The following table shows the beneficial ownership
of our Common Stock as of August 2, 2021 held by (i) each person known to us to be the beneficial owner of more than five percent (5%)
of our common stock; (ii) each director; (iii) each executive officer; and (iv) all directors and executive officers as a group.
Beneficial ownership is determined in accordance
with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held. Shares of
common stock subject to options and warrants currently exercisable or which may become exercisable within 60 days of August 2, 2021 are
deemed outstanding and beneficially owned by the person holding such options or warrants for purposes of computing the number of shares
and percentage beneficially owned by such person, but are not deemed outstanding for purposes of computing the percentage beneficially
owned by any other person. Except as indicated in the footnotes to this table, the persons or entities named have sole voting and investment
power with respect to all shares of our common stock shown as beneficially owned by them.
The following table provides for percentage ownership
assuming 20,473,799 shares are issued and outstanding as of August 2, 2021. Unless otherwise indicated, the address of each beneficial
holder of our Common Stock is our corporate address.
The following table sets forth certain information
concerning the ownership of our common stock as of August 2, 2021, with respect to: (i) each person, or group of affiliated persons, known
to us to be the beneficial owner of more than five percent (5%) of our common stock; (ii) each of our directors; (iii) each of our named
executive officers; and (iv) all of our current directors and executive officers as a group.
Applicable percentage ownership is based on 10,058,259
shares of common stock outstanding as of August 2, 2021. The percentage of beneficial ownership after this offering assumes the sale and
issuance of shares of common stock in this offering.
We have determined beneficial
ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who
possess sole or shared voting or investment power with respect to such securities. In addition, pursuant to such rules, we deemed outstanding
shares of common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days
of August 2, 2021. We did not deem such shares outstanding, however, for the purpose of computing the percentage ownership of any other
person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the beneficial owners
named in the table below have sole voting and investment power with respect to all shares of our common stock that they beneficially
own, subject to applicable community property laws. Unless otherwise indicated, the address of each beneficial holder of our Common Stock
is our corporate address.
As a result of the inability of the Company and Piezo to determine
the final Exchange Ratio until the Effective Time, the Company has omitted a table showing information concerning the ownership of our
common stock assuming the consummation of the Merger with respect to: (i) each person, or group of affiliated persons, known to us to
be the beneficial owner of more than five percent (5%) of the Combined Company’s common stock; (ii) each of the directors; (iii)
each of the named executive officers; and (iv) all of the then-current directors and executive officers as a group. Assuming no dissenters
rights have been triggered, the Company believes that such persons who received Company Common Stock in the Merger will own approximately
one-half of the percentage ownership in the Combined Company that such persons owned in Piezo. The Company cannot estimate at this time
the post-Merger percentage ownership of such persons who were existing shareholders of the Company, as a result of (a) the number of
shares that will be issued between the date of this Information Statement and the Effective Time not being known and (b) the number of
shares underlying certain outstanding convertible promissory notes of the Company at the Effective Time not being quantifiable at this
time.
Boris Goldstein, the Chairman of the Board, Executive
Vice President and Secretary of the Company, and Nickolay Kukekov, a director of the Company, each have an interest in the Actions as
a result of their ownership of shares of our Common Stock, as set forth in the section entitled “Security Ownership of Certain
Beneficial Owners and Management” above, and as described elsewhere in this Information Statement. Other than Messrs. Goldstein
and Kukekov, we do not believe that our directors and/or officers have interests in the Actions that are different from or greater than
those of any of our other stockholders.
The Company will pay all costs associated with the
distribution of this Information Statement, including the costs of printing and mailing. The Company has asked or will ask brokers and
other custodians, nominees and fiduciaries to forward this Information Statement to the beneficial owners of the Common Stock held of
record by such persons and will reimburse such persons for out-of-pocket expenses incurred in forwarding such material.
We file annual reports on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and other information with the SEC. You may obtain such SEC filings from the SEC’s website
at http://www.sec.gov. You can also read and copy these materials at the SEC’s public reference room at 100 F Street, N.E., Washington,
D.C. 20549. You can obtain information about the operation of the SEC’s public reference room by calling the SEC at 1-800-SEC-0330.
We
will send only one Information Statement and other corporate mailings to stockholders who share a single address unless we received contrary
instructions from any stockholder at that address. This practice, known as “householding,” is designed to reduce our printing
and postage costs. However, we will deliver promptly upon written or oral request a separate copy of the Information Statement to a stockholder
at a shared address to which a single copy of the Information Statement was delivered. You may make such a written or oral request by
(a) sending a written notification stating (i) your name, (ii) your shared address and (iii) the address to which we should direct the
additional copy of the Information Statement, to us at Brain Scientific Inc., 125 Wilbur Place, Suite 170, Bohemia, NY 11716; Telephone:
(917) 388-1578; Email: bgoldstein@memorymd.com.
If multiple stockholders sharing an address have
received one copy of this Information Statement or any other corporate mailing and would prefer us to mail each stockholder a separate
copy of future mailings, you may send notification to or call our principal executive offices. Additionally, if current stockholders
with a shared address received multiple copies of this Information Statement or other corporate mailings and would prefer us to mail
one copy of future mailings to stockholders at the shared address, notification of such request may also be made by mail or telephone
to our principal executive offices.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2020
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
DTI Motion Corp (“Motion or “the Company”)
was formed as a Delaware corporation on January 24, 2020. The initial shareholding was set up on March 15, 2020 and a share offering was
made at the end of March, 2020. On March 27, 2020, Motion entered into a secured, short-term loan in an amount up to $249,000 to Discovery
Technology International, Inc. (“DTI”) for the purpose of funding of operations. The loan maturity was April 27, 2020. DTI
was unable to repay the loan and the shareholders authorized a merger between Motion (legal acquirer) and DTI (accounting acquirer) which
was completed on May 20, 2020. See Note 3 for further details on the share exchange.
