or in any Related Document to which the Seller is a party;
(iii) the Excluded Liabilities;
(iv) any sales, value added, excise or other Taxes payable in connection with sales of the Products and the operation of the Business on or prior to the Closing Date; and
(v) all claims, damages, liabilities, losses and expenses, including reasonable attorneys’ fees, that arise out of negligent business and operational decisions made by Seller;
(b) Acquiror Indemnifying Persons shall indemnify, defend, and hold harmless the Seller Indemnified Persons from, against and in respect of any and all claims, Liabilities, losses (whether or not involving a third party claim), costs, expenses, penalties, fines and judgments (at equity or at law), and damages whenever arising or incurred (including amounts paid in settlement, costs of investigation and reasonable attorneys' fees and expenses) (arising out of, relating to or in connection with:
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(i) the untruth, inaccuracy or breach of any representation or warranty of the Acquiror in this Agreement, or in any Related Document to which the Acquiror is a party (or any facts or circumstances constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Acquiror contained in this Agreement or in any Related Document to which the Acquiror is a party; and
(iii) the Assumed Liabilities.
8.2 Assertion of Claims.
All claims under Section 8.1 must be brought within a period of time after the Closing Date equal to the maximum statute of limitations to which the Parties can contractually agree under applicable law with respect to any Fundamental Representation or Fraud, and within twenty-four (24) months after the Closing Date with respect to any Non-Fundamental Representation. The “Fundamental Representations” are those representations contained in Sections 5.1, (Organization; Good Standing; Qualification and Power), 5.3 (Title to Purchased Assets), 5.8 (Taxes), 5.11 (Financial Information), 5.12 (Brokers), 5.13 (Environmental Matters), 5.14 (Bankruptcy Etc.), 5.18 (Securities Law Matters), 5.19 (Relationships with Affiliates), 6.1 (Organization; Good Standing), and 6.4 (Brokers). “Non-Fundamental Representations” are all representations that are not Fundamental Representations.
8.3 Limitations on Indemnification.
(a) Indemnity Limitations for the Seller Indemnifying Persons. Except in the case of Fraud:
(i) the Purchaser Indemnified Persons shall not have the right to be indemnified pursuant to Section 8.1(a)(i) unless and until the Purchaser Indemnified Persons (or any of them) shall have incurred on a cumulative basis aggregate Losses in an amount exceeding $5,000.00 (the “Deductible”), in which event the Purchaser Indemnified Persons’ right to be indemnified shall apply only to the extent such Losses exceed the Deductible; and
(ii) the sum of all Losses pursuant to which indemnification is payable by the Seller Indemnifying Persons pursuant to Section 8.1(a) shall not exceed $1,000,000.00 (the “Cap”).
(b) Indemnity Limitations for the Purchaser Indemnifying Persons. Except in the case of Fraud:
(i) the Seller Indemnified Persons shall not have the right to be indemnified pursuant to Section 8.1(b)(i) unless and until the Seller Indemnified Persons (or any of them) shall have incurred on a cumulative basis aggregate Losses in an amount exceeding the Deductible, in which event the Seller Indemnified Persons’ right to be indemnified shall apply only to the extent such Losses exceed the Deductible; and
(ii) the sum of all Losses pursuant to which indemnification is payable by the Purchaser Indemnifying Persons pursuant to Section 8.1(b) shall not exceed the Cap.
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(c) Section 8(a) and 8(b) will not apply to any claim for indemnification if the representation and warrant to which the claim related is a Fundamental Representation.
(d) If a Party would have a claim for indemnification under this Article VII if the representation and warranty to which the claim relates did not include a materiality qualifier and the aggregate amount of all such claims exceeds the Deductible, then the Indemnified Person shall be entitled to indemnification for the amount of such claims in excess of the Deductible in the aggregate notwithstanding the materiality qualification in the relevant provisions of this Agreement.
(e) DAMAGES LIMITATION. IN NO EVENT SHALL ANY PARTY TO THIS AGREEMENT BE LIABLE TO ANY OTHER PARTY TO THIS AGREEMENT, UNDER THIS AGREEMENT OR OTHERWISE IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT, FOR CONSEQUENTIAL, INDIRECT, INCIDENTAL, PUNITIVE OR SPECIAL DAMAGES OR LOST PROFITS, DIMINUTION IN VALUE OF THE BUSINESS OR THE PURCHASED ASSETS, MULTIPLIERS OF DIRECT DAMAGES OR DAMAGE TO REPUTATION OR GOODWILL, EXCEPT, IN EACH CASE, (i) IN THE EVENT OF ACTUAL FRAUD AND (ii) TO THE EXTENT THAT AN INDEMNIFIED PERSON IS REQUIRED TO PAY SUCH DAMAGES OR OTHER ITEMS TO A THIRD PERSON IN CONNECTION WITH A MATTER FOR WHICH SUCH INDEMNIFIED PERSON IS ENTITLED TO INDEMNIFICATION UNDER THIS ARTICLE VIII.
8.4 Notice and Defense of Third Person Claims.
The obligations and liabilities of an Indemnifying Person with respect to Losses resulting from the assertion of liability by third Persons (each, a “Third Person Claim”) shall be subject to the following terms and conditions:
(a) An Indemnified Person shall promptly give written notice to the Indemnifying Persons of any Third Person Claim that might give rise to any Losses by the Indemnified Persons, stating the nature and basis of such Third Person Claim, and the amount thereof to the extent known; provided, however, that no delay on the part of the Indemnified Persons in notifying any Indemnifying Persons shall relieve the Indemnifying Persons from any liability or obligation hereunder unless (and then solely to the extent that) the Indemnifying Person is prejudiced by the delay. Such notice shall be accompanied by copies of all relevant documentation with respect to such Third Person Claim, including any summons, complaint or other pleading which may have been served, any written demand or any other related document or instrument.
(b) If the Indemnifying Persons acknowledge in a writing delivered to the Indemnified Persons that the Indemnifying Persons shall be obligated under the terms of their indemnification obligations hereunder in connection with such Third Person Claim, then the Indemnifying Persons shall have the right to assume the defense of any Third Person Claim at their own expense and by their own counsel, which counsel shall be reasonably satisfactory to the Indemnified Persons.
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(c) If the Indemnifying Persons shall assume the defense of a Third Person Claim, the Indemnifying Persons shall not be responsible for any legal or other defense costs subsequently incurred by the Indemnified Persons in connection with the defense thereof and the Indemnifying Persons shall nevertheless be entitled to participate in such defense with their own counsel and at their own expense. If the Indemnifying Persons do not exercise their right to assume the defense of a Third Person Claim by giving the written acknowledgement referred to in Section 8.4(b), the Indemnified Persons may defend the Third Person Claim and seek indemnity from the Indemnifying Persons for Litigation Expenses incurred in connection with such defense.
(d) If the Indemnifying Persons exercise their right to assume the defense of a Third Person Claim, they shall not make any settlement of any claims without the written consent of the Indemnified Persons, which consent shall not be unreasonably withheld; provided, however, that if the Indemnifying Persons propose the settlement of any claim that is capable of settlement by the payment of money only and the Indemnified Persons do not consent thereto within twenty (20) days after the receipt of written notice thereof, any Losses incurred by the Indemnified Persons in excess of such proposed settlement shall be at the sole expense of the Indemnified Persons.
8.5 Survival of Representations and Warranties and Covenants.
(a) The representations and warranties of the Seller contained in this Agreement or in any certificate delivered in connection with this Agreement shall survive the Closing Date and shall terminate on the second anniversary of the Closing Date, provided that the Fundamental Representations of the Seller shall survive the Closing until the expiration of the applicable statute of limitations. The covenants and other agreements of the Seller in this Agreement shall survive the Closing Date unless and until they terminate in accordance with their own terms.
(b) The representations and warranties of the Acquiror contained in this Agreement or in any certificate delivered in connection with this Agreement shall survive the Closing Date and shall terminate on the second anniversary of the Closing Date, provided that the representations and warranties of the Acquiror contained in Section 6.4 shall survive the Closing until the expiration of the applicable statute of limitations. The covenants and other agreements of the Acquiror contained in this Agreement shall survive the Closing Date unless and until they terminate in accordance with their own terms.
(c) For convenience of reference, the date upon which any representation, warranty, covenant or agreement contained herein shall terminate, if any, is referred to herein as the “Survival Date”.
8.6 Right of Setoff.
Upon Notice to Seller specifying in reasonable detail the basis therefor, the Acquiror may set off any amount to which it may be entitled under this Article VIII against any amounts otherwise payable under Section 3.4. Neither the exercise of not the failure to exercise such right of set off will constitute an election of remedies or limit the Acquiror in any manner in the enforcement of any other remedies that may be available to it.
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8.7 Exclusive Remedy.
Except in the case of Fraud, the rights and remedies provided for in this Article VIII shall be the sole and exclusive rights and remedies of the Indemnified Persons with respect to any matter relating to this Agreement, or otherwise relating to the transactions contemplated hereby or arising under or in connection with this Agreement. Neither party shall avoid the limitations on liability set forth in this Article VIII by seeking monetary damages for tort or pursuant to any other theory of liability other than a claim for indemnification under this Article VIII. To the extent that the rights and remedies provided for in this Article VIII are determined by a court of competent jurisdiction not to be exclusive under circumstances in which no exception to exclusivity contained in this Section 8.7 applies, the provisions of Sections 8.3and 8.5 shall apply to any remedy available to the Parties.
ARTICLE IX
POST-CLOSING COVENANTS
AND OTHER AGREEMENTS
9.1 Transfer of Purchased Assets.
The Seller shall cooperate with the Acquiror to facilitate the efficient and expeditious transfer to the Acquiror of the Purchased Assets.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 No Third Party Beneficiaries.
This Agreement shall not confer any rights or remedies upon any Person, other than the Parties and their respective successors and permitted assigns.
10.2 Entire Agreement.
This Agreement and the Related Documents (including the schedules and the exhibits attached hereto) contain all of the agreements between the parties hereto with respect to the transactions contemplated hereby and supersede all prior agreements or understandings, whether written or oral, between the Seller and the Acquiror.
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10.3 Successors and Assigns.
All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Notwithstanding anything herein to the contrary, no party shall assign this Agreement without the prior written consent of the other Parties, provided that the Acquiror may assign this Agreement to any of its Affiliates or a successor in interest to substantially all of its business.
10.4 Amendment; Waiver.
This Agreement shall not be altered or otherwise amended except pursuant to an instrument in writing signed by each Party. No obligation of the Seller to the Acquiror shall be waived except by means of a writing signed by the Acquiror, and no obligation of the Acquiror to the Seller shall be waived except by means of a writing signed by the Seller. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
10.5 Fees and Expenses.
Subject to Article VIII, each Party hereto shall bear its own fees and expenses incurred in connection with this Agreement and the Related Documents and the transactions contemplated hereby and thereby, including the legal, accounting and due diligence fees, costs and expenses incurred by such Party.
10.6 Notices.
All notices, amendments, waivers, or other communications pursuant to this Agreement shall be in writing and shall be deemed to be sufficient if delivered personally, faxed, sent by e-mail, sent by nationally-recognized overnight courier or mailed by registered or certified mail (return receipt requested), postage prepaid, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
| To Acquiror: | Costas, Inc (d/b/a Standard Dental Labs Inc.) Suite 308 424 E Central Blvd. Orlando, FL 32801 Attention: James D. Brooks Email: james.brooks@standarddentallabs.com |
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| To Seller: | Prime Dental Lab LLC 1008 N. Pine Hills Road Orlando, FL 32808 Attention: John (Jong Pil) Kim Email: primedentallabllc@gmail.com |
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All such notices and other communications shall be deemed to have been delivered and received (i) in the case of personal delivery or delivery by e-mail, on the date of such delivery if delivered during business hours on a Business Day or, if not delivered during business hours on a Business Day, the first Business Day thereafter, (ii) in the case of delivery by nationally-recognized overnight courier, on the Business Day delivered, and (iii) in the case of mailing, on the fifth Business Day following such mailing. A copy of any notice or other communication sent by e-mail shall also be sent on the same day by registered or certified mail (return receipt requested) or by nationally-recognized overnight courier.
10.7 Governing Law; Arbitration.
(a) Governing Law. To the extent not prohibited by state law all questions concerning the construction, interpretation and validity of this Agreement and all claims or causes of action (whether in contract or tort) that may be based upon, arise out of or relate to this Agreement or the negotiation, execution or performance of this Agreement shall be governed by and construed and enforced in accordance with the domestic Laws of the State of Nevada, without giving effect to any choice or conflict of Law provision or rule, whether in the State of Nevada or any other jurisdiction, that would cause the Laws of any jurisdiction other than the State of Nevada to apply. In furtherance of the foregoing, the internal Law of the State of Nevada shall control the interpretation and construction of this Agreement, even if under the State of Nevada’s choice of Law or conflict of Law analysis, the substantive Law of some other jurisdiction would ordinarily or necessarily apply.
