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Item 1.01
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Entry into a Material Definitive Agreement
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General
On October 14, 2016, Integrated Surgical
Systems, Inc., a Delaware corporation (“
Integrated
”), entered into a Share Exchange Agreement (the “
Share
Exchange Agreement
”) with theMaven Network, Inc., a Nevada corporation (“
theMaven
”) and the shareholders
of theMaven, holding all of the issued and outstanding shares of theMaven (collectively, “
theMaven Shareholders
”).
The transaction will result in Integrated
acquiring theMaven as a wholly owned subsidiary by the exchange of all of the outstanding securities of theMaven held by theMaven
Shareholders for a number of newly issued shares of the common stock of Integrated (the “
Common Stock
”), representing
approximately 55% of the issued and outstanding shares of Common Stock immediately after the transaction (the “
Share Exchange
”).
The final number of shares of Common Stock to be issued to theMaven Shareholders (the “
Exchange Shares
”) at
the closing of the Share Exchange (the “
Closing
”) will be determined and adjusted based on an exchange formula
as set forth in the Share Exchange Agreement.
The Share Exchange Agreement contains customary
representations and warranties from theMaven, theMaven Shareholders and Integrated. At the Closing, 35% of the Exchange Shares
will be delivered into escrow and will be subject to indemnification claims for breach of representations and warranties by theMaven
and theMaven Shareholders, as well as repurchase by Integrated if theMaven does not meet specific milestone achievements.
The Closing is conditioned on certain pre-closing
conditions, including but not limited to the preparation of the financial statements of theMaven and entry of employment agreements
with the current, key employees of theMaven. Integrated is expecting to close the Share Exchange in the next several weeks. Under
the Share Exchange Agreement, theMaven has granted Integrated an exclusivity period until December 31, 2016.
At the Closing, Mr. James C. Heckman, the
current Chief Executive of theMaven will be appointed as a director as well as the Chief Executive and the President of Integrated.
The current Chief Operating Officer of theMaven and current Chief Technology Officer of theMaven will also become the Chief Operating
Officer and Chief Technology Officer of Integrated. The current Chief Financial Officer of Integrated, Mr. Gary Schuman will continue
as the Chief Financial Officer of Integrated. The current directors of Integrated will continue to serve on the Board of Directors
of Integrated. Mr. Robert Levande will resign as the Secretary of Integrated and the new Chief Operating Officer of Integrated
will serve as the Secretary.
All of the newly issued Exchange Shares
will be subject to a one-year lock-up and do not have any registration rights. The Share Exchange will made on the basis of its
being a private placement under Section 4(a)(2) of the Securities Exchange Act of 1933, as amended (the “
Act
”).
After the Closing, theMaven will become a wholly owned subsidiary of Integrated and Integrated will cease to be a “shell
company” (as such term is defined in Rule 12b-2 under Securities Exchange Act of 1934).
Other Key Terms of the Share Exchange Agreement
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·
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Previously, Integrated provided a series of advances for an aggregated amount of approximately $640,000 to theMaven (the “
Term
Note
”). The Term Note is personally guaranteed of an officer of theMaven and secured by a mortgage held by Integrated
on certain properties located in the State of Washington and the Province of British Columbia (“
Mortgage
”).
A portion of the Term Note is secured by a corporate guarantee (“
MDB Guarantee
”) from MDB Capital Group, LLC
(“
MDB
”). At the Closing, the Term Note will be cancelled and the Personal Guarantee, the Mortgage and the MDB
Guarantee will be terminated.
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MDB is acting as an advisor to Integrated in connection with the Share Exchange under an investment banking advisory services
agreement dated November 28, 2007, amended on September 12, 2008 and April 15, 2009 (the “
Investment Banking Agreement
”).
Under the Investment Banking Agreement, Integrated will pay MDB a cash fee and issue a 5-year warrant to purchase a number of shares
of Common Stock, representing 5% of the number of shares of Integrated on a fully diluted basis immediately after the Closing.