DTI was converted from a limited liability partnership
to a corporation on January 26, 2011 in the state of Florida. DTI’s office is located in Sarasota, Florida. DTI is a company focused
on the ultrasonic standing wave-type piezo motor technology for rotary and linear motion. DTI has experience in the research and development,
as well as the manufacturing, of piezo motors for high-tech industries across the globe.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
The significant accounting policies of the
Company are as follows:
Basis of Presentation and Consolidation
The Company has one wholly-owned subsidiary: Discovery
Technology International, Inc. (“DTI”). The consolidated financial statements, which include the accounts of the Company and
its wholly-owned subsidiary, are prepared in conformity with generally accepted accounting principles in the United States of America
(U.S. GAAP). All significant intercompany balances and transactions have been eliminated. The consolidated financial statements, which
include the accounts of the Company and its wholly-owned subsidiary, and related disclosures have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission (“SEC”). The Financial Statements have been prepared using the accrual
basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and
presented in US dollars. The year end is December 31.
Use of Estimates
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses. Actual results could differ from these estimates and assumptions.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents. The Company maintains deposits primarily in one financial
institution, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation ("FDIC").
The Company has not experienced any losses related to amounts in excess of FDIC limits.
Fair Value of Financial Instruments
The Company measures assets and liabilities at
fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount
that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between
market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability.
The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring
or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of
inputs to measure fair value:
|
●
|
Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets
or liabilities.
|
|
●
|
Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not
active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the
assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
●
|
Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation
techniques used to determine fair value. These assumptions are required to be consistent with market
|
The carrying amounts of the Company’s financial
assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and interest, certain
notes payable, approximate their fair values because of the short maturity of these instruments. The Company accounts for its equity instruments
(such as warrants and stock-based compensation) at fair value.
Property, Plant and Equipment
Property, plant and equipment are carried at cost.
Depreciation is provided on the straight-line method over the assets estimated service lives. Expenditures for maintenance and repairs
are charged to expense in the period in which they are incurred, and betterments are capitalized. The cost of assets sold or abandoned
and the related accumulated depreciation are eliminated from the accounts and any gains or losses are reflected in the accompanying statements
of operations of the respective period. The estimated useful lives range from 3 to 7 years.
Revenue Recognition
The Company recognizes revenue in accordance with
Accounting Standards Update (“ASU”) 2014-09, “Revenue from contracts with customers,” (Topic 606). Revenue
is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature,
amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded
reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step
model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised
goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction
price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and
(v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company’s main revenue stream is
from product sales. The performance obligation associated with a typical product sale will be satisfied upon shipment to the customer,
and the revenue will be recognized at that time.
The Company only applies the five-step model to
contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it
transfers to the customer. Once a contract is determined to be within the scope of Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 606 at contract inception, the Company reviews the contract to determine which performance
obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenues the amount
of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as
it is satisfied. Generally, the Company's performance obligations are transferred to customers at a point in time, typically upon delivery.
Income Taxes
The Company follows Section 740-10-30 of the FASB
ASC, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the fiscal year in which
the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it
is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the fiscal years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period
that includes the enactment date. Through December 31, 2020, the Company has an accumulated deficit. Due to uncertainty of realization
for these losses, a full valuation allowance is expected. Accordingly, no provision has been made for federal income taxes in the accompanying
financial statements.
Stock based compensation
The Company records stock-based compensation in
accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,” which establishes accounting
standards for transactions in which an entity exchanges its equity instruments for goods or services. In accordance with guidance provided
under ASC Topic 718, the Company recognizes an expense for the fair value of its stock awards at the time of grant and the fair value
of its outstanding stock options as they vest, whether held by employees or others. As of December 31, 2020 and 2019 there were 0 and
1,101,762 options outstanding, respectively. For the years ended December 31, 2020 and 2019, the Company recorded $355,534 and $518,663
in stock-based compensation expenses, respectively which is included within general and administrative expenses on the accompanying statements
of operations.
Recently Adopted Accounting Pronouncements
On June 20, 2018, the Financial
Accounting Standards Board, or FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce cost and complexity and to improve financial reporting
for share-based payments to nonemployees (for example, service providers, external legal counsel, suppliers, etc.). Under the new standard,
companies will no longer be required to value non-employee awards differently from employee awards. Meaning that companies will value
all equity classified awards at their grant-date under ASC 718 and forgo revaluing the award after this date. The Company adopted ASU
2018-07 on January 1, 2019. The adoption of this standard did not have a material impact on the financial statements.
Financial
Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 “Leases (Topic 842)”- In February
2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use
asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either
operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting,
but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the
lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The Company has adopted this guidance effective January 1, 2019. The Company currently has
an occupancy lease with a one-year term and has elected to apply the short term lease exception.
The Company has implemented all new accounting
pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise
disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have
a material impact on its financial position or results of operations.
NOTE 3 – EXCHANGE AGREEMENT
On April 8, 2020, DTI Motion Corp (“DTIM”)
along with Discovery Technology International, Inc., a Delaware corporation (“DTI”) and DTIM, Inc., a newly formed, wholly-owned
subsidiary of DTIM (the “Merger- Sub”) entered into a merger agreement. The merger was considered effective on May 20, 2020.