(b) Arbitration. Except to the extent prohibited by law, any dispute or controversy or claim between Seller and Acquiror arising out of or relating to this Agreement, or the breach thereof, shall be submitted to arbitration in accordance with the commercial rules of the American Arbitration Association. The site of the arbitration shall be Florida. The arbitration shall be conducted in accordance with the Rules of the Commercial Arbitration Association prevailing at the time the demand for arbitration is made hereunder. Judgment upon any award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction and shall be binding and final. The costs of the arbitration, including administrative and arbitrator’s fees, shall be fully paid by the non-prevailing party. Notwithstanding the foregoing, the parties shall bear the expense of their own attorneys’ fees in accordance with this section.
10.8 Interpretation; Construction.
(a) “Agreement” means this agreement together with all schedules and exhibits hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. “Knowledge” of any Person means the actual knowledge of such Person. When used in the case of the Seller, the term “Knowledge” shall mean actual or constructive knowledge. The use in this Agreement of the term “including” or “include” means “including, without limitation” or “include, without limitation.” The words “herein”, “hereof”, “hereunder”, “hereby”, “hereto”, “hereinafter”, and other words of similar import refer to this Agreement as a whole, including the schedules and exhibits, as the same may from time to time be amended, modified, supplemented or restated, and not to any particular article, section, subsection, paragraph, subparagraph or clause contained in this Agreement. All references to articles, sections, subsections, clauses, paragraphs, schedules and exhibits mean such provisions of this Agreement and the schedules and exhibits attached to this Agreement, except where otherwise stated. The title of and the article, section and paragraph headings in this Agreement are for convenience of reference only and shall not govern or affect the interpretation of any of the terms or provisions of this Agreement. The use herein of the masculine, feminine or neuter forms shall also denote the other forms, as in each case the context may require.
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(b) Where specific language is used to clarify by example a general statement contained herein, such specific language shall not be deemed to modify, limit or restrict in any manner the construction of the general statement to which it relates. The language used in this Agreement has been chosen by the parties to express their mutual intent, and no rule of strict construction shall be applied against any party. Accounting terms used but not otherwise defined herein shall have the meanings given to them under GAAP. Unless expressly provided otherwise, the measure of a period of one month or year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day following the starting date. For example, one month following February 18 is March 18, and one month following March 31 is May 1.
10.9 Incorporation of Exhibits.
The Exhibits and Annexes identified in this Agreement are incorporated herein by reference and made a part hereof.
10.10 Independence of Covenants and Representations and Warranties.
All covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain covenant, the fact that such action or condition is permitted by another covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached shall not affect the incorrectness of or a breach of a representation and warranty hereunder.
10.11 Counterparts; Electronic Signatures
This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Electronic counterpart signatures to this Agreement shall be deemed to be original and shall be acceptable and binding.
[Signature Page Follows]
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WITNESS WHEREOF, each of the undersigned has executed this Agreement as of the date first written above.
| THE ACQUIROR: | |||
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| STANDARD DENTAL LABS, INC. |
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| By: | /s/ James D. Brooks | ||
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| Name: | James D. Brooks | |
| Title: | CEO, President | ||
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| THE SELLER: |
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| PRIME DENTAL LAB LLC |
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| By: | /s/ John (Jong Pil) Kim |
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| Name: | John (Jong Pil) Kim |
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| Title: | Managing Member |
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ANNEX I
CERTAIN DEFINITIONS
“Affiliate” means, with respect to any Person (i) a director, officer or 5% or greater shareholder of such Person, (ii) a spouse, parent, sibling or descendant of such Person (or spouse, parent, sibling or descendant of any director or executive officer of such Person), and (iii) any other Person that, directly or indirectly through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person.
“Business” means the business of the Seller, as it exists now or may exist in the future.
“Business Day” means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York are not required to be open.
“Code” means the Internal Revenue Code of 1986, as amended.
“Contract” means any loan or credit agreement, note, bond, mortgage, indenture, lease, sublease, purchase order or other agreement, commitment, instrument, permit, concession, franchise or license.
“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Encumbrances” means any security interests, mortgages, deeds of trust, liens, pledges, charges, claims, easements, reservations, restrictions, clouds, equities, rights of way, options, rights of first refusal, grants of power to confess judgment, conditional sales and title retention agreements (including any lease in the nature thereof) and all other encumbrances, whether or not relating to the extension of credit or the borrowing of money.
“Environmental, Health and Safety Laws” means all Laws, Permits and Contracts with Governmental Entities relating to or addressing pollution or protection of the environment or natural resources, releases of Hazardous Materials, public health and safety or employee health and safety, including the Solid Waste Disposal Act, as amended, 42 U.S.C. §6901, et seq., the Clean Air Act, as amended, 42 U.S.C. §7401 et seq., the Federal Water Pollution Control Act, as amended, 33 U.S.C. §1251 et seq., the Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C. §11001 et seq., the Comprehensive Environmental Response, Compensation, and Liability Act, as amended, 42 U.S.C. §9601 et seq., the Hazardous Materials Transportation Uniform Safety Act, as amended, 49 U.S.C. §1804 et seq., the Occupational Safety and Health Act of 1970, as amended, the regulations promulgated thereunder, and any similar Laws and other requirements having the force or effect of Law, and all Orders issued or promulgated thereunder, and all related common law theories.
“Fraud” means any material misrepresentation made with the intention of misleading the Party alleging any breach of a representation or warranty.
| Annex I-1 |
“Fundamental Documents” means the documents by which any Person (other than an individual) establishes its legal existence or which govern its internal affairs. For example, the “Fundamental Documents” of a corporation are its certificate of incorporation and by-laws.
“GAAP” means United States generally accepted accounting principles as consistently applied by the Seller.
“Governmental Entity” means any federal, state, local, foreign, political subdivision, court, administrative agency, commission or department or other governmental authority or instrumentality.
“Hazardous Materials” means any hazardous or toxic chemicals, materials or substances, pollutants, contaminants or crude oil or any fraction thereof (including as such terms are defined under any Environmental, Health and Safety Law).
“Indemnified Persons” means and includes the Seller Indemnified Persons or the Purchaser Indemnified Persons, as the case may be.
“Indemnifying Persons” means and includes the Seller Indemnifying Persons or the Purchaser Indemnifying Persons, as the case may be.
“Intellectual Property” means the Intellectual Property Rights of the Seller.
“Intellectual Property Rights” means all intellectual property rights including all Patents, Trademarks, Trade Names, domain names, websites, internet addresses and applications for any of the foregoing, copyrights, copyright rights, manufacturing and other know-how, trade secrets, proprietary processes, formulae and information, computer software, confidential information, franchises, licenses, inventions, marketing materials and other intellectual property, and all documentation and media constituting, describing or relating to the foregoing, including software, manuals, memoranda and records of a Person.
“Inventory” means inventory, including inventories of raw materials, work in process, and finished goods.
“Law” means any law, statute, treaty, rule, directive, regulation, guideline or Order of any Governmental Entity.
“Liability” means any liability or obligation, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due, regardless of when asserted.
“Litigation Expense” means any expenses incurred in connection with investigating, defending or asserting any claim, legal or administrative action, suit or Proceeding incident to any matter indemnified against under Article VIII, including court filing fees, court costs, arbitration fees or costs, witness fees and fees and disbursements of legal counsel, investigators, expert witnesses, accountants and other professionals.
| Annex I-2 |
“Losses” means any and all losses, claims, shortages, damages, Liabilities, expenses (including reasonable attorneys’ and accountants’ and other professionals’ fees and Litigation Expenses), assessments, Tax deficiencies, and Taxes (including interest or penalties thereon) arising from or in connection with any such matter that is the subject of indemnification under Article VIII net of any amounts recovered by the Indemnified Persons under insurance policies with respect to such Loss.
“Material Adverse Effect”' means any event, occurrence, fact, condition or change that is, or could reasonably be expected to become, individually or in the aggregate, materially adverse to (a) the Business, results of operations, prospects, condition (financial or otherwise) or assets of Seller, or (b) the ability of Seller to consummate the transactions contemplated hereby on a timely basis.
“Orders” means judgments, writs, decrees, compliance agreements, injunctions or orders of any Governmental Entity or arbitrator.
“Patents” means all pending, abandoned, expires, completed and issued U.S. and foreign patents and applications therefor, including all reissues, re-examinations, divisions, continuations, continuations-in-part and extensions thereof, foreign equivalents thereto and provisional and non-provisional applications, including Patent Cooperation Treaty (PCT) and regional patent applications.
“Permits” means all permits, licenses, authorizations, registrations, franchises, approvals, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Entities.
“Person” shall be construed broadly and shall include an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or another entity including a Governmental Entity.
“Proceedings” means actions, suits, claims, investigations or legal or administrative or arbitration proceedings.
“Products” means all goods and services produced, distributed, sold, offered or provided by the Seller.
“Purchaser Indemnified Persons” means the Purchaser, its Affiliates, successors and assigns, and the shareholders, directors, officers, managers, members, partners, trustees, subsidiaries, employees, contractors, subcontractors, attorneys, intermediaries, brokers or other agents, or representatives of the foregoing.
“Purchaser Indemnifying Persons” means the Purchaser and its successors and assigns.
“Purchaser Losses” means any and all Losses sustained, suffered or incurred by any of the Purchaser Indemnified Persons.
| Annex I-3 |
“Representatives” means officers, directors, employees, agents, attorneys, accountants and financial advisors of the Purchaser or the Seller, as the case may be.
“Seller Indemnified Persons” means the Seller and its Affiliates, successors and assigns and the officers and directors of each of the foregoing.
“Seller Indemnifying Persons” means the Seller and its successors and assigns.
“Seller Losses” means any and all Losses sustained, suffered or incurred by any Seller Indemnified Person.
“Shareholder” means any individual or entity holding shares or membership units of a company or corporation.
“Stock Consideration” means the Acquiror’s Class A Common Shares.
“Tax” or “Taxes” means, with respect to any Person, (i) all income taxes (including any tax on or based upon net income, gross income, income as specially defined, earnings, profits or selected items of income, earnings or profits) and all gross receipts, sales, use, ad valorem, transfer, franchise, license, withholding, payroll, employment, excise, environmental (including taxes under Code Section 59A), social security, severance, stamp, occupation, premium, property or windfall profits taxes, alternative or add-on minimum taxes, customs duties and other taxes, fees, assessments or charges of any kind whatsoever, together with all interest and penalties, additions to tax and other additional amounts imposed by any Taxing Authority (domestic or foreign) on such Person (if any) and (ii) any liability for the payment of any amount of the type described in clause (i) above as a result of (A) being a “transferee” (within the meaning of Section 6901 of the Code or any other applicable Law) of another Person, (B) being a member of an affiliated, combined or consolidated group or (C) a contractual arrangement or otherwise.
“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
“Taxing Authority” means any Governmental Entity that has the authority to determine the amount of or collect any Taxes.
“Trademarks” means all pending, expired, abandoned, registered, unregistered, and common law U.S. and foreign trademark applications and trademarks, service mark applications and service marks, designs, logos, and trade dress, including the goodwill related to the foregoing, and all federal and state registrations thereof.
“Trade Names” means (i) names, (ii) brand names, (iii) business names and (iv) logos and all other names and slogans.