The warrant will be issued on a private placement basis, to an accredited investor under Section 4(a)(2) of the Act. The Common
Stock underlying the warrant is subject to a one-year lock-up commencing on the closing date of the Share Exchange.
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Note that MDB is an affiliate of Integrated by reason
of Mr. Christopher Marlett being a director and officer of Integrated and the principal owner, member and officer of MDB and Mr.
Robert Levande being a director and officer of Integrated and an affiliate of MDB. Mr. Gary Schuman the Chief Financial Officer
of Integrated and the Chief Financial Officer of MDB.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This document contains forward-looking statements, which reflect
our views with respect to future events and financial performance. These forward-looking statements are subject to certain uncertainties
and other factors that could cause actual results to differ materially from such statements. These forward-looking statements are
identified by, among other things, the words “anticipates”, “believes”, “estimates”, “expects”,
“plans”, “projects”, “targets” and similar expressions. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the date the statement was made. Integrated undertakes
no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Important factors that may cause actual results to differ from those projected include the risk specified below.
Overview of theMaven
History of theMaven and Business Overview
theMaven was incorporated in Nevada on July
22, 2016, under the name “Amplify Media, Inc.” On July 27, 2016, the corporate name was amended to “Amplify Media
Network, Inc.” and on October 14, 2016, the corporate name was further amended to “theMaven Network, Inc.”
Although theMaven was founded in 2016, its
founding team worked on a variety of digital media platforms, with the common thread of achieving economies of scale by assembling
a network of publishers, covering particular niche media interests, on a unified technology and business platform. The founder
and Chief Executive Officer of theMaven created the first version of this model in 1991, leveraging early digital technology for
NFL teams for “NFL Exclusive”, and later founded Rivals.com, which is still operated today by Yahoo!. theMaven’s
founders have worked together since 1999, building many different socially focused, single platform media models, including Scout.com,
Rivals.com, Rivals.net (Europe), Zazzle, and 5to1.com.
Based on theMaven team’s prior experience,
the founders of theMaven established TheMaven to build and operate an exclusive network of professionally managed media channels
and interest groups, each operated by a hand-selected group of experts, reporters, group evangelists and social leaders as “Channel
Partners.” theMaven’s Channel Partners leverage theMaven’s proprietary, socially-driven, mobile-enabled, video-focused
technology platform to engage niche audiences within a single network ( “
theMaven Platform
”).
theMaven believes its media model will appeal
to the users and subscribers of theMaven Platform in a way similar to how the model has previously appealed to sports fans in its
founders’ previous ventures. theMaven Platform intends to appeal to professional publishers who currently struggle to monetize
on their existing platforms, or are operating with less-than-world-class features in one or more areas (mobile, video, community,
etc.). The consumer-facing product of theMaven Platform will be made available on the web and as iOS (Apple) and Android mobile
applications.
Once launched, theMaven expects its two
primary revenue sources to be online advertising/sponsorships and paid memberships (subscriptions). theMaven expects advertising/sponsorships
will be sold primarily by theMaven and/or major media partner(s) to companies to promote the companies’ brands, products
and services, amplify their visibility and reach to target an audience based on the professionally managed media channels and interest
groups on theMaven Platform.
At this stage of the company’s development,
business development consists of developing a “target” list of selective, invite-only “Channel Partners,”
and reaching out to those “Channel Partners” for discussion. The management team has extensive experience in the past
building partner networks, but it will take time and further development of the technology platform to begin securing these partners.
Technology and Intellectual Property
theMaven expects to incorporate state-of-the-art
mobile, video, communications, social, notifications and other technology into its theMaven Platform, including modern DevOps processes
with continuous integration/continuous deployment and an entirely cloud-based back-end. The software engineering team is experienced
at delivering service at extreme scale, drawing upon years of experience at Google
TM
, Yahoo!