As part of the agreement the Merger-Sub merged with and into DTI with DTI surviving as a wholly-owned subsidiary of DTIM and all outstanding
shares of the Company’s common stock (“DTI Common Stock”), Series A Preferred Stock (“DTI Series A Preferred Stock”),
Series B Preferred Stock (“DTI Series B Preferred Stock”) and Series C Preferred Stock (“DTI Series C Preferred Stock”)
and together with the DTI Company Common Stock, collectively, the “DTI Capital Stock”), automatically converted into shares
of common stock of DTIM (“DTIM Common Stock”). In addition, all outstanding DTI stock options (“DTI Stock Options”)
granted under DTI’s equity incentive plan (the “DTI EIP”) and common stock purchase warrants (“DTI Warrants”)
were cancelled. Holders of such cancelled DTI Warrants received shares of DTIM Common Stock, all in consideration for and settlement of
each holder’s cancellation of its DTI Warrants.
The merger has been accounted for as a reverse
merger transaction, with DTI as the accounting acquirer and DTIM as the accounting acquiree. The acquisition of a private operating company
(“DTI”) by a nonoperating shell company (“DTIM”) is considered in substance, a capital transaction rather than
a business combination (or asset acquisition). That is, the transaction is a reverse recapitalization, equivalent to the issuance of shares
by the private operating company for the net monetary assets of the shell company accompanied by a recapitalization. There is no goodwill
or other intangible assets recognized.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December
31, 2020 and 2019:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
4,164
|
|
|
$
|
7,062
|
|
Machinery and equipment
|
|
|
121,433
|
|
|
|
92,630
|
|
Computer software
|
|
|
-
|
|
|
|
6,995
|
|
Leasehold improvements
|
|
|
5,000
|
|
|
|
-
|
|
Less: Accumulated depreciation
|
|
|
(38,855
|
)
|
|
|
(29,387
|
)
|
Total, net
|
|
$
|
91,742
|
|
|
$
|
77,300
|
|
Depreciation expense was $17,353 and $16,860 for
the years ended December 31, 2020 and 2019, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED
EXPENSES
Accounts payable and accrued expenses as of December 31, 2020 and 2019,
consisted of the following:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
398,155
|
|
|
$
|
46,542
|
|
Accrued payroll
|
|
|
997,410
|
|
|
|
147,131
|
|
Credit card payable
|
|
|
42,361
|
|
|
|
37,891
|
|
Accrued director fees
|
|
|
5,133
|
|
|
|
5,134
|
|
Accrued - other
|
|
|
1,417
|
|
|
|
-
|
|
Total
|
|
$
|
1,444,476
|
|
|
$
|
236,698
|
|
NOTE 6 – NOTES PAYABLE
In July 2020, Motion made an offering of convertible
notes not to exceed approximately $2,400,000. In October, the Board authorized increasing the potential investment to not exceed $5,000,000.
Unless earlier terminated by the Company, the offering shall terminate on April 30, 2021. These notes are payable by August 21, 2021,
interest accruing at 10% per annum. At the completion of a qualifying investment, Motion, at its sole discretion may convert the loans
and any accrued interest to common stock with a 120% multiplier on the value of the common stock in the qualifying investment. As of December
31, 2020, the carrying amount of these notes was $650,000 with accrued interest of $26,766.
NOTE 7 – PAYCHECK PROTECTION PROGRAM
LOAN
In May 2020, DTI received a Paycheck Protection
Program (PPP) loan under the terms of the CARES Act in the amount of $106,477 and an Economic Industry Disaster Loan (“EIDL”)
of $5,000. The interest rate on the PPP loan is 1% fixed with a term of 24 months. DTI may apply for loan forgiveness.
NOTE 8 - EQUITY
On May 20, 2020 a merger was completed between
Motion and DTI. The merger was approved by over 66% of all classes of stock for both Motion and DTI. Terms for the merger were included
in a confidential term sheet. All common stock, preferred stock Series A, B and C, and warrants of DTI were converted. All DTI options
were cancelled as of the merger date. See Footnote 3. The conversion ratio for the different classes of stock were agreed to by the shareholders
in the merger. The conversion ratios were as follows:
|
|
Conversion
ratio
|
|
DTI Pre-merger stockholders (Common Stock)
|
|
|
16.13
|
|
DTI Pre-merger stockholders (Series A)
|
|
|
5.76
|
|
DTI Pre-merger stockholders (Series B)
|
|
|
5.38
|
|
DTI Pre-merger stockholders Series B Exchange Warrants
|
|
|
16.13
|
|
DTI Pre-merger stockholders (Series C)
|
|
|
3.75
|
|
DTI Pre-merger stockholder Series C Exchange Warrants
|
|
|
8.06
|
|
Placement Agent Warrants
|
|
|
1.61
|
|
Common stock
After the merger and recapitalization on May 20,
2020, there were 10,000,000 shares issued and outstanding.
On June 10, 2020, 24,759 shares were issued for
commission on the March 2020 investment in Motion. Inclusive of shares issued to preserve anti-dilution of 33,500, the total shares issued
were 58,259. The shares were valued at $9,450.
As of December 31, 2020 and 2019, there were 10,058,259
and 7,678,535 shares issued and outstanding, respectively.
DTI Preferred stock
In 2019, there were 15,000,000 shares authorized
as preferred stock, of which 2,766,317 are designated as Series A, 3,390,780 are designated as Series B and 5,742,903 designated as Series
C. 3,100,000 shares have yet to be designated. At the merger all DTI preferred stock was converted to common stock of Motion.
Series C Preferred Stock
Between March 20, 2019 and December 9, 2019, DTI
sold 1,327,254 shares of Series C Preferred Stock for $1,659,068. The Company received $1,439,993 in net proceeds after $219,075 in stock
issuance costs. In connection with the sale, the holders received 1,327,254 Class A Warrants and 663,627 Class B Warrants. The amount
of $1,659,068 was allocated among the instruments as follows: (i) $867,603 to Series C Preferred Stock, (ii) $561,559 to Class A Warrants,
and (iii) $229,906 to Class B Warrants.