“Trading Price” means (i) as to the Stock Consideration, the ten (10) day volume weighted average trading price for shares of Share Consideration for the ten (10) Business Day period immediately preceding the Closing Date (the “Closing Trading Price”);
| Annex I-4 |
SCHEDULE 1.1
ACCOUNTS RECEIVABLE
SCHEDULE 1.1(a)
INVENTORY
SCHEDULE 1.1(b)
EXCLUDED INVENTORY
SCHEDULE 1.1(e)
ASSIGNED CONTRACTS & CONSENTS TO TRANSFER
SCHEDULE 1.1(i)
TRANSFERRED PERMITS
SCHEDULE 1.2
ADDITIONAL EXCLUDED ASSETS
Certain assets of the Seller shall be excluded from the list of included Purchased Assets as follows:
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| 1. | All of Seller’s ownership and other rights with respect to the real property owned and located at 1008 N Pine Hills Road, Orlando, FL 82808. |
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| 2. | All of the Seller’s interest and any potential judgment in the pending litigation filed in the County Court of the Ninth Circuit Court in and for Orange County, Prime Dental Lab, LLC v. Richard S. Rogers, D.D.S., P.A. (CASE NO.: 2020-CC-013501-O). |
SCHEDULE 5.4
INTELLECTUAL PROPERTY
SCHEDULE 5.6
LITIGATION
Seller confirms the following litigation (and related legal matters) is pending against PDL:
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| 1. | Pending litigation was filed in the County Court of the Ninth Circuit Court in and for Orange County, Prime Dental Lab, LLC v. Richard S. Rogers, D.D.S., P.A. (CASE NO.: 2020-CC-013501-O). |
SCHEDULE 5.8
PERMITS
SCHEDULE 5.10
WARRANTIES
SCHEDULE 5.21
RELATIONSHIPS WITH AFFILIATES
EXHIBIT “A”
LOCK-UP AGREEMENT
September 1, 2022
| TO: | Costas, Inc. (d/b/a Standard Dental Labs Inc.) (the "Company") |
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| RE: | Lock-up Agreement pursuant to Asset Acquisition |
| 1. | The undersigned acknowledges that this lock-up agreement (the “Lock-Up Agreement”) is being entered into and delivered to the Company pursuant to Section 3.1 of the asset purchase agreement dated August 15, 2022 (the “Asset Purchase Agreement”) between the undersigned and the Company. |
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| 2. | All capitalized terms not otherwise defined herein have the meaning given to them in the Asset Purchase Agreement. |
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| 3. | In consideration of the issuance of the Share Consideration portion of the Gross Consideration to the undersigned pursuant to the Acquisition, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned agrees that during the period beginning from the date of issuance of any Share Consideration of the Company to the undersigned pursuant to the Asset Purchase Agreement (the “Security Issuance Date”) and ending on each quarterly release date (for each applicable quarterly release of securities, the “Quarterly Lock-Up Release”) during the period that ends twenty-four (24) months following the Security Issuance Date (the “Restricted Period”) that the undersigned shall not, directly or indirectly, offer, sell, transfer, pledge, hypothecate, assign, grant an option or right to purchase, make any short sale, enter into any swap, forward, hedge or any other agreement or arrangement to transfer the economic consequences of or alter the economic exposure to, or otherwise dispose of, monetize or deal with, or publicly announce any intention to do any of the foregoing, whether through the facilities of a stock exchange, by private placement or otherwise (the “Lock-Up Restriction”) unless, in each case: (a) the prior written consent of the Company has been obtained; OR (b) such Share Consideration has satisfied any applicable Quarterly Revenue Targets AND (c) has been released from the Lock-Up Restrictions set forth herein in accordance with the schedule below: |
| Date | Quarterly Lock-Up Release |
| The Closing Date: September 1, 2022 (unless extended) |
0% (0 shares) |
| The date that is three (3) months following the Closing Date: December 1, 2022 (unless extended) |
12.5% (93,750 shares) |
| The date that is six (6) months following the Closing Date: March 1, 2023 (unless extended) |
12.5% (93,750 shares) |
| The date that is nine (9) months following the Closing Date: June 1, 2023 (unless extended) |
12.5% (93,750 shares) |
| The date that is twelve (12) months following the Closing Date: September 1, 2022 (unless extended) |
12.5% (93,750 shares) |
| The date that is fifteen (15) months following the Closing Date: December 1, 2023 (unless extended) |
12.5% (93,750 shares) |
| The date that is eighteen (18) months following the Closing Date: March 1, 2024 (unless extended) |
12.5% (93,750 shares) |
| The date that is twenty-one (21) months following the Closing Date: June 1, 2024 (unless extended) |
12.5% (93,750 shares) |
| The date that is twenty-four (24) months following the Closing Date: September 1, 2024 (unless extended) |
12.5% (93,750 shares) |
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| 4. | Section 3 above shall not apply to: (a) transfers occurring by operation of law, provided, in each case, that any such transferee shall first execute a lock-up agreement in substantially the form hereof covering the remainder of the Restricted Period for such transferred Share Consideration, (b) transfers made pursuant to a bona fide take-over bid or similar transaction made to all holders of common shares of the Company, including without limitation, a merger, arrangement or amalgamation, involving a change of control of the Company and provided that in the event the take-over or acquisition transaction is not completed, the Consideration Securities shall remain subject to the restrictions contained in this Lock-Up Agreement, or (c) transfers or other dealings in respect of which the Company has provided prior written consent, such consent not to be unreasonably withheld. |
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| 5. | The Parties recognize that the Company currently has a substantial number of shares outstanding and, in the event that the Company decides to validly approve and complete a share consolidation or share rollback within twelve (12) months after the date of this Agreement, the Share Consideration issued in this transaction to the undersigned shall be protected from such share consolidation action (on a one time basis) and the total number of shares issued as Share Consideration in this transaction shall remain as outlined herein. |
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| 6. | The undersigned represents and warrants that it has full power, capacity and authority to enter into this Lock-Up Agreement and understands that the Company is relying upon this Lock-Up Agreement in proceeding with Closing. The undersigned further understands that this Lock-Up Agreement is irrevocable and shall be binding upon the undersigned’s legal representatives, successors, and permitted assigns, and shall enure to the benefit of the Company and its legal representatives, successors and assigns. |
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| 7. | The undersigned hereby authorizes the Company and its transfer agent to decline to make any transfer of the Share Consideration if such transfer would constitute a violation or breach of this Lock-Up Agreement and hereby agrees and consents to the entry of stop transfer restrictions, or other equivalent measures, with the Company’s transfer agent and registrar, against the transfer of the Share Consideration except in compliance with this Lock-Up Agreement. |
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| 8. | This Lock-Up Agreement will be governed by the laws of the State of Nevada and the federal laws of the United States applicable therein and may be executed by facsimile or PDF signature and as so executed shall constitute an original. |
[Rest of page intentionally left blank; Signature page follows]
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DATED as of the date first written above.
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| PRIME DENTAL LAB LLC |
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| By: | /s/ John (Jong Pil) Kim |
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| Name: John (Jong Pil) Kim |
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| Title: Member |
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EXHIBIT 10.3
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the “Agreement”), dated as of November 22, 2022, by and between COSTAS, INC., a Nevada corporation (the “Company”), and WORLD AMBER CORPORATION, also a Nevada corporation (the “Investor”). Capitalized terms used herein and not otherwise defined herein are defined in Section 1 hereof.
WHEREAS:
Subject to the terms and conditions set forth in this Agreement, the Company wishes to sell to the Investor, and the Investor wishes to buy from the Company, up to Two Million Five Hundred Thousand Dollars ($2,500,000) of the Company’s common stock, $0.001 par value per share (the “Common Stock”). The shares of Common Stock to be purchased hereunder are referred to herein as the “Purchase Shares.”
NOW THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Investor hereby agree as follows:
1. CERTAIN DEFINITIONS.
For purposes of this Agreement, the following terms shall have the following meanings:
(a) “Available Amount” means, initially, Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate, which amount shall be reduced by the Purchase Amount each time the Investor purchases shares of Common Stock pursuant to Section 2 hereof.
(b) “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
(c) “Business Day” means any day on which the Principal Market is open for trading, including any day on which the Principal Market is open for trading for a period of time less than the customary time.
(d) “Closing Sale Price” means, for any security as of any date, the last closing sale price for such security on the Principal Market as reported by the Principal Market.
(e) “Confidential Information” means any information disclosed by either party to the other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including, without limitation, documents, prototypes, samples, plant and equipment), which is designated as “Confidential,” “Proprietary” or some similar designation. Information communicated orally shall be considered Confidential Information if such information is confirmed in writing as being Confidential Information within ten (10) Business Days after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by third parties. Confidential Information shall not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party without confidential restriction at the time of disclosure by the disclosing party as shown by the receiving party’s files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from a third party without a breach of such third party’s obligations of confidentiality; or (v) is independently developed by the receiving party without use of or reference to the disclosing party’s Confidential Information, as shown by documents and other competent evidence in the receiving party’s possession.
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(f) “DTC” means The Depository Trust Company, or any successor performing substantially the same function for the Company.
(g) “DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC under its Fast Automated Securities Transfer (FAST) Program, or any similar program hereafter adopted by DTC performing substantially the same function.
(h) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(i) “Material Adverse Effect” means any material adverse effect on (i) the enforceability of any Transaction Document, (ii) the results of operations, assets, business or financial condition of the Company and its Subsidiaries, taken as a whole, other than any material adverse effect that resulted exclusively from (A) any change in the United States or foreign economies or securities or financial markets in general that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (B) any change that generally affects the industry in which the Company and its Subsidiaries operate that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, (C) any change arising in connection with earthquakes, hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts of war, sabotage or terrorism or military actions existing as of the date hereof, (D) any action taken by the Investor, its affiliates or its or their successors and assigns with respect to the transactions contemplated by this Agreement, (E) the effect of any change in applicable laws or accounting rules that does not have a disproportionate effect on the Company and its Subsidiaries, taken as a whole, or (F) any change resulting from compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement, or (iii) the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document to be performed as of the date of determination.
(j) “Maturity Date” means the first day of the month immediately following the Twenty-Four (24) month anniversary of the Commencement Date.
(k) “New Registration Statement” has the meaning set forth in the Registration Rights Agreement.
(l) “Person” means an individual or entity including but not limited to any limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.
(m) “Principal Market” means the OTCQB operated by OTC Markets Group, Inc. (or any nationally recognized successor thereto); provided, however, that in the event the Company’s Common Stock is ever listed or traded on The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, the New York Stock Exchange, NYSE American, the NYSE Arca, the OTC Pink or the OTCQX operated by the OTC Markets Group, Inc. (or any nationally recognized successor to any of the foregoing), then the “Principal Market” shall mean such other market or exchange on which the Company’s Common Stock is then listed or traded.
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(n) “Prospectus” means the prospectus included in the Registration Statement, as supplemented by any prospectus supplement, including the documents and information incorporated by reference therein.
(o) “Purchase” means any Regular Purchase made hereunder.
(p) “Purchase Amount” means, with respect to any Regular Purchase, the portion of the Available Amount to be purchased by the Investor pursuant to Section 2 hereof.
(q) “Purchase Notice” means a notice delivered to the Investor pursuant to Section 2 with respect to any Regular Purchase.
(r) “Registration Rights Agreement” means that certain Registration Rights Agreement, of even date herewith between the Company and the Investor.
(s) “Registration Statement” has the meaning set forth in the Registration Rights Agreement.
(t) “Regular Purchase Date” means, with respect to a Regular Purchase made pursuant to Section 2(a) hereof, the Business Day on which the Investor receives, after 4:00 p.m., Eastern time on such Business Day, a valid Purchase Notice for such Regular Purchase in accordance with this Agreement; provided that any Business Day that is twenty (20) days or less before the filing of any post-effective amendment to the Registration Statement or New Registration Statement, and until the effective date of any such post-effective amendment to the Registration Statement or New Registration Statement shall not be a Regular Purchase Date.
(u) “Regular Purchase Share Limit” the Regular Purchase Share Limit shall equal the maximum number of Purchase Shares which would enable the Company to deliver to the Investor a Purchase Notice for a Purchase Amount equal to, or as closely approximating, but without exceeding, One Hundred and Four Thousand Dollars ($104,000); and unless excluded herein, such number of Purchase Shares and price per share to be adjusted following any reorganization, recapitalization, non-cash dividend, stock split, reverse stock, split or other similar transaction effected with respect to the Common Stock.
(v) “Sale Price” means any sale price for the shares of Common Stock on the Principal Market as reported by the Principal Market.
(w) “SEC” means the U.S. Securities and Exchange Commission.
(x) “Securities” means, collectively, the Purchase Shares.
(y) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(z) “Subsidiary” means any Person the Company wholly owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.
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(aa) “Transaction Documents” means, collectively, this Agreement and the schedules and exhibits hereto, the Registration Rights Agreement and the schedules and exhibits thereto, and each of the other agreements, documents, certificates and instruments entered into or furnished by the parties hereto in connection with the transactions contemplated hereby and thereby.
(bb) “Transfer Agent” means Nevada Agency and Transfer Company, or such other Person who is then serving as the transfer agent for the Company in respect of the Common Stock.
(cc) “VWAP” means in respect of an applicable Purchase Date, the volume weighted average price of the Common Stock on the Principal Market, as reported on the Principal Marketor by another reputable source such as Bloomberg, L.P.
2. PURCHASE OF COMMON STOCK.
Subject to the terms and conditions set forth in this Agreement, the Company has the obligation, to sell to the Investor, and the Investor has the obligation to purchase from the Company, Purchase Shares as follows:
(a) Commencement of Regular Purchases of Common Stock. Upon the satisfaction of the conditions set forth in Sections 7 and 8 hereof (the “Commencement” and the date of satisfaction of such conditions the “Commencement Date”), the Company shall direct the Investor, by its delivery to the Investor of a Purchase Notice from time to time on any Regular Purchase Date, to purchase up to the Regular Purchase Share Limit (each such purchase, a “Regular Purchase”) at the price of $0.30 per Purchase Share (the “Purchase Price”). The Company shall deliver a Regular Purchase Notice to the Investor as every 30 days from the Commencement Date to the Maturity Date.