TM
, Microsoft
TM
et al. theMaven expects to develop its software by combining proprietary code with components from the open-source
community, plus select commercial services. To the extent it is able and given the limited financial resources at its disposal,
theMaven is investing in core technical competencies to be able to do more product development.
theMaven believes that innovation is one
of the keys to its competitiveness and will be necessary for future sustained growth. Currently, theMaven relies on the confidentiality
of its operations, proprietary know-how and business secrets. All theMaven employees have entered into confidentiality agreements
and it considers its employees’ work to be proprietary and owned by theMaven. There can be no assurance that theMaven will
be able to enforce its rights if they are improperly taken by theMaven’s employees or adopted by its competitors without
the approval of theMaven.
In the future, when necessary, theMaven
will take steps to protect its intellectual property interests under the laws of the United States and the jurisdictions in which
it intends to operate. In the future, theMaven plans to protect its intellectual property in appropriate market segments. As the
business develops, theMaven plans to develop specific trademarks for its products and seek registration of those marks with government
authorities for their protection. theMaven also plans to seek opportunities to obtain patent protections. theMaven does not currently
hold registered trademarks or patents.
Competition
Currently theMaven believes that there are
dozens of competitors delivering niche media content on the web and on mobile devices. All those competitors use mobile alerts,
invest heavily in video and leverage social media. theMaven, however, believe its team has developed distribution, production and
technology tactics that have proven to be highly engaging and effective for its particular model, which organizes channels into
interest groups, led by its expert partners – the “Channel Partners.”
The web provides unlimited access to the
market by niche or general media companies, so there are a large number and variety of direct competitors of theMaven competing
for audience and ad dollars. The general business of online media, combined with some level or method of leveraging community attracts
many potential entrants, and in the future there may be strong competitors that will compete with theMaven in general or in selected
markets. These and other companies may be better financed and be able to develop their markets more quickly and penetrate
those market more effectively.
As discussed above, theMaven anticipates
that it will compete on the basis of its technology, ease of use, value delivered to both consumers and “Channel Partners,”
and platform evolution through a continuing development program. theMaven believes that, if properly funded, its methods, technology
and experience will enable it to compete for a material amount of market share of media dollars and subscription revenue. theMaven
also believes it will rapidly establish a reputation for its business, distribution and technology methods within selected initial
markets, which can be enhanced over time as theMaven gains customer awareness and channel partner success. Concurrent with the
growth of its customer base, theMaven believes it will develop brand awareness, which translates to sponsorship support, and will
obtain data from its users that will allow theMaven to expand our its content and advertising offerings.
theMaven’s competitive position may
be seriously damaged if it cannot maintain and obtain patent protection for important differentiating aspects of its products or
otherwise protect its intellectual property rights in its technology. theMaven relies on a combination of contracts, patent and
trade secret laws to establish and protect its proprietary rights in its technology. However, it may not be able to prevent misappropriation
of its intellectual property, its competitors may be able to independently develop similar technology and the agreements it enter
into to protect its proprietary rights may not be enforceable.
Employees and Operation
At the time of this report, theMaven had
a total of fourteen full-time employees, of which three of them were in senior executive positions, eight of them were in software
development/test/operations, two of them were in business/network development and one employee was in user experience/design. None
of the employees are covered by any collective bargaining agreement. In the future, theMaven expects to expand its management employees
for financial compliance, and add operational employees as the channel partner network expands. Its future success will depend
in part on its ability to continue to attract, retain and motivate highly qualified technical and management personnel.
theMaven currently subleases approximately
1,500 square feet for its executive offices and operational facilities on a month-to-month basis in Seattle, WA. The business office
of theMaven is located at 5048 Roosevelt Way NE, Seattle, WA 98105. Management, software development and operations activities
are conducted at 200 1
st
Ave. West, Suite 230, Seattle, WA 98119.
theMaven operates a website at themaven.net,
which is currently under development. Information contained on any personal, viral, social network informational websites or software
applications, do not constitute part of this report.