In connection with the Series C Preferred issuances,
the Company issued 712,431 warrants to the Series B Preferred holders to make them whole. These warrants were valued at $349,078 and are
recorded on the statement of operations under stock-based compensation. At the merger the Series C preferred stock and warrants were converted
to common stock of Motion.
On February 20, 2020 DTI issued 80,000 shares
of Series C Preferred Stock and 120,000 warrants for $100,000.
The Company has selected the Black-Scholes-Merton
(“BSM”) valuation technique to fair value the warrants because it believes that this technique is reflective of all the inputs
that market participants would likely consider in transactions involving warrants. Significant inputs and results arising from the BSM
calculation are as follows:
|
|
December
31,
2020
|
|
|
December
31,
2019
|
|
Underlying price
|
|
$
|
1.25
|
|
|
$
|
1.25
|
|
Contractual strike price
|
|
$
|
1.25 - $3.00
|
|
|
$
|
1.25 - $3.00
|
|
Contractual term to maturity
|
|
|
5.00 Years
|
|
|
|
5.00 Years
|
|
Market volatility:
|
|
|
|
|
|
|
|
|
Equivalent Volatility
|
|
|
83.36
|
%
|
|
|
66.17% - 130.70
|
%
|
Interest rate
|
|
|
1.37
|
%
|
|
|
1.37% - 3.04
|
%
|
At the merger, the Series C preferred stock and
warrants were converted to common stock of Motion.
Equity Incentive Plan
On August 19, 2011, the Board of Directors adopted
DTI’s “2011 Equity Incentive Plan” (the “Plan”) effective immediately. The maximum number of options
issuable under the Plan is 1,000,000 shares or additional amounts if needed under shareholder approval. The exercise price of the options
granted under the plan is determined by the Board at its sole discretion. Options are exercisable over periods not exceeding ten years
and vesting and exercisability is determined by the board at grant. The plan involves restricted stock and stock options. Stock options
can be incentive stock options and non-qualified options.
During the year ended December 31, 2019, DTI granted
a total of 105,000 options with an exercise prices of $1.25. The grant date value of these options was $104,550. Of the $104,550 in grant
date fair value, $30,882 was recorded as stock-based compensation for the year ended December 31, 2019. Of the 880,000 options granted
in 2018, $487,781 was recorded as stock-based compensation for the year ended December 31, 2019. The aggregate compensation expense for
the year ended December 31, 2019 was $518,663. As of the merger date of May 20, 2020, all options were cancelled. As a result of the cancellation,
the unvested portion of $311,979 was accelerated and the expense was charged in full immediately.
The Company selected the Black-Scholes-Merton
(“BSM”) valuation technique to calculate the grant date fair values for the stock options because it believes that this technique
is reflective of all the inputs that market participants would likely consider in transactions involving warrants. The inputs include
the strike price, underlying price, term to expiration, volatility, and risk-free interest rate.
No options were outstanding as of December 31,
2020. At December 31, 2019 options outstanding were:
|
|
Number
of Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Contractual Life
|
Options Outstanding – January 1, 2019
|
|
|
1,060,000
|
|
|
$
|
1.33
|
|
|
8.8 years
|
Issued
|
|
|
105,000
|
|
|
$
|
1.32
|
|
|
10 years
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
Expired
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(63,238
|
)
|
|
$
|
1.91
|
|
|
6.9 years
|
Options Outstanding – December 31, 2019
|
|
|
1,101,762
|
|
|
$
|
1.40
|
|
|
7.9 years
|
Issued
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
|
Forfeited
|
|
|
-
|
|
|
|
|
|
|
|
Cancelled at merger date
|
|
|
(1,101,762
|
)
|
|
|
|
|
|
|
Options Outstanding – December 31, 2020
|
|
|
-
|
|
|
|
|
|
|
|
Warrants
No warrants were outstanding for the Company at
year end. The following table represents warrant activity for DTI as of and for the years ended December 31, 2020 and 2019:
|
|
Number
of Warrants
|
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual Life
|
|
Warrants Outstanding – January 1, 2019
|
|
|
7,839,804
|
|
|
$
|
1.85
|
|
|
4.0 years
|
|
Issued
|
|
|
2,119,553
|
|
|
$
|
2.00
|
|
|
5.0 years
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
|
|
Warrants Outstanding – December 31, 2019
|
|
|
9,959,357
|
|
|
$
|
1.88
|
|
|
3.30 years
|
|
Issued
|
|
|
-
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
|
|
Cancelled at merger date
|
|
|
(9,959,357
|
)
|
|
|
|
|
|
|
|
Warrants Outstanding – December 31, 2020
|
|
|
-
|
|
|
|
|
|
|
|
|
NOTE 9 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company
may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance
with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies
and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably
estimated, it establishes the necessary accruals. As of December 31, 2020, the Company is not aware of any contingent liabilities that
should be reflected in the financial statements.
The Company entered into employment agreements
with its President and Chief Executive Officer as of March 15, 2020. Under the terms of these agreements the Company will be liable for
severance and other payments under certain conditions. The employment agreements are for a period of 36 months and may be terminated by
the Chief Executive Officer or President upon three months written notice.
The Company
entered into a facilities’ lease on January 1, 2020 for a premise located at 6968 Professional Parkway East, Sarasota, FL 34240.
The lease period is for one year. Under Topic 842, a short-term lease is a lease that, at the commencement date, has a ‘lease
term’ of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain
to exercise. Although short-term leases are in the scope of Topic 842, a simplified form of accounting is permitted. A lessee can elect,
by class of underlying asset, not to apply the recognition requirements of Topic 842 and instead to recognize the lease payments as lease
cost on a straight-line basis over the lease term. The Company has elected the short-term method to account for these leases. Total rent
expense for the years ending December 31, 2020 and 2019 were $45,551 and $42,571, respectively, which are included in general and administrative
expense within the accompanying statements of operations.