(b) Payment for Purchase Shares. For each Regular Purchase, the Investor shall pay to the Company an amount equal to the Purchase Amount with respect to such Regular Purchase, as full payment for such Purchase Shares via wire transfer of immediately available funds on the same Business Day that the Investor receives such Purchase Shares, if such Purchase Shares are received by the Investor before 1:00 p.m., Eastern time, or, if such Purchase Shares are received by the Investor after 1:00 p.m., Eastern time, the next Business Day. Within one (1) Business Day after completion of each Purchase Date for a Purchase, the Investor will provide to the Company a written confirmation of such Purchase setting forth the applicable Purchase Share Amount. For each Purchase, the Investor shall pay to the Company an amount equal to the Purchase Amount with respect to such purchase as full payment for such Purchase Shares via wire transfer of immediately available funds no later than the second Business Day following the date that the Investor receives the Purchase Shares for such Purchase. If the Company or the Transfer Agent shall fail for any reason or for no reason to electronically transfer any Purchase Shares as DWAC Shares with respect to any Purchase within two (2) Business Days following the receipt by the Company of the Purchase Price for any Purchase therefor in compliance with this Section 2(b), and if on or after such Business Day the Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of Purchase Shares in anticipation of receiving Purchase Shares from the Company with respect to such Purchase, then the Company shall, within two (2) Business Days after the Investor’s request, either (i) pay cash to the Investor in an amount equal to the Investor’s total purchase price (including customary brokerage commissions, if any) for the shares of Common Stock so purchased (the “Cover Price”), at which point the Company’s obligation to deliver such Purchase Shares as DWAC Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Investor such Purchase Shares as DWAC Shares and pay cash to the Investor in an amount equal to the excess (if any) of the Cover Price over the total Purchase Amount paid by the Investor pursuant to this Agreement for all of the Purchase Shares to be purchased by the Investor in connection with such purchases. All payments made under this Agreement shall be made in lawful money of the United States of America or wire transfer of immediately available funds to such account as the Company may from time to time designate by written notice in accordance with the provisions of this Agreement. Whenever any amount expressed to be due by the terms of this Agreement is due on any day that is not a Business Day, the same shall instead be due on the next succeeding day that is a Business Day.
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(c) Beneficial Ownership Limitation. Notwithstanding anything to the contrary contained in this Agreement, the Company shall not issue or sell, and the Investor shall not purchase or acquire, any shares of Common Stock under this Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by the Investor and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) would result in the beneficial ownership by the Investor and its affiliates of more than 9.99% of the then issued and outstanding shares of Common Stock (the “Beneficial Ownership Limitation”). Upon the written or oral request of the Investor, the Company shall promptly (but not later than twenty-four (24) hours) confirm orally or in writing to the Investor the amount of Common Stock then outstanding. The Investor and the Company shall each cooperate in good faith in the determinations required hereby and the application hereof. The Investor’s written certification to the Company of the applicability of the Beneficial Ownership Limitation, and the resulting effect thereof hereunder at any time, shall be conclusive with respect to the applicability thereof and such result absent manifest error.
(d) Excess Share Limitations. If the Company delivers any Purchase Notice for a Purchase Amount in excess of the limitations contained in this Section 2, such Purchase Notice shall be void ab initio to the extent of the amount by which the number of Purchase Shares set forth in such Purchase Notice exceeds the number of Purchase Shares which the Company is permitted to include in such Purchase Notice in accordance herewith, and the Investor shall have no obligation to purchase such excess Purchase Shares in respect of such Purchase Notice; provided, however, that the Investor shall remain obligated to purchase the number of Purchase Shares which the Company is permitted to include in such Purchase Notice. If any issuance of Purchase Shares would result in the issuance of a fraction of a share of Common Stock, the Company shall round down such fraction of a share of Common Stock to the nearest whole share and no fractional shares will be issued.
(e) Adjustments for Shares and Prices. Except as specifically stated otherwise, all share-related and dollar-related limitations contained in this Section 2, shall be adjusted to take into account any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction effected with respect to the Common Stock. Notwithstanding the foregoing, no adjustments shall be made as a result a stock split, reverse stock split or other similar transaction effected with respect to the Common Stock for a period of six months from the effective date of the Registration Statement.
3. INVESTOR’S REPRESENTATIONS AND WARRANTIES.
The Investor represents and warrants to the Company that as of the date hereof and as of the Commencement Date:
(a) Organization, Authority. Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder.
(b) Accredited Investor Status. The Investor is an “accredited investor” as that term is defined in Rule 501(a)(3) of Regulation D promulgated under the Securities Act.
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(c) Reliance on Exemptions. The Investor understands that the Securities may be offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying in part upon the truth and accuracy of, and the Investor’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Investor set forth herein in order to determine the availability of such exemptions and the eligibility of the Investor to acquire the Securities.
(d) Investment Purpose. The Investor is acquiring the Securities as principal for its own account for investment only and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other Persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Investor’s right to sell the Securities at any time pursuant to the Registration Statement described herein or otherwise in compliance with applicable federal and state securities laws). The Investor is acquiring the Securities hereunder in the ordinary course of its business.
(e) Information. The Investor understands that its investment in the Securities involves a high degree of risk. The Investor (i) is able to bear the economic risk of an investment in the Securities including a total loss thereof, (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the proposed investment in the Securities and (iii) has had an opportunity to ask questions of and receive answers from the officers of the Company concerning the financial condition and business of the Company and other matters related to an investment in the Securities. Neither such inquiries nor any other due diligence investigations conducted by the Investor or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in Section 4 below. The Investor has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities and is not relying on any accounting, legal, tax or other advice from the Company or its officers, employees, representatives or advisors. The Investor acknowledges and agrees that the Company neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 4 hereof.
(f) No Governmental Review. The Investor understands that no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of an investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.
(g) Transfer or Sale. The Investor understands that (i) the Securities may not be offered for sale, sold, assigned or transferred unless (A) registered pursuant to the Securities Act or (B) an exemption exists permitting such Securities to be sold, assigned or transferred without such registration; (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder.
(h) Validity; Enforcement. This Agreement and the other Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the Investor and each is a valid and binding agreement of the Investor enforceable against the Investor in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.
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(i) Residency. The Investor’s principal place of business is in the State of New York.
(j) No Short Selling. The Investor represents and warrants to the Company that at no time prior to the date of this Agreement has any of the Investor, its agents, representatives or affiliates engaged in or effected, in any manner whatsoever, directly or indirectly, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Investor that as of the date hereof and as of the Commencement Date:
(a) Organization and Qualification. The Companyand each of its Subsidiaries is an entity is duly incorporated and each of its Subsidiaries is an entity, validly existing and in good standing under the laws of the State of Nevada, with the requisite corporate power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective articles of incorporation or bylaws except as would not be expected to result in a Material Adverse Effect. The Company is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to result in a Material Adverse Effect, and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification. The Company has no Subsidiaries except as set forth in the OTC Documents.
(b) Authorization; Enforcement; Validity. (i) The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and each of the other Transaction Documents, and to issue the Securities in accordance with the terms hereof and thereof, (ii) the execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby, and the reservation for issuance and the issuance of the Purchase Shares issuable under this Agreement, have been duly authorized by the Company’s Board of Directors or a validly authorized committee thereof (collectively, the “Board of Directors”) and no further consent or authorization is required by the Company, its Board of Directors or any committee thereof, or its stockholders, (iii) this Agreement has been, and each other Transaction Document shall be on the Commencement Date, duly executed and delivered by the Company and (iv) this Agreement constitutes, and each other Transaction Document upon its execution on behalf of the Company, shall constitute, the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies. The Board of Directors of the Company has adopted all applicable resolutions (the “Signing Resolutions”) substantially in the form agreed to by the Investor to authorize this Agreement and the transactions contemplated hereby. The Signing Resolutions are valid, in full force and effect and have not been modified or supplemented in any respect. The Company has delivered to the Investor a true and correct copy of the Signing Resolutions adopted by the Board of Directors. Except as set forth in this Agreement, no other approvals or consents of the Company’s Board of Directors and/or stockholders is necessary under applicable laws and the Company’s Articles of Incorporation in effect on the date hereof (the “Articles of Incorporation”) and/or the Company’s Bylaws in effect on the date hereof (the “Bylaws”) to authorize the execution and delivery of this Agreement or any of the transactions contemplated hereby, including, but not limited to, the issuance of the Purchase Shares.
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(c) Capitalization. As of the date hereof, the authorized and issued capital stock of the Company is set forth in the OTC Documents (as defined below). Except as disclosed in the OTC Documents, (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances suffered or permitted by the Company, (ii) there are no outstanding debt securities, (iii) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company or any of its Subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, (iv) there are no agreements or arrangements under which the Company or any of its Subsidiaries is obligated to register the sale of any of their securities under the Securities Act (except the Registration Rights Agreement), (v) there are no outstanding securities or instruments of the Company or any of its Subsidiaries which contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Company is or may become bound to redeem a security of the Company or any of its Subsidiaries, (vi) there are no securities or instruments containing anti-dilution or similar provisions that will be triggered by the issuance of the Securities as described in this Agreement and (vii) the Company does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Company has furnished to the Investor true and correct copies of the Articles of Incorporation and Bylaws, and summaries of the material terms of all securities convertible into or exercisable for Common Stock, if any, which are not otherwise disclosed in the Registration Statement, any SEC Document or filed as an exhibit thereto.
(d) Issuance of Securities. Upon issuance and payment therefor in accordance with the terms and conditions of this Agreement, the Securities shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions, rights of first refusal and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of Common Stock. 8,333,334 shares of Common Stock (subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction) have been duly authorized and reserved for issuance upon purchase under this Agreement as Purchase Shares.
(e) No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the reservation for issuance and issuance of the Securities) will not (i) result in a violation of the Articles of Incorporation, any Certificate of Designations, Preferences and Rights of any outstanding series of preferred stock of the Company or the Bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and the rules and regulations of the Principal Market applicable to the Company) or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, except in the case of conflicts, defaults, terminations, amendments, accelerations, cancellations and violations under clause (ii), which would not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in violation of any term of or is in default under any material contract, agreement, mortgage, indebtedness, indenture, instrument, judgment, decree or order or any statute, rule or regulation applicable to the Company or any of its Subsidiaries, except for possible conflicts, defaults, terminations or amendments that would not reasonably be expected to have a Material Adverse Effect. The business of the Company and its Subsidiaries is not being conducted, and shall not be conducted, in violation of any law, ordinance, regulation of any governmental entity, except for possible violations, the sanctions for which either individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. Except as specifically contemplated by this Agreement and as required under the Securities Act or applicable state securities laws and the rules and regulations of the Principal Market, the Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency or any regulatory or self-regulatory agency in order for it to execute, deliver or perform any of its obligations under or contemplated by the Transaction Documents in accordance with the terms hereof or thereof. Except as set forth elsewhere in this Agreement, all consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence shall be obtained or effected on or prior to the Commencement Date. Except as disclosed in the OTC Documents, for one year prior to the date hereof, the Company has not received nor delivered any notices or correspondence from or to the Principal Market. Except as disclosed in the OTC Documents, for one year prior to the date hereof, the Principal Market has not commenced any delisting proceedings against the Company.
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(f) OTC Documents; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company with the OTC Markets for the twelve months preceding the date hereof (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “OTC Documents”). None of the OTC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the OTC Documents comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing. Such financial statements (i) have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and (ii) fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
(g) Absence of Certain Changes. Except as disclosed in the OTC Documents, since December 31, 2021, there has been no change that would constitute a Material Adverse Effect. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is financially solvent and is generally able to pay its debts as they become due.
(h) Absence of Litigation. Except as disclosed in the OTC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company, the Common Stock or any of the Company's Subsidiaries or any of the Company's or the Company's Subsidiaries’ officers or directors in their capacities as such, which would reasonably be expected to have a Material Adverse Effect.
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(i) Acknowledgment Regarding Investor’s Status. The Company acknowledges and agrees that the Investor is acting solely in the capacity of arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated hereby and thereby and any advice given by the Investor or any of its representatives or agents in connection with the Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to the Investor’s purchase of the Securities. The Company further represents to the Investor that the Company’s decision to enter into the Transaction Documents has been based solely on the independent evaluation by the Company and its representatives and advisors.
(j) No General Solicitation. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of the Securities. Neither the Company, nor or any of its affiliates, nor any Person acting on their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would require registration of the offer and sale of any of the Securities under the Securities Act, whether through integration with prior offerings or otherwise.
(k) Intellectual Property Rights. Except as disclosed in the OTC Documents, the Companyand its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights necessary to conduct its business as now conducted. None of the Company’s material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, government authorizations, trade secrets or other intellectual property rights have expired or terminated, or, by the terms and conditions thereof, could expire or terminate within two years from the date of this Agreement, except as would not reasonably be expected to have a Material Adverse Effect. The Company and its Subsidiaries are not, and to the knowledge of the Company, no other party is in breach of any license agreement related to the intellectual property rights of the Company or its Subsidiaries. The Company does not have any knowledge of any infringement by the Company or any of its Subsidiaries of any material trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, trade secret or other similar rights of others, or of any such development of similar or identical trade secrets or technical information by others, and there is no claim, action or proceeding brought against, or to the Company’s knowledge, being threatened against, the Company or any of its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, which would reasonably be expected to have a Material Adverse Effect.