NOTE 10 – GOING CONCERN
The Company's financial statements are prepared
using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation
of liabilities in the normal course of business. At December 31, 2020 and December 31, 2019,
the Company had $68,493 and $169,501 in cash and $1,987,853 and $43,264 in negative working capital, respectively. For the
years ended December 31, 2020 and 2019, the Company had a net loss of 2,803,029 and $1,857,633, respectively. Continued losses
may adversely affect the liquidity of the Company in the future. In view of the matters described in the preceding paragraph, recoverability
of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and to succeed in its future
operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE 11 – INCOME TAXES
The Company adopted the provisions of uncertain
tax positions as addressed in ASC 740-10-65-1. As a result of the implementation of ASC 740-10-65-1, the Company recognized no increase
in the liability for unrecognized tax benefits. As of December 31, 2020 the Company had net operating loss carry forwards of approximately
$13,178,237 that may be available to reduce future years’ taxable income in varying amounts through 2030. Future tax benefits
which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined
not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss
carry-forwards.
The valuation allowance at December 31, 2020 was
approximately $13,178,237. The net change in valuation allowance during the year ended December 31, 2020 was $(2,803,029). In assessing
the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred
income tax assets will not be realized.
The components of the net deferred tax asset (liability)
at December 31, 2020 and, 2019 and the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are
indicated below:
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Net operating loss carry-forward
|
|
$
|
13,178,237
|
|
|
$
|
10,375,208
|
|
Valuation Allowance
|
|
|
(13,178,237
|
)
|
|
|
(10,375,208
|
)
|
Net Deferred Tax Asset (Liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
Income tax benefit resulting
from applying statutory rates in jurisdictions in which we are taxed (Federal and State of Florida) differs from the income tax provision
(benefit) in our financial statements. The following table reflects the reconciliation for the years ended December 31, 2020 and 2019:
|
|
Year
Ended December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Benefit at federal and statutory rate
|
|
|
(21
|
)%
|
|
|
(21
|
)%
|
Change in valuation allowance
|
|
|
21
|
%
|
|
|
21
|
%
|
Effective tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
NOTE 12 – SUBSEQUENT EVENTS
On January 19, 2021, the Company issued a 10%
convertible note for $250,000. The note matures on August 21, 2021 and is convertible to Company common stock at a 120% multiplier of
the conversion rate of a public or private placement of $1,000,000 or greater.
The Company changed its name from DTI Motion Corp.
to Piezo Motion Corp. on February 1, 2021.
The Company entered into a lease agreement for
office space located in Sarasota, Florida. The term of the lease is for a period of two years commencing on February 1, 2021 and ending
on February 1, 2023. The rent is $6,530 per month for year 1, $6,726 per month for year 2 and $6,928 per month for year 3. The Company
will account for the lease under ASC 842 whereby the operating lease right-of-use assets and liabilities are recognized at the present
value of the future lease payments at the lease commencement date.
On January 19, 2021 and February 10, 2021 respectively,
the Company issued 10% convertible notes for $250,000 each, for a total of $500,000. The notes mature on August 21, 2021 and are
convertible to Company common stock at a 120% multiplier of the conversion rate of a public or private placement of $1,000,000 or greater.
Piezo
Motion Corp. (f/n/a DTI Motion Corp.) and Subsidiary
INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED
MARCH
31, 2021
Consolidated Financial Statements
Piezo
Motion Corp. (f/n/a DTI Motion Corp.) and Subsidiary
Piezo Motion Corp. (f/n/a DTI Motion Corp.)
and Subsidiary
Consolidated Balance Sheets
|
|
As of
March 31,
2021
|
|
|
As of
December 31,
2020
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
695,841
|
|
|
$
|
68,943
|
|
Inventory
|
|
|
49,816
|
|
|
|
44,904
|
|
Advances to officers
|
|
|
13,617
|
|
|
|
7,542
|
|
Deposits and prepaid expenses
|
|
|
19,378
|
|
|
|
12,000
|
|
Total current assets
|
|
|
778,652
|
|
|
|
133,389
|
|
|
|
|
|
|
|
|
|
|
Fixed assets
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
106,531
|
|
|
|
91,742
|
|
Right of use asset
|
|
|
212,716
|
|
|
|
-
|
|
Total Assets
|
|
$
|
1,097,899
|
|
|
$
|
225,131
|
|
|
|
|
|
|
|
|
|
|
Liabilities & Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
1,491,681
|
|
|
$
|
1,444,476
|
|
Accrued interest
|
|
|
84,691
|
|
|
|
26,766
|
|
Note payable
|
|
|
1,969,982
|
|
|
|
650,000
|
|
Lease liability
|
|
|
66,224
|
|
|
|
-
|
|
Total current liabilities
|
|
|
3,612,578
|
|
|
|
2,121,242
|
|
|
|
|
|
|
|
|
|
|
Paycheck protection loan
|
|
|
-
|
|
|
|
111,477
|
|
Lease liability, non-current
|
|
|
146,913
|
|
|
|
-
|
|
Total Liabilities
|
|
|
3,759,491
|
|
|
|
2,232,719
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 60,000,000 shares authorized; 10,058,259 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
|
|
|
1,006
|
|
|
|
1,006
|
|
Additional paid in capital
|
|
|
11,169,643
|
|
|
|
11,169,643
|
|
Accumulated deficit
|
|
|
(13,832,241
|
)
|
|
|
(13,178,237
|
)
|
Total Stockholders’ Equity
|
|
|
(2,661,592
|
)
|
|
|
(2,007,588
|
)
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
1,097,899
|
|
|
$
|
225,131
|
|
See
accompanying notes to the unaudited financial statements.
Piezo Motion Corp. (f/n/a DTI Motion Corp.) and Subsidiary
Consolidated
Statements of Operations
|
|
For the three months ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,475
|
|
|
$
|
18,481
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
575
|
|
|
|
10,588
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
900
|
|
|
|
7,893
|
|
|
|
|
|
|
|
|
|
|
General and administrative corporate expenses:
|
|
|
|
|
|
|
|
|
General and administrative expenses
|
|
|
349,335
|
|
|
|
190,085
|
|
Personnel expenses
|
|
|
287,537
|
|
|
|
116,698
|
|
Research and development
|
|
|
53,328
|
|
|
|
51,317
|
|
Sales and marketing expenses
|
|
|
12,924
|
|
|
|
-
|
|
Depreciation expense
|
|
|
5,333
|
|
|
|
1,221
|
|
Total general and administrative corporate expenses
|
|
|
708,457
|
|
|
|
359,321
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(707,557
|
)
|
|
|
(351,428
|
)
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Gain on forgiveness of paycheck protection loan
|
|
|
112,338
|
|
|
|
-
|
|
Interest expense
|
|
|
(58,785
|
)
|
|
|
(621
|
)
|
Total other income (expense)
|
|
|
53,553
|
|
|
|
(621
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(654,004
|
)
|
|
$
|
(352,049
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share on net loss
|
|
$
|
(0.07
|
)
|
|
$
|
(0.05
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted
|
|
|
10,058,259
|
|
|
|
7,678,535
|
|
Piezo Motion Corp. (f/n/a DTI Motion Corp.) and Subsidiary
Consolidated
Statement of Changes in Stockholders’ Equity
From January 1, 2021 through March 31, 2021
|
|
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
|
|
10,058,259
|
|
|
$
|
1,006
|
|
|
$
|
11,169,643
|
|
|
$
|
(13,178,237
|
)
|
|
$
|
(2,007,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(654,004
|
)
|
|
|
(654,004
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2021
|
|
|
10,058,259
|
|
|
$
|
1,006
|
|
|
$
|
11,169,643
|
|
|
$
|
(13,832,241
|
)
|
|
$
|
(2,661,592
|
)
|
See
accompanying notes to the financial statements.
Piezo Motion Corp. (f/n/a DTI Motion Corp.)
and Subsidiary
Consolidated Statement of Changes in Stockholders’
Deficit
From January 1, 2020 through March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
Series A
Preferred Stock
|
|
|
Series B
Preferred Stock
|
|
|
Series C
Preferred Stock
|
|
|
Common
Stock
|
|
|
Paid
in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019
|
|
|
2,766,317
|
|
|
$
|
277
|
|
|
|
2,424,265
|
|
|
$
|
242
|
|
|
|
5,070,157
|
|
|
$
|
507
|
|
|
|
7,678,535
|
|
|
$
|
768
|
|
|
$
|
10,407,450
|
|
|
$
|
(10,375,208
|
)
|
|
$
|
34,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of Series C Preferred Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
80,000
|
|
|
|
8
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,456
|
|
|
|
-
|
|
|
|
53,464
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued in connection with the sale of Series C Preferred Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
46,536
|
|
|
|
-
|
|
|
|
46,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(352,049
|
)
|
|
|
(352,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance March 31, 2020
|
|
|
2,766,317
|
|
|
$
|
277
|
|
|
|
2,424,265
|
|
|
$
|
242
|
|
|
|
5,150,157
|
|
|
$
|
515
|
|
|
|
7,678,535
|
|
|
$
|
768
|
|
|
$
|
10,507,442
|
|
|
$
|
(10,727,257
|
)
|
|
$
|
(218,013
|
)
|
See
accompanying notes to the financial statements.
Piezo Motion Corp. (f/n/a DTI Motion Corp.)
and Subsidiary
Consolidated Statements of Operations
|
|
For the three months ended
|
|
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Cash Flows from Operating Activities
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(654,004
|
)
|
|
$
|
(352,049
|
)
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,333
|
|
|
|
1,221
|
|
Gain on forgiveness of paycheck protection loan
|
|
|
(112,338
|
)
|
|
|
-
|
|
Amortization of right of use asset
|
|
|
421
|
|
|
|
-
|
|
Changes in operating assets & liabilities
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
(12,000
|
)
|
Inventory
|
|
|
(4,912
|
)
|
|
|
(471
|
)
|
Officer advances
|
|
|
(6,075
|
)
|
|
|
2,705
|
|
Deposits and prepaid expenses
|
|
|
(7,378
|
)
|
|
|
-
|
|
Accounts payable and accrued liabilities
|
|
|
47,205
|
|
|
|
91,364
|
|
Accrued interest
|
|
|
58,786
|
|
|
|
-
|
|
Net cash used by operating activities
|
|
|
(672,962
|
)
|
|
|
(269,230
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
Cash paid for property, plant and equipment
|
|
|
(20,122
|
)
|
|
|
-
|
|
Net cash used by investing activities
|
|
|
(20,122
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from notes payable
|
|
|
1,319,982
|
|
|
|
-
|
|
Proceeds from issuance of Series C Preferred Stock
|
|
|
-
|
|
|
|
100,000
|
|
Net cash provided by financing activities
|
|
|
1,319,982
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
626,898
|
|
|
|
(169,230
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
68,943
|
|
|
|
169,501
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
695,841
|
|
|
$
|
271
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to the financial statements.
PIEZO
MOTION CORP. (F/N/A DTI MOTION CORP.) AND SUBSIDIARY
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2021
NOTE
1 - ORGANIZATION AND NATURE OF BUSINESS
Piezo
Motion Corp., formerly known as DTI Motion Corp. (“Motion or “the Company”) was formed as a Delaware corporation on
January 24, 2020. The initial shareholding was set up on March 15, 2020 and a share offering was made at the end of March, 2020. On March
27, 2020, Motion entered into a secured, short-term loan in an amount up to $249,000 to Discovery Technology International, Inc. (“DTI”)
for the purpose of funding of operations. The loan maturity was April 27, 2020. DTI was unable to repay the loan and the shareholders
authorized a merger between Motion (legal acquirer) and DTI (accounting acquirer) which was completed on May 20, 2020. See Note 3 for
further details on the share exchange.