(l) Environmental Laws. The Company and its Subsidiaries (i) are in compliance with any and all applicable foreign, federal, state and local laws and regulations relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective business and (iii) are in compliance with all terms and conditions of any such permit, license or approval, except where, in each of the three foregoing clauses, the failure to so comply would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
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(m) Title. The Company and its Subsidiaries have good and marketable title in all real and personal property owned by them that is material to the business of the Company and its Subsidiaries, in each case, free and clear of all liens, encumbrances and defects (“Liens”) and, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties and Liens that would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect. The Company and the Subsidiaries are the absolute legal and beneficial owners of and have good and marketable title to all of the material assets of the Company and the Subsidiaries, including all prospecting, exploration, development, ingress, egress, access and surface rights, mining and mineral rights, concessions, claims, licenses, permits, consents, approvals, authorizations, participant interests and other conventional property and proprietary interests and rights in respect of mining operations in the jurisdiction in which such properties are located, in respect of the ore bodies and minerals located on such properties in which the Company or its Subsidiaries have a valid, subsisting and enforceable interest to explore for and exploit the minerals relating thereto (“Mining Rights”). The Mining Rights grant the Company or its Subsidiaries the right and ability to explore for and exploit minerals, ore and metals for development and production purposes as are appropriate in view of the rights and interest therein of the Company or its Subsidiary, with only such exceptions as do not materially interfere with the current use made by the Company or its Subsidiary. Any real property and facilities held under lease by the Company and its Subsidiaries are held by it under valid, subsisting and enforceable leases with which the Company and its Subsidiaries are in compliance with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries or would not reasonably be expected, individually in or the aggregate, to result in a Material Adverse Effect.
(n) Regulatory Permits. The Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as currently conducted, including, without limitation, all permits, certificates and approvals required for the exploration, development and eventual or actual operation of its mining operations and real property interests including environmental assessment certificates, water licenses, land tenures, rezoning or zoning variances and other necessary local, provincial, state and federal approvals, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such material certificate, authorization or permit except such notices that would not reasonably be expected to have a Material Adverse Effect.
(o) Tax Status. The Company and each of its Subsidiaries has made or filed all federal, state and foreign income and all other material tax returns, reports and declarations required by any jurisdiction to which it is subject (unless and only to the extent that the Companyand each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported taxes) and has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. There are no unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction.
(p) Transactions With Affiliates. Except as disclosed in the OTC Documents, to the Company’s knowledge, none of the Company’s stockholders covered by Item 403(a) of Regulation S-K, officers or directors or any family member or affiliate of any of the foregoing, has either directly or indirectly an interest in, or is a party to, any transaction that is required to be disclosed as a related party transaction pursuant to Item 404 of Regulation S-K promulgated under the Securities Act.
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(q) Disclosure. Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents that will be timely publicly disclosed by the Company, the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information which is not otherwise disclosed in the Registration Statement or the OTC Documents. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting purchases and sales of securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Investor regarding the Company, its business and the transactions contemplated hereby, including the disclosure schedules to this Agreement, taken as a whole, is true and correct in all material respects and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading. The Company acknowledges and agrees that the Investor neither makes nor has made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in Section 3 hereof.
(r) Foreign Corrupt Practices. Neither the Company, nor to the knowledge of the Company, any agent or other Person acting on behalf of the Company, has (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Company (or made by any Person acting on its behalf of which the Company is aware) which is in violation of law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(s) DTC Eligibility. The Company, through the Transfer Agent, currently participates in the DTC Fast Automated Securities Transfer (FAST) Program and the Common Stock can be transferred electronically to third parties via the DTC Fast Automated Securities Transfer (FAST) Program.
(t) Certain Fees. No brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by the Transaction Documents. The Investor shall have no obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 4(t) that may be due in connection with the transactions contemplated by the Transaction Documents. The Company shall pay, and hold the Investor harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees and out of pocket expenses) arising in connection with any such claim.
(u) Investment Company. The Company is not, and immediately after giving effect to the sale of the Purchase Shares in accordance with this Agreement and the application of the proceeds as described in the Registration Statement under the caption “Use of Proceeds,” will not be, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
(v) Regulatory. During the 12-month period immediately preceding the date hereof, except as described in the OTC Documents, the Company and each of its Subsidiaries: (A) was and at all times has been in material compliance with all applicable U.S. and foreign statutes, rules, or regulations applicable to Company and its Subsidiaries (“Applicable Laws”), except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect; (B) have not received any material written notice of adverse finding, warning letter, untitled letter or other correspondence or notice from any federal, state, or foreign governmental authority having authority over the Company (“Governmental Authority”) 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) possess all material Authorizations and such material Authorizations are valid and in full force and effect and, to the Company’s knowledge, are not in violation of any term of any such material Authorizations; (D) have not received written notice of any claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Authority or third party alleging that any product, operation or activity is in violation of any Applicable Laws or Authorizations and have no knowledge that any such Governmental Authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (E) have not received written notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and the Company has no knowledge that any such Governmental Authority is considering such action; and (F) have filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or material Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct in all material respects on the date filed (or were corrected or supplemented by a subsequent submission).
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(w) No Disqualification Events. None of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the Securities Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event
5. COVENANTS.
(a) Filing of Registration Statement. The Company shall file with the SEC within ninety (90) days of the date hereof, a new registration statement (the “Registration Statement”) covering the resale of the Securities in accordance with the terms of the Registration Rights Agreement. The Company shall permit the Investor to review and comment upon the final pre-filing draft version of the Registration Statement at least two (2) Business Days prior to the filing of each with the SEC, and the Company shall not file the the Registration Statement with the SEC in a form to which the Investor reasonably objects. The Investor shall use its reasonable best efforts to comment upon the final pre-filing draft version of the Registration Statement within one (1) Business Day from the date the Investor receives it from the Company.
(b) Blue Sky. The Company shall take all such action, necessary in order to obtain an exemption for or to register or qualify (i) the issuance and the sale of the Purchase Shares to the Investor under this Agreement and (ii) any subsequent resale of all Purchase Shares by the Investor, in each case, under applicable securities or “Blue Sky” laws of the states of the United States in such states as is reasonably requested by the Investor from time to time, and shall provide evidence of any such action so taken to the Investor.
(c) Listing/DTC. The Company shall promptly secure the listing of all of the Purchase Shares to be issued to the Investor hereunder on the Principal Market (subject to official notice of issuance) and upon each other national securities exchange or automated quotation system, if any, upon which the Common Stock is then listed, and shall use best efforts to maintain, so long as any shares of Common Stock shall be so listed, such listing of all such Securities from time to time issuable hereunder. The Company shall use best efforts to maintain the listing or quotation of the Common Stock on the Principal Market and shall comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules and regulations of the Principal Market. The Company shall not take any action that would reasonably be expected to result in the delisting or suspension of the Common Stock on the Principal Market. The Company shall promptly, and in no event later than the following Business Day, provide to the Investor copies of any notices it receives from the Principal Market regarding the continued eligibility of the Common Stock for listing on the Principal Market; provided, however, that the Company shall not be required to provide the Investor copies of any such notice that the Company reasonably believes constitutes material non-public information and the Company would not be required to publicly disclose such notice in any report or statement filed with the SEC under the Exchange Act (including on Form 8-K) or the Securities Act. The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 5(c). The Company shall take all action necessary to ensure that its Common Stock can be transferred electronically as DWAC Shares.
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(d) Prohibition of Short Sales and Hedging Transactions. The Investor agrees that beginning on the date of this Agreement and ending on the date of termination of this Agreement as provided in Section 11, the Investor and its agents, representatives and affiliates shall not in any manner whatsoever enter into or effect, directly or indirectly, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging transaction, which establishes a net short position with respect to the Common Stock.
(e) Due Diligence; Non-Public Information. During the term of this Agreement, the Investor shall have the right, from time to time as the Investor may reasonably deem appropriate, and upon reasonable advance notice to the Company, to perform reasonable due diligence on the Company during normal business hours. The Company and its officers and employees shall provide information and reasonably cooperate with the Investor in connection with any reasonable request by the Investor related to the Investor’s due diligence of the Company. Each party hereto agrees not to disclose any Confidential Information of the other party to any third party and shall not use the Confidential Information for any purpose other than in connection with, or in furtherance of, the transactions contemplated hereby. Each party hereto acknowledges that the Confidential Information shall remain the property of the disclosing party and agrees that it shall take all reasonable measures to protect the secrecy of any Confidential Information disclosed by the other party. The receiving party may disclose Confidential Information to the extent such information is required to be disclosed by law, regulation or order of a court of competent jurisdiction or regulatory authority, provided that the receiving party shall promptly notify the disclosing party when such requirement to disclose arises, and shall cooperate with the disclosing party so as to enable the disclosing party to: (i) seek an appropriate protective order; and (ii) make any applicable claim of confidentiality in respect of such Confidential Information; and provided, further, that the receiving party shall disclose Confidential Information only to the extent required by the protective order or other similar order, if such an order is obtained, and, if no such order is obtained, the receiving party shall disclose only the minimum amount of such Confidential Information required to be disclosed in order to comply with the applicable law, regulation or order. In addition, any such Confidential Information disclosed pursuant to this Section 5(e) shall continue to be deemed Confidential Information. Notwithstanding anything in this Agreement to the contrary, the Company and the Investor agree that neither the Company nor any other Person acting on its behalf shall provide the Investor or its agents or counsel with any information that constitutes or may reasonably be considered to constitute material, non-public information, unless a simultaneous public announcement thereof is made by the Company in the manner contemplated by Regulation FD. In the event of a breach of the foregoing covenant by the Company or any Person acting on its behalf (as determined in the reasonable good faith judgment of the Investor), in addition to any other remedy provided herein or in the other Transaction Documents, if the Investor is holding any Securities at the time of the disclosure of such material non-public information, the Investor shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, non-public information without the prior approval by the Company; provided the Investor shall have first provided notice to the Company that it believes, based on the advice of external counsel, it has received information that constitutes material, non-public information, the Company shall have at least twenty-four (24) hours to either publicly disclose such material, non-public information or to demonstrate to the Investor that such information does not constitute material, non-public information prior to any such disclosure by the Investor. The Investor shall not have any liability to the Company, or any of itsSubsidiaries, or any of their respective directors, officers, employees, stockholders or agents, for any such disclosure. The Company understands and confirms that the Investor shall be relying on the foregoing covenants in effecting transactions in securities of the Company.
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(f) Purchase Records. The Investor and the Company shall each maintain records showing the remaining Available Amount at any given time and the dates and Purchase Amounts for each Regular Purchase or shall use such other method, reasonably satisfactory to the Investor and the Company.
(g) Taxes. The Company shall pay any and all transfer, stamp or similar taxes that may be payable with respect to the issuance and delivery of any shares of Common Stock to the Investor made under this Agreement.
(h) Use of Proceeds. The Company will use the net proceeds from the offering for any corporate purpose at the sole discretion of the Company.
(i) Other Transactions. During the term of this Agreement, the Company shall not enter into, announce or recommend to its stockholders any agreement, plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay, conflict with or impair the ability or right of the Company to perform its obligations under the Transaction Documents, including, without limitation, the obligation of the Company to deliver the Purchase Shares to the Investor in accordance with the terms of the Transaction Documents.
(j) No Integration. From and after the date of this Agreement, neither the Company, nor or any of its affiliates will, and the Company shall use its reasonable best efforts to ensure that no Person acting on their behalf will, directly or indirectly, make any offers or sales of any security or solicit any offers to buy any security, under circumstances that would require registration of the offer and sale of any of the Securities under the Securities Act.
(k) Publicity. The Company shall afford the Investor and its counsel with the opportunity to review and comment upon, shall consult with the Investor and its counsel on the form and substance of, and shall give due consideration to all such comments from the Investor or its counsel on, disclosure that is part of any press release, SEC filing or any other public disclosure by or on behalf of the Company that identifies the Investor, describes its purchases hereunder or summarizes any aspect of the Transaction Documents or the transactions contemplated thereby, not less than twenty-four (24) hours prior to the issuance, filing or public disclosure thereof; provided that (i) the Company shall not be required to provide to the Investor any SEC filing or any other public disclosure that solely discloses the aggregate number of shares sold to Lincoln Park and the amounts paid by Lincoln Park for such shares and (ii) the Company shall not be required to provide to the Investor any disclosures that are materially similar to those previously reviewed by the Investor. The Investor must be provided with a substantially final version of any such disclosure that relates to the Investor, at least twenty-four (24) hours prior to any release, filing or use by the Company thereof. The Company agrees and acknowledges that its failure to fully comply with this provision constitutes a Material Adverse Effect.
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(l) Right of First Refusal. Except as otherwise expressly permitted in this Agreement, for period of twenty-fours months from the date of this Agreement:
(i) The Company shall not sell any equity interest in the Company (including convertible debt) or incur any debt obligations (with the exception of debt provided by Tier 1 lending institutions) unless the Company (“Offeror”) first offers by notice in writing (the “RFR Offer”) to the Investor the prior right to purchase, receive or otherwise acquire the equity interest or fund such proposed debt transaction;
(ii) the RFR Offer must set forth:
· the terms and conditions of the proposed transaction; and
· that the RFR Offer is open for acceptance for a period of 14 days(the “Acceptance Period”) after receipt of such RFR Offer by the Investor and request that the Investor state in writing whether it is willing to purchase any of the equity interests or fund any of the proposed debt, as applicable and, if so, the maximum number it is willing to purchase/fund.