DTI’s
office is located in Sarasota, Florida. DTI is a company focused on the ultrasonic standing wave-type piezo motor technology for rotary
and linear motion. DTI has experience in the research and development, as well as the manufacturing, of piezo motors for high-tech industries
across the globe.
The
Company changed its name from DTI Motion Corp. to Piezo Motion Corp. on February 1, 2021.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
significant accounting policies of the Company are as follows:
Basis
of Presentation and Consolidation
The
Company has one wholly-owned subsidiary: Discovery Technology International, Inc. (“DTI”). The consolidated financial statements,
which include the accounts of the Company and its wholly-owned subsidiary, are prepared in conformity with generally accepted accounting
principles in the United States of America (U.S. GAAP). All significant intercompany balances and transactions have been eliminated.
The consolidated financial statements, which include the accounts of the Company and its wholly-owned subsidiary, and related disclosures,
have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Financial
Statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) and presented in US dollars. The year end is December 31.
Use
of Estimates
Management
uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ
from these estimates and assumptions.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Company
maintains deposits primarily in one financial institution, which may at times exceed amounts covered by insurance provided by the U.S.
Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses related to amounts in excess of
FDIC limits.
Fair
Value of Financial Instruments
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair
value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the
case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants
would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework
for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical
level.
The
following are the hierarchical levels of inputs to measure fair value:
|
●
|
Level
1 – Observable inputs that reflect quoted market prices in active markets for identical
assets or liabilities.
|
|
●
|
Level
2 – Inputs reflect quoted prices for identical assets or liabilities in markets that
are not active; quoted prices for similar assets or liabilities in active markets; inputs
other than quoted prices that are observable for the assets or liabilities; or inputs that
are derived principally from or corroborated by observable market data by correlation or
other means.
|
|
●
|
Level
3 – Unobservable inputs reflecting the Company’s assumptions incorporated in
valuation techniques used to determine fair value. These assumptions are required to be consistent
with market
|
The
carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, accounts receivable, accounts
payable, accrued expenses and interest, certain notes payable, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its equity instruments (such as warrants and stock-based compensation) at fair value.
Property,
Plant and Equipment
Property,
plant and equipment are carried at cost. Depreciation is provided on the straight-line method over the assets estimated service lives.
Expenditures for maintenance and repairs are charged to expense in the period in which they are incurred, and betterments are capitalized.
The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses
are reflected in the accompanying statements of operations of the respective period. The estimated useful lives range from 3 to 7 years.
Revenue
Recognition
The
Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from contracts
with customers,” (Topic 606). Revenue is recognized when a customer obtains control of promised goods or services. In addition,
the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with
customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those
goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods
in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in
the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation
of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance
obligation. The Company’s main revenue stream is from product sales. The performance obligation associated with a typical product
sale will be satisfied upon shipment to the customer, and the revenue will be recognized at that time.
The
Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled
to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Financial
Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606 at contract inception, the
Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations
are distinct. The Company recognizes as revenues the amount of the transaction price that is allocated to the respective performance
obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred
to customers at a point in time, typically upon delivery.
Income
Taxes
The
Company follows Section 740-10-30 of the FASB ASC, which requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax
assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the fiscal year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation
allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the fiscal years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
the statements of operations in the period that includes the enactment date. Through March 31, 2021, the Company has an accumulated deficit.
Due to uncertainty of realization for these losses, a full valuation allowance is expected. Accordingly, no provision has been made for
federal income taxes in the accompanying financial statements.
Stock
based compensation
The
Company records stock-based compensation in accordance with the provisions of FASB ASC Topic 718, “Accounting for Stock Compensation,”
which establishes accounting standards for transactions in which an entity exchanges its equity instruments for goods or services. In
accordance with guidance provided under ASC Topic 718, the Company recognizes an expense for the fair value of its stock awards at the
time of grant and the fair value of its outstanding stock options as they vest, whether held by employees or others. As of March 31,
2021 and December 31, 2020 there were 0 options outstanding, respectively.
Recently
Adopted Accounting Pronouncements
On
June 20, 2018, the Financial Accounting Standards Board, or FASB issued ASU 2018-07,
Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is
intended to reduce cost and complexity and to improve financial reporting for share-based payments to nonemployees (for example, service
providers, external legal counsel, suppliers, etc.). Under the new standard, companies will no longer be required to value non-employee
awards differently from employee awards. Meaning that companies will value all equity classified awards at their grant-date under ASC
718 and forgo revaluing the award after this date. The Company adopted ASU 2018-07 on January 1, 2019. The adoption of this standard
did not have a material impact on the financial statements.
Financial
Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 “Leases (Topic 842)”- In February
2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use
asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either
operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting,
but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the
lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The Company has adopted this guidance effective January 1, 2019. The Company currently has
an occupancy lease with a one-year term and has elected to apply the short term lease exception.
The
Company has implemented all new accounting pronouncements that are in effect. These pronouncements did not have any material impact on
the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements
that have been issued that might have a material impact on its financial position or results of operations.
NOTE
3 – EXCHANGE AGREEMENT
On
April 8, 2020, Piezo Motion Corp (“Motion”) along with Discovery Technology International, Inc., a Delaware corporation (“DTI”)
and DTIM, Inc., a newly formed, wholly-owned subsidiary of DTIM (the “Merger- Sub”) entered into a merger agreement. The
merger was considered effective on May 20, 2020. As part of the agreement the Merger-Sub merged with and into DTI with DTI surviving
as a wholly-owned subsidiary of Motion and all outstanding shares of the Company’s common stock (“DTI Common Stock”),
Series A Preferred Stock (“DTI Series A Preferred Stock”), Series B Preferred Stock (“DTI Series B Preferred Stock”)
and Series C Preferred Stock (“DTI Series C Preferred Stock”) and together with the DTI Company Common Stock, collectively,
the “DTI Capital Stock”), automatically converted into shares of common stock of DTIM (“DTIM Common Stock”).
In addition, all outstanding DTI stock options (“DTI Stock Options”) granted under DTI’s equity incentive plan (the
“DTI EIP”) and common stock purchase warrants (“DTI Warrants”) were cancelled. Holders of such cancelled DTI
Warrants received shares of Motion Common Stock, all in consideration for and settlement of each holder’s cancellation of its DTI
Warrants.
The
merger has been accounted for as a reverse merger transaction, with DTI as the accounting acquirer and Motion as the accounting acquiree.
The acquisition of a private operating company (“DTI”) by a nonoperating shell company (“Motion”) is considered
in substance, a capital transaction rather than a business combination (or asset acquisition). That is, the transaction is a reverse
recapitalization, equivalent to the issuance of shares by the private operating company for the net monetary assets of the shell company
accompanied by a recapitalization. There is no goodwill or other intangible assets recognized.
NOTE
4 – PROPERTY, PLANT AND EQUIPMENT
Property,
plant and equipment consisted of the following at March 31, 2021 and December 31, 2020:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Computer equipment
|
|
$
|
4,164
|
|
|
$
|
4,164
|
|
Machinery and equipment
|
|
|
135,740
|
|
|
|
121,433
|
|
Computer software
|
|
|
-
|
|
|
|
-
|
|
Leasehold improvements
|
|
|
10,815
|
|
|
|
5,000
|
|
Less: Accumulated depreciation
|
|
|
(44,188
|
)
|
|
|
(38,855
|
)
|
Total, net
|
|
$
|
106,531
|
|
|
$
|
91,742
|
|
Depreciation
expense was $5,333 and $1,221 for the three months ended March 31, 2021 and 2020, respectively.
NOTE
5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses as of March 31, 2020 and December 31, 2020, consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
328,626
|
|
|
$
|
398,155
|
|
Accrued payroll
|
|
|
1,099,050
|
|
|
|
997,410
|
|
Credit card payable
|
|
|
58,872
|
|
|
|
42,361
|
|
Accrued director fees
|
|
|
5,133
|
|
|
|
5,133
|
|
Accrued - other
|
|
|
-
|
|
|
|
1,417
|
|
Total
|
|
$
|
1,491,681
|
|
|
$
|
1,444,476
|
|
NOTE
6 – NOTES PAYABLE
In
July 2020, Motion made an offering of convertible notes not to exceed approximately $2,400,000. In October, the Board authorized increasing
the potential investment to not exceed $5,000,000. Unless earlier terminated by the Company, the offering shall terminate on April 30,
2021. These notes are payable by August 21, 2021, interest accruing at 10% per annum. At the completion of a qualifying investment, Motion,
at its sole discretion may convert the loans and any accrued interest to common stock with a 120% multiplier on the value of the common
stock in the qualifying investment. As of March 31, 2021 and December 31, 2020, the carrying amount of these notes was $1,969,982 and
$650,000, respectively with accrued interest of $84,691 and $26,766, respectively.
NOTE
7 – PAYCHECK PROTECTION PROGRAM LOAN
In
May 2020, DTI received a Paycheck Protection Program (PPP) loan under the terms of the CARES Act in the amount of $106,477 and an Economic
Industry Disaster Loan (“EIDL”) of $5,000. The interest rate on the PPP loan is 1% fixed with a term of 24 months. DTI applied
for and was granted loan forgiveness. As a result, DTI recorded a gain on forgiveness of PPP loan in the amount of $112,338.
NOTE
8 - EQUITY
On
May 20, 2020 a merger was completed between Motion and DTI. The merger was approved by over 66% of all classes of stock for both Motion
and DTI. Terms for the merger were included in a confidential term sheet. All common stock, preferred stock Series A, B and C, and warrants
of DTI were converted. All DTI options were cancelled as of the merger date. See Footnote 3. The conversion ratio for the different classes
of stock were agreed to by the shareholders in the merger. The conversion ratios were as follows:
|
|
Conversion ratio
|
|
DTI Pre-merger stockholders (Common Stock)
|
|
|
16.13
|
|
DTI Pre-merger stockholders (Series A)
|
|
|
5.76
|
|
DTI Pre-merger stockholders (Series B)
|
|
|
5.38
|
|
DTI Pre-merger stockholders Series B Exchange Warrants
|
|
|
16.13
|
|
DTI Pre-merger stockholders (Series C)
|
|
|
3.75
|
|
DTI Pre-merger stockholder Series C Exchange Warrants
|
|
|
8.06
|
|
Placement Agent Warrants
|
|
|
1.61
|
|
Common
stock
After
the merger and recapitalization on May 20, 2020, there were 10,000,000 shares issued and outstanding.
On
June 10, 2020, 24,759 shares were issued for commission on the March 2020 investment in Motion. Inclusive of shares issued to preserve
anti-dilution of 33,500, the total shares issued were 58,259. The shares were valued at $9,450.
As
of March 31, 2021 and December 31, 2020, there were 10,058,259 shares issued and outstanding.
NOTE
9 – COMMITMENTS AND CONTINGENCIES
During
the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates
the merits of the case in accordance with FASB ASC 450-20-50, Contingencies. The Company evaluates its exposure to the matter,
possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome
is