6. TRANSFER AGENT INSTRUCTIONS.
(a) On the Commencement Date, the Company shall issue to the Transfer Agent, and any subsequent transfer agent, (i) irrevocable instructions in the form substantially similar to those used by the Investor in substantially similar transactions (the “Commencement Irrevocable Transfer Agent Instructions”) and (ii) the notice of effectiveness of the Registration Statement in the form attached as an exhibit to the Registration Rights Agreement (the “Notice of Effectiveness of Registration Statement”), in each case to issue the Securities in accordance with the terms of this Agreement and the Registration Rights Agreement. All Purchase Shares to be issued from and after the Commencement Date to the Investor pursuant to this Agreement shall be issued only as DWAC Shares. The Company represents and warrants to the Investor that, while this Agreement is effective, no instruction other than the Commencement Irrevocable Transfer Agent Instructions and the Notice of Effectiveness of Registration Statement referred to in this Section 6(a) will be given by the Company to the Transfer Agent with respect to the Purchase Shares covered by the Registration Statement from and after Commencement, and the Purchase Shares covered by the Registration Statement shall otherwise be freely transferable on the books and records of the Company. The Company agrees that if the Company fails to fully comply with the provisions of this Section 6(a) within five (5) Business Days of the Investor providing the deliveries referred to above, the Company shall, at the Investor’s written instruction, purchase such shares of Common Stock containing the Restrictive Legend from the Investor at the purchase price paid for such shares of Common Stock.
7. CONDITIONS TO THE COMPANY’S RIGHT TO COMMENCE SALES OF SHARES OF COMMON STOCK.
The right of the Company hereunder to commence sales of the Purchase Shares on the Commencement Date is subject to the satisfaction or, where legally permissible, the waiver of each of the following conditions:
(a) The Investor shall have executed each of the Transaction Documents and delivered the same to the Company;
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(b) The Registration Statement covering the resale of all of the Purchase Shares as required pursuant to the Registration Rights Agreement shall have been declared effective under the Securities Act by the SEC and no stop order with respect to the Registration Statement shall be pending or, to the Company’s knowledge, threatened by the SEC;
(c) The Common Stock shall be listed or designated for quotation on the Principal Market, and all Securities to be issued by the Company to the Investor under the Transaction Documents shall have been approved for listing on the Principal Market in accordance with the applicable rules and regulations of the Principal Market, subject only to official notice of issuance;
(d) The Purchase Shares shall have had a Closing Sale Price at or above $0.50 for a period of fourteen trading days prior to the delivery of a Purchase Notice; and
(e) The representations and warranties of the Investor shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 3 above, in which case, such representations and warranties shall be true and correct without further qualification) as of the date hereof and as of the Commencement Date as though made at that time.
8. CONDITIONS TO THE INVESTOR’S OBLIGATION TO PURCHASE SHARES OF COMMON STOCK.
The obligation of the Investor to buy Purchase Shares under this Agreement is subject to the satisfaction or, where legally permissible, the waiver of each of the following conditions on or prior to the Commencement Date and, once such conditions have been initially satisfied, there shall not be any ongoing obligation to satisfy such conditions after the Commencement has occurred:
(a) The Company shall have executed each of the Transaction Documents and delivered the same to the Investor;
(b) The Investor shall have received the opinions and the negative assurances letter of the Company’s legal counsel dated as of the Commencement Date substantially in the form agreed to prior to the date of this Agreement by the Company’s legal counsel and the Investor’s legal counsel;
(c) The representations and warranties of the Company shall be true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 4 above, in which case, such representations and warranties shall be true and correct in all material respects without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct in all material respects as of such date) and the Company shall have performed, satisfied and complied with the covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date. The Investor shall have received a certificate, executed by the Chief Executive Officer or the Chief Financial Officer of the Company, dated as of the Commencement Date, to the foregoing effect in the form attached hereto as Exhibit A;
(d) The Board of Directors of the Company shall have adopted the Signing Resolutions, which shall be in full force and effect without any amendment or supplement thereto as of the Commencement Date;
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(e) As of the Commencement Date, the Company shall have reserved out of its authorized and unissued Common Stock solely for the purpose of effecting purchases of Purchase Shares hereunder, 8,333,334 shares of Common Stock;
(f) The Commencement Irrevocable Transfer Agent Instructions and the Notice of Effectiveness of Registration Statement each shall have been delivered to and acknowledged in writing by the Company and the Company’s Transfer Agent (or any successor transfer agent);
(g) The Company shall have delivered to the Investor a certified copy of the Articles of Incorporation and a certificate evidencing the incorporation and good standing of the Company in the State of Nevada, each issued by the Secretary of State of the State of Nevada, as well as a certificate evidencing the authorization to do business in each state where the Company is required to be authorized to do business, as of a date within ten (10) Business Days of the Commencement Date;
(h) The Company shall have delivered to the Investor a secretary’s certificate executed by the Secretary of the Company, dated as of the Commencement Date, in the form attached hereto as Exhibit B;
(i) The Registration Statement covering the resale of the Purchase Shares shall have been declared effective under the Securities Act by the SEC and no stop order with respect to the Registration Statement shall be pending or, to the Company’s knowledge, threatened by the SEC. The Company shall have prepared and filed with the SEC, not later than two (2) Business Days after the effective date of the Registration Statement, a final prospectus (the preliminary form of which shall be included in the Registration Statement) and shall have delivered to the Investor a true and complete copy thereof. When filed, such prospectus shall be current and available for the resale by the Investor of all of the Securities covered thereby. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC at or prior to the Commencement Date pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act;
(j) The Purchase Shares shall have had a Closing Sale Price at or above $0.50 for a period of fourteen trading days prior to the delivery of a Purchase Notice;
(k) No Event of Default (as defined below) has occurred, and no event which, after notice and/or lapse of time, would reasonably be expected to become an Event of Default has occurred;
(l) No statute, regulation, order, decree, writ, ruling or injunction shall have been enacted, entered, promulgated, threatened or endorsed by any federal, state, local or foreign court or governmental authority of competent jurisdiction which prohibits the consummation of or which would materially modify or delay any of the transactions contemplated by the Transaction Documents;
(m) No action, suit or proceeding before any federal, state, local or foreign arbitrator or any court or governmental authority of competent jurisdiction shall have been commenced or threatened, and no inquiry or investigation by any federal, state, local or foreign governmental authority of competent jurisdiction shall have been commenced or threatened, against the Company, or any of the officers, directors or affiliates of the Company, seeking to restrain, prevent or change the transactions contemplated by the Transaction Documents, or seeking material damages in connection with such transactions; and
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(n) All federal, state and local governmental laws, rules and regulations applicable to the transactions contemplated by the Transaction Documents and necessary for the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby in accordance with the terms thereof shall have been complied with, and all consents, authorizations and orders of, and all filings and registrations with, all federal, state and local courts or governmental agencies and all federal, state and local regulatory or self-regulatory agencies necessary for the execution, delivery and performance of the Transaction Documents and the consummation of the transactions contemplated thereby in accordance with the terms thereof shall have been obtained or made, including, without limitation, in each case those required under the Securities Act, the Exchange Act, applicable state securities or “Blue Sky” laws or applicable rules and regulations of the Principal Market, or otherwise required by the SEC, the Principal Market or any state securities regulators.
9. INDEMNIFICATION.
In consideration of the Investor’s execution and delivery of the Transaction Documents and acquiring the Securities hereunder and in addition to all of the Company’s other obligations under the Transaction Documents, the Company shall defend, protect, indemnify and hold harmless the Investor and all of its affiliates, officers, directors, members, managers, employees and direct or indirect investors and any of the foregoing Person’s agents or other representatives (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in connection therewith (irrespective of whether any such Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or arising out of or relating to: (a) any misrepresentation or breach of any representation or warranty made by the Company in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of the Company contained in the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against such Indemnitee and arising out of or resulting from the execution, delivery, performance or enforcement of the Transaction Documents or any other certificate, instrument or document contemplated hereby or thereby other than, in the case of clause (c), with respect to Indemnified Liabilities which directly and primarily result from the fraud, gross negligence or willful misconduct of an Indemnitee. The indemnity in this Section 8(n) shall not apply to amounts paid in settlement of any claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed. To the extent that the foregoing undertaking by the Company may be unenforceable for any reason, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. Payment of under this indemnification shall be made within thirty (30) days from the date the Indemnitee makes written request for it. A certificate containing reasonable detail as to the amount of such indemnification submitted to the Company by the Indemnitee shall be conclusive evidence, absent manifest error, of the amount due from the Company to the Indemnitee. If any action shall be brought against any Indemnitee in respect of which indemnity may be sought pursuant to this Agreement, such Indemnitee shall promptly notify the Company in writing, and the Company shall have the right to assume the defense thereof with counsel of its own choosing reasonably acceptable to the Indemnitee. Any Indemnitee shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such Indemnitee, except to the extent that (i) the employment thereof has been specifically authorized by the Company in writing, (ii) the Company has failed after a reasonable period of time to assume such defense and to employ counsel or (iii) in such action there is, in the reasonable opinion of such separate counsel, a material conflict on any material issue between the position of the Company and the position of such Indemnitee, in which case the Company shall be responsible for the reasonable fees and expenses of no more than one such separate counsel.
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10. EVENTS OF DEFAULT.
In addition to any other rights and remedies under applicable law and this Agreement, so long as an “Event of Default” has occurred and is continuing, or if any event that, after notice and/or lapse of time, would reasonably be expected to become an Event of Default, has occurred and is continuing, the Company shall not deliver to the Investor any Purchase Notice, and the Investor shall not purchase any shares of Common Stock under this Agreement. An “Event of Default” shall be deemed to have occurred at any time as any of the following events occurs:
(a) the effectiveness of the Registration Statement registering the Securities lapses for any reason (including, without limitation, the issuance of a stop order or similar order), the Registration Statement or any Prospectus is unavailable for the sale by the Company to the Investor (or the resale by the Investor) of any or all of the Securities to be issued to the Investor under the Transaction Documents, and any such lapse or unavailability continues for a period of ten (10) consecutive Business Days or for more than an aggregate of thirty (30) Business Days in any 365-day period, but excluding a lapse or unavailability where (i) the Company terminates the Registration Statement after the Investor has confirmed in writing that all of the Securities covered thereby have been resold or (ii) the Company supersedes the Registration Statement with a New Registration Statement, including (without limitation) when the Registration Statement is effectively replaced with a New Registration Statement covering Securities (provided in the case of this clause (ii) that all of the Securities covered by the superseded (or terminated) registration statement that have not theretofore been sold to the Investor are included in the superseding (or new) registration statement);
(b) the suspension of the Common Stock from trading on the Principal Market for a period of one (1) Business Day, provided that the Company may not direct the Investor to purchase any shares of Common Stock during any such suspension;
(c) the delisting of the Common Stock from the OTCQB operated by the OTC Markets Group, Inc; provided, however, that the Common Stock is not immediately thereafter trading on The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, the New York Stock Exchange, the NYSE Arca, the NYSE American, the OTC Pinks or the OTCQX operated by the OTC Markets Group, Inc. (or any nationally recognized successor to any of the foregoing);
(d) the failure for any reason by the Transfer Agent to issue Purchase Shares to the Investor within one (1) Business Day after the applicable Regular Purchase Date (as applicable) on which the Investor is entitled to receive such Purchase Shares;
(e) the Company breaches any representation, warranty, covenant or other term or condition under any Transaction Document if such breach could have a Material Adverse Effect and except, in the case of a breach of a covenant which is reasonably curable, only if such breach continues for a period of at least five (5) Business Days;
(f) if any Person commences a proceeding against the Company pursuant to or within the meaning of any Bankruptcy Law;
(g) if the Company is at any time insolvent, or, pursuant to or within the meaning of any Bankruptcy Law, (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law (a “Custodian”) of it or for all or substantially all of its property, or (iv) makes a general assignment for the benefit of its creditors or is generally unable to pay its debts as the same become due;
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(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (i) is for relief against the Company in an involuntary case, (ii) appoints a Custodian of the Company or for all or substantially all of its property, or (iii) orders the liquidation of the Company or any Subsidiary; or
(i) if at any time the Company is not eligible to transfer its Common Stock electronically as DWAC Shares.
11. TERMINATION
This Agreement may be terminated only as follows:
(a) If pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property, or the Company makes a general assignment for the benefit of its creditors (any of which would be an Event of Default as described in Sections 10(f), 10(g) and 10(h) hereof), this Agreement shall automatically terminate without any liability or payment to the Company (except as set forth below) without further action or notice by any Person.
(b) In the event that the Commencement shall not have occurred on or before __________, 2023, due to the failure to satisfy the conditions set forth in Sections 7 and 8 above with respect to the Commencement, either the Company or the Investor shall have the option to terminate this Agreement at the close of business on such date or thereafter without liability of any party to any other party (except as set forth below); provided, however, that the right to terminate this Agreement under this Section 11(b) shall not be available to any party if such party is then in breach of any covenant or agreement contained in this Agreement or any representation or warranty of such party contained in this Agreement fails to be true and correct such that the conditions set forth in Section 7(e) or Section 8(c), as applicable, could not then be satisfied.
(c) At any time after the Commencement Date, the Company shall have the option to terminate this Agreement for any reason or for no reason by delivering notice (a “Company Termination Notice”) to the Investor electing to terminate this Agreement without any liability whatsoever of any party to any other party under this Agreement (except as set forth below). The Company Termination Notice shall be effective one (1) Business Day after it has been received by the Investor.
(d) This Agreement shall automatically terminate on the date that the Company sells and the Investor purchases the full Available Amount as provided herein, without any action or notice on the part of any party and without any liability whatsoever of any party to any other party under this Agreement (except as set forth below).
(e) If, for any reason or for no reason, the full Available Amount has not been purchased in accordance with Section 2 of this Agreement by the Maturity Date, this Agreement shall automatically terminate on the Maturity Date, without any action or notice on the part of any party and without any liability whatsoever of any party to any other party under this Agreement (except as set forth below).
(f) At any time after the Commencement Date the VWAP of the Purchase Shares shall have been below $0.35 for a period of thirty days.
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Except as set forth in Sections 11(a) (in respect of an Event of Default under Sections 10(f), 10(g) and 10(h)), 11(d) and 11(e), any termination of this Agreement pursuant to this Section 11 shall be effected by written notice from the Company to the Investor, or the Investor to the Company, as the case may be, setting forth the basis for the termination hereof. The representations and warranties of the Company and the Investor contained in Sections 3 and 4hereof, the indemnification provisions set forth in Section 9 hereof and the agreements and covenants set forth in Sections 5, 6, 10, 11 and 12 shall survive the Commencement and any termination of this Agreement. No termination of this Agreement shall (i) affect the Company’s or the Investor’s rights or obligations under (A) this Agreement with respect to any pending Regular Purchases, and the Company and the Investor shall complete their respective obligations with respect to any pending Regular Purchases under this Agreement and (B) the Registration Rights Agreement, which shall survive any such termination in accordance with its terms, or (ii) be deemed to release the Company or the Investor from any liability for intentional misrepresentation or willful breach of any of the Transaction Documents.
12. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. The corporate laws of the State of Nevada shall govern all issues concerning the relative rights of the Company and its stockholders. All questions concerning the construction, validity, enforcement and interpretation of this Agreement and the other Transaction Documents shall be governed by the internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Nevada. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Nevada, for the adjudication of any dispute hereunder or under the other Transaction Documents or in connection herewith or therewith, or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature or signature delivered by e-mail in a “.pdf” format data file shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original signature.
(c) Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.
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(e) Entire Agreement. The Transaction Documents supersede all other prior oral or written agreements between the Investor, the Company, their affiliates and Persons acting on their behalf with respect to the subject matter thereof, and this Agreement, the other Transaction Documents and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. The Company acknowledges and agrees that it has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in the Transaction Documents. The Investor acknowledges and agrees that it has not relied on, in any manner whatsoever, any representations or statements, written or oral, other than as expressly set forth in the Transaction Documents.
(f) Notices. Any notices, consents or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt when delivered personally; (ii) upon receipt when sent by facsimile or email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company:
Costas, Inc.
424 E Central Blvd,
Suite 308
Orlando, FL 32801
Telephone: (407) 789-1923
E-mail: james.brooks@standarddentallabs.com
Attention: James Brooks
If to the Investor:
World Amber Corporation
211 Richmond Street
Brooklyn, NY 11208
Telephone:
E-mail: yohananaharon1951@gmail.com
Attention: Yahanan Aharon
If to the Transfer Agent:
Transfer Online
512 SE Salmon St.
Portland, OR 97214
Telephone: +1 (503) 227-2950
Fax: +1 (503) 227-6874
E-mail: info@trasnferonline.com
Attention: Kieran O’Day
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or at such other address, email and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or email account containing the time, date, and recipient facsimile number or email address, as applicable, and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile, email or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, including by merger or consolidation. The Investor may not assign its rights or obligations under this Agreement.
(h) No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and, except as set forth in Section 9, is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
(i) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to consummate and make effective, as soon as reasonably possible, the Commencement, and to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
(k) Remedies, Other Obligations, Breaches and Injunctive Relief. The Investor’s remedies provided in this Agreement, including, without limitation, the Investor’s remedies provided in Section 9, shall be cumulative and in addition to all other remedies available to the Investor under this Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), no remedy of the Investor contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Investor’s right to pursue actual damages for any failure by the Company to comply with the terms of this Agreement. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Investor and that the remedy at law for any such breach may be inadequate. The Company therefore agrees that, in the event of any such breach or threatened breach, the Investor shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.
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(l) Enforcement Costs. If: (i) this Agreement is placed by the Investor in the hands of an attorney for enforcement or is enforced by the Investor through any legal proceeding; (ii) an attorney is retained to represent the Investor in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Agreement; or (iii) an attorney is retained to represent the Investor in any other proceedings whatsoever in connection with this Agreement, then the Company shall pay to the Investor, as incurred by the Investor, all reasonable costs and expenses including attorneys’ fees incurred in connection therewith, as incurred, in addition to all other amounts due hereunder.
(m) Waiver; Failure or Indulgence Not Waiver. No provision of this Agreement may be amended other than by a written instrument signed by both parties hereto and (ii) no provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. No failure or delay in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
** Signature Page Follows **
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IN WITNESS WHEREOF, the Investor and the Company have caused this Purchase Agreement to be duly executed as of the date first written above.
| THE COMPANY: | |||
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| COSTAS, INC. |
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| By: | /s/ James Brooks | ||
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| Name: | James Brooks | |
| Title: | President | ||
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| INVESTOR: |
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| WORLD AMBER CORPORATION |
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| By: | /s/ Yohanan Aharon |
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| Name: | Yohanan Aharon |
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| Title: | CEO |
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EXHIBITS
| Exhibit A | Form of Officer’s Certificate |
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| Exhibit B | Form of Secretary’s Certificate |
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EXHIBIT A
FORM OF OFFICER’S CERTIFICATE
This Officer’s Certificate (“Certificate”) is being delivered pursuant to Section 8(c) of that certain Purchase Agreement dated as of November 22, 2022, (“Purchase Agreement”), by and between COSTAS, INC., a Nevada corporation (the “Company”), and WORLD AMBER CORPORATION (the “Investor”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.
The undersigned, James D. Brooks, President of the Company, hereby certifies, on behalf of the Company and not in his individual capacity, as follows:
1. I am the President of the Company and make the statements contained in this Certificate;
2. The representations and warranties of the Company are true and correct in all material respects (except to the extent that any of such representations and warranties is already qualified as to materiality in Section 4 of the Purchase Agreement, in which case, such representations and warranties are true and correct without further qualification) as of the date when made and as of the Commencement Date as though made at that time (except for representations and warranties that speak as of a specific date, in which case such representations and warranties are true and correct in all material respects as of such date);
3. The Company has performed, satisfied and complied in all material respects with covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by the Company at or prior to the Commencement Date, to the extent not otherwise waived.
4. The Company has not taken any steps, and does not currently expect to take any steps, to seek protection pursuant to any Bankruptcy Law nor does the Company currently have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or insolvency proceedings. The Company is currently financially solvent and is generally able to pay its debts as they become due.
IN WITNESS WHEREOF, I have hereunder signed my name as of the date first written above.
| /s/ James D. Brooks | ||
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| Name: James D. Brooks | |
| Title: President, CEO |
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The undersigned as Secretary of COSTAS, INC., a Nevada corporation, hereby certifies that James D. Brooks is the duly elected, appointed, qualified and acting President of COSTAS, INC., and that the signature appearing above is his genuine signature.
| /s/ James D. Brooks | ||
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| Name: James D. Brooks | |
| Title: Secretary |
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EXHIBIT B
FORM OF SECRETARY’S CERTIFICATE
This Secretary’s Certificate (“Certificate”) is being delivered pursuant to Section 8(h) of that certain Purchase Agreement dated as of November 22, 2022 (“Purchase Agreement”), by and between COSTAS, INC., a Nevada corporation (the “Company”) and WORLD AMBER CORPORATION (the “Investor”), pursuant to which the Company may sell to the Investor up to Two Million Five Hundred Thousand Dollars ($2,500,000) of the Company’s Common Stock, $0.001 par value (the “Common Stock”). Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Purchase Agreement.
The undersigned, James D. Brooks, Secretary of the Company, hereby certifies, on behalf of the Company and not in her individual capacity, as follows:
1. I am the Secretary of the Company and make the statements contained in this Secretary’s Certificate.
2. Attached hereto as Exhibit A and Exhibit B are true, correct and complete copies of the Company’s Bylaws (“Bylaws”) and Articles of Incorporation (“Charter”), in each case, as amended through the date hereof, and no action has been taken by the Company, its directors, officers or stockholders, in contemplation of the filing of any further amendment relating to or affecting the Bylaws or Charter.
3. Attached hereto as Exhibit C are true, correct and complete copies of the resolutions duly adopted by the Board of Directors of the Company on November 22, 2022, in accordance with the Nevada Business Corporation Act. Such resolutions have not been amended, modified or rescinded and remain in full force and effect and such resolutions are the only resolutions adopted by the Company’s Board of Directors, or any committee thereof, or the stockholders of the Company relating to or affecting (i) the entering into and performance of the Purchase Agreement, or the issuance, offering and sale of the Purchase Shares and (ii) and the performance of the Company of its obligation under the Transaction Documents as contemplated therein.
4. As of the date hereof, the authorized, issued and reserved capital stock of the Company is as set forth on Exhibit D hereto.
IN WITNESS WHEREOF, I have hereunder signed my name as of the date first written above.
| /s/ James D. Brooks | ||
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| Name: James D. Brooks | |
| Title: Secretary |
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The undersigned as Treasurer of COSTAS, INC., a Nevada corporation, hereby certifies that James D. Brooks is the duly elected, appointed, qualified and acting Secretary of COSTAS, INC., and that the signature appearing above is her genuine signature.
| /s/ James D. Brooks | ||
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| Name: James D. Brooks | |
| Title: Treasurer |
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EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of November 22, 2022, by and between COSTAS, INC., a Nevada corporation (the “Company”), and WORLD AMBER CORPORATION, a Nevada corporation (together with its permitted assigns, the “Buyer”). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement by and between the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Purchase Agreement”).
WHEREAS:
The Company has the right, upon the terms and subject to the conditions of the Purchase Agreement, to sell and issue to the Buyer up to Two Million Five Hundred Thousand Dollars ($2,500,000) of Purchase Shares and to induce the Buyer to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the “Securities Act”), and applicable state securities laws.
NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following meanings:
a. “Investor” means the Buyer, any transferee or assignee thereof to whom the Buyer assigns its rights under this Agreement in accordance with Section 9 and who agrees to become bound by the provisions of this Agreement, and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement in accordance with Section 9 and who agrees to become bound by the provisions of this Agreement.
b. “Person” means any individual or entity including but not limited to any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
c. “Register,” “registered,” and “registration” refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the “SEC”).
d. “Registrable Securities” means all of the Purchase Shares that may, from time to time, be issued or become issuable to the Investor under the Purchase Agreement (without regard to any limitation or restriction on purchases), and any and all shares of capital stock issued or issuable with respect to the Purchase Shares or the Purchase Agreement as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement.
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e. “Registration Statement” means one or more registration statements of the Company covering only the resale of the Registrable Securities.
2. REGISTRATION.
a. Mandatory Registration. The Company shall, within ninety (90) days from the date of this Agreement, file with the SEC an initial Registration Statement covering the maximum number of Registrable Securities as the Company shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor under Rule 415 under the Securities Act at then prevailing market prices (and not fixed prices), as mutually determined by both the Company and the Investor in consultation with their respective legal counsel (in any case including all of the Initial Purchase Shares and Commitment Shares), subject to the aggregate number of authorized shares of the Company’s Common Stock then available for issuance in its Articles of Incorporation. The initial Registration Statement shall register only the Registrable Securities. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such Registration Statement and any amendment or supplement to such Registration Statement and any related prospectus prior to its filing with the SEC, and the Company shall give due consideration to all comments. The Investor acknowledges that it will be identified in the initial Registration Statement as an underwriter within the meaning of Section 2(a)(11) of the Securities Act and shall furnish all information reasonably requested by the Company for inclusion therein. The Company shall use reasonable best efforts to have the Registration Statement and any amendment declared effective by the SEC as soon as practicable. The Company shall use reasonable best efforts to keep the Registration Statement effective pursuant to Rule 415 promulgated under the Securities Act and available for the resale by the Investor of all of the Registrable Securities covered thereby at all times until the date on which the Investor shall have resold all the Registrable Securities covered thereby and no Available Amount remains under the Purchase Agreement (the “Registration Period”). The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any 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, in light of the circumstances in which they were made, not misleading.
b. Rule 424 Prospectus. The Company shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the Securities Act, the prospectus and prospectus supplements, if any, to be used in connection with resales of the Registrable Securities by the Buyer under the Registration Statement. The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC, and the Company shall give due consideration to all comments. The Investor shall use its reasonable best efforts to provide any such comments within one (1) Business Day from the date the Investor receives the final pre-filing version of such prospectus.
c. Sufficient Number of Shares Registered. In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new Registration Statement (a “New Registration Statement”), so as to cover all of such Registrable Securities (subject to the limitations set forth in Section 2(a)) as soon as practicable, but in any event not later than ten (10) Business Days after the necessity arises, subject to any limits that may be imposed by the SEC pursuant to Rule 415 under the Securities Act. The Company shall use its commercially reasonable efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof.
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d. Offering. If the staff of the SEC (the “Staff”) or the SEC seeks to characterize any offering pursuant to a Registration Statement filed pursuant to this Agreement as constituting an offering of securities that does not permit such Registration Statement to become effective and be used for resales by the Investor under Rule 415 at then-prevailing market prices (and not fixed prices), or if after the filing of the initial Registration Statement with the SEC pursuant to Section 2(a), the Company is otherwise required by the Staff or the SEC to reduce the number of Registrable Securities included in such initial Registration Statement, then the Company shall reduce the number of Registrable Securities to be included in such initial Registration Statement (with the prior consent, which shall not be unreasonably withheld, delayed or conditioned, of the Investor and its legal counsel as to the specific Registrable Securities to be removed therefrom) until such time as the Staff and the SEC shall so permit such Registration Statement to become effective and be used as aforesaid. In the event of any reduction in Registrable Securities pursuant to this paragraph, the Company shall file one or more New Registration Statements in accordance with Section 2(c) until such time as all Registrable Securities have been included in Registration Statements that have been declared effective and the prospectus contained therein is available for use by the Investor. Notwithstanding any provision herein or in the Purchase Agreement to the contrary, the Company’s obligations to register Registrable Securities (and any related conditions to the Investor’s obligations) shall be qualified as necessary to comport with any requirement of the SEC or the Staff as addressed in this Section 2(d).
3. RELATED OBLIGATIONS.
With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2, including on any New Registration Statement, the Company shall use its commercially reasonable efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:
a. The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the Investor as set forth in such Registration Statement.
b. The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Business Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects. The Investor shall use its commercially reasonable efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Business Days from the date the Investor receives the final version thereof. The Company shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration Statement.
c. Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any Registration Statement, a copy of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor. For the avoidance of doubt, any filing available to the Investor via the SEC’s live EDGAR system shall be deemed “furnished to the Investor” hereunder.
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d. The Company shall use commercially reasonable efforts to (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.
e. As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor of the happening of any event or existence of such facts as a result of which the prospectus included in any Registration Statement, as then in effect, includes an untrue statement of a material fact or omits 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 (provided that in no event shall such notice contain any material, non-public information regarding the Company), and promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request). The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by email or facsimile on the same day of such effectiveness or by overnight mail), (ii) of any request by the SEC for amendments or supplements to any Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.
f. The Company shall use its commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness of any Registration Statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
g. The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3.
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h. The Company shall comply with Section 6(b) of the Purchase Agreement with respect to the issuance of Registrable Securities.
i. The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.
j. If reasonably requested by the Investor, the Company shall (i) as soon as practicable after receipt of written notice from the Investor, incorporate in a prospectus supplement or post-effective amendment such information as the Investor reasonably believes necessary to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as practicable after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement.
k. The Company shall use its commercially reasonable efforts to cause the Registrable Securities covered by any Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.
l. On the date any Registration Statement which includes the Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause its legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such Registration Statement has been declared effective by the SEC substantially in the form attached hereto as Exhibit A, or such other form agreed to by the Investor. Thereafter, if reasonably requested by the Buyer at any time, the Company (acting directly or through its counsel) shall deliver to the Buyer, which may be via e-mail, a written confirmation whether or not the effectiveness of such Registration Statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order by the SEC) and whether or not the Registration Statement is available to the Buyer for sale of all of the Registrable Securities.
m. Company agrees to take all other reasonable actions as necessary and reasonably requested in writing by the Investor to expedite and facilitate disposition by the Investor of the Registrable Securities pursuant to any Registration Statement.
4. OBLIGATIONS OF THE INVESTOR.
a. The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any Registration Statement hereunder. The Investor shall as soon as practicable furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.
b. The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder and any amendments and supplements thereto.
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c. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until the Investor’s receipt of the copies of a notice regarding the resolution or withdrawal of the stop order or suspension as contemplated by Section 3(f) or the supplemented or amended prospectus as contemplated by the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of a notice from the Company to the Investor of the happening of any event of the kind described in Section 3(f) or the first sentence of Section 3(e) and for which the Investor has not yet settled.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.
6. INDEMNIFICATION.
a. To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, directors, officers, partners, employees, agents, managers, and representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or reasonable expenses, joint or several, (collectively, “Claims”) reasonably incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, “Violations”). The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any reasonable and documented legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information about the Investor furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto or prospectus contained therein, if such Registration Statement, New Registration Statement or amendment thereof or supplement thereto or prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superseded prospectus, shall not inure to the benefit of any Indemnified Person from whom the Indemnified Person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such Indemnified Person) if the untrue statement or omission of material fact contained in the superseded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld, delayed or conditioned. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the rights and obligations hereunder pursuant to Section 9.
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b. In connection with the Registration Statement or any New Registration Statement, the Investor agrees to indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement or any New Registration Statement, each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (collectively and together with an Indemnified Person, an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information about the Investor set forth on Exhibit B attached hereto and furnished to the Company by the Investor expressly for use in connection with such Registration Statement (as such information about the Investor may be updated and furnished to the Company by the Investor expressly for use in connection with any New Registration Statement or prospectus); and, subject to Section 6(d), the Investor will reimburse any legal or other expenses reasonably incurred by any Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld, delayed or conditioned; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.
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c. Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
d. The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
e. The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to applicable law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
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8. REPORTS AND DISCLOSURE UNDER THE SECURITIES ACT.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration (“Rule 144”), the Company agrees, at the Company’s sole expense, so long as the Investor owns Registrable Securities:
a. make and keep public information available, as those terms are understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144;
c. furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the Securities Act and the Exchange Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration; and
d. take such additional action as is reasonably requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be reasonably requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.
The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to seek equitable relief in the form of a preliminary or permanent injunction, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor; provided, however, that any transaction, whether by merger, reorganization, restructuring, consolidation, financing or otherwise, whereby the Company remains the surviving entity immediately after such transaction shall not be deemed an assignment. The Investor may not assign its rights under this Agreement without the written consent of the Company, other than to an affiliate of the Investor, in which case the assignee must agree in writing to be bound by the terms and conditions of this Agreement.
10. AMENDMENT OF REGISTRATION RIGHTS.
No provision of this Agreement may be amended or waived by the parties from and after the date that is one (1) Business Day immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, no provision of this Agreement may be (i) amended other than by a written instrument signed by both parties hereto or (ii) waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
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11. MISCELLANEOUS.
a. A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
b. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or email (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Business Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications shall be:
If to the Company:
Costas, Inc.
424 E Central Blvd,
Suite 308
Orlando, FL 32801
Telephone: (407) 789-1923
E-mail: james.brooks@standarddentallabs.com
Attention: James Brooks
If to the Investor:
World Amber Corporation
211 Richmond Street
Brooklyn, NY 11208
Telephone: [___________]
E-mail: [___________]
Attention: Yohanan Aharon
or at such other address, email address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party at least three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender’s facsimile machine or email account containing the time, date, recipient facsimile number or email address, as applicable, or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile, email or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
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c. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Illinois, County of Cook, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
d. This Agreement and the Purchase Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof. There are no restrictions, promises, warranties or undertakings among the parties hereto, other than those set forth or referred to herein and therein. This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.
e. Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties hereto.
f. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
g. This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission or by e-mail in a “.pdf” format data file of a copy of this Agreement bearing the signature of the party so delivering this Agreement.
h. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
i. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
j. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
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12. TERMINATION.
The obligations of the Company contained in Sections 2, 3, 5 and 8 of this Agreement shall terminate in their entirety upon the earlier of (i) the date on which the Investor shall have sold all the Securities and no Available Amount remains under the Purchase Agreement and (ii) 180 days following the earlier of (A) the Maturity Date and (B) the date of termination of the Purchase Agreement; provided that as long as any Securities remain unsold by the Investor, the Company must make available “current public information” pursuant to Rule 144 promulgated under the Securities Act until the Investor may sell the Securities thereunder without any restrictions (including any restrictions under Rule 144(c) or Rule 144(i)).
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IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written.
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| THE COMPANY: | ||
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| COSTAS, INC. |
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| By: | /s/ James D. Brooks | ||
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| Name: | James D. Brooks |
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| Title: | CEO and President |
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| BUYER: |
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| WORLD AMBER CORPORATION |
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| By: | /s/ Yohanan Aharon |
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| Name: | Yohanan Aharon |
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| Title: | President |
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EXHIBIT A
FORM OF NOTICE OF EFFECTIVENESS
OF REGISTRATION STATEMENT
[Date]
[Transfer agent]
Re: Costas, Inc. – Registration Statement on Form S-1
Ladies and Gentlemen:
We are counsel to Costas, Inc., a Nevada corporation (the “Company”), and have represented the Company in connection with that certain Purchase Agreement, dated as of November [__], 2022 (the “Purchase Agreement”), entered into by and between the Company and World Amber Corporation (the “Buyer”) pursuant to which, among other things, the Company has agreed to issue to the Buyer an aggregate of up to 8,333,333 shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), in consideration for an aggregate amount up to Two Million Five Hundred Thousand Dollars ($2,500,000), in accordance with the terms of the Purchase Agreement.
Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, dated as of November [__], 2022 with the Buyer (the “Registration Rights Agreement”) pursuant to which the Company agreed, among other things, to register the Purchase Shares and the Commitment Shares under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the Company’s obligations under the Purchase Agreement and the Registration Rights Agreement, on [_____________], 2022, the Company filed a Registration Statement on Form S-1 (File No. 333-[_________]) (the “Registration Statement”) with the Securities and Exchange Commission (“SEC”) to register for resale the following securities:
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| (1) | Up to 8,333,333 shares of Common Stock to be issued upon purchase from the Company by the Buyer from time to time pursuant to the Purchase Agreement (the “Purchase Shares”). |
In connection with the foregoing, we advise you that (i) based solely on our review of the Notice of Effectiveness posted by the SEC on the SEC’s EDGAR system, the SEC declared the Registration Statement effective under the Securities Act at __:__ am/pm on _______ __, 2023, (ii) to our knowledge, based solely on our review of the Commission’s “Stop Orders” web page (http://sec.gov/litigation/stoporders.shtml), no stop order suspending the Registration Statement’s effectiveness has been issued, and to our knowledge, no proceedings for that purpose are pending before, or threatened by, the SEC, and (iii) the Initial Purchase Shares, the Commitment Shares and the Purchase Shares are available for resale under the Securities Act pursuant to the Registration Statement and may be issued without any restrictive legend referencing the Securities Act provided that at the time of such issuance, we or the Company has not otherwise notified you that the Registration Statement is unavailable for the sale of the Purchase Shares or the Commitment Shares.
| Very truly yours, [Company Counsel] | |||
| By: | |||
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| cc: World Amber Corporation | |||
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EXHIBIT B
TO REGISTRATION RIGHTS AGREEMENT
Information About The Investor Furnished To The Company By The Investor
Expressly For Use In Connection With The Registration Statement
Information With Respect to World Amber Corporation
“As of the date of the Purchase Agreement, World Amber Corporation, beneficially owned [___] shares of our common stock. _______________________, the ______________________ of World Amber Corporation, are deemed to be beneficial owners of all of the shares of common stock owned by World Amber Corporation. _________________________ have voting and investment power over the shares being offered under the prospectus filed with the SEC in connection with the transactions contemplated under the Purchase Agreement. World Amber Corporation is not a licensed broker dealer or an affiliate of a licensed broker dealer.”
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EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the inclusion of our Auditors' Report, dated September 8, 2022, the financial statements of Costas, Inc. as of December 31, 2021 and 2020, and for the years then ended, included in the Form S-1 Registration Statement. We acknowledge that any financial statement figures are materially correct based on our audit work performed. We also consent to application of such report to the financial information in the Form S-1 Offering, when such financial information is read in conjunction with the financial statements referred to in our report.
/S/ Olayinka Oyebola
OLAYINKA OYEBOLA & CO.
(Chartered Accountants)
Lagos Nigeria
December 29, 2022
PCAOB 5968
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the inclusion of our Auditors' Report, dated December 29, 2022, the financial statements of Prime Dental Labs LLC. as of December 31, 2021, and 2020, and for the years then ended, included in the Form S-1 Registration Statement. We acknowledge that any financial statement figures are materially correct based on our audit work performed. We also consent to application of such report to the financial information in the Form S-1 Offering, when such financial information is read in conjunction with the financial statements referred to in our report.
/S/ Olayinka Oyebola
OLAYINKA OYEBOLA & CO.
(Chartered Accountants)
Lagos Nigeria
December 29, 2022
PCAOB 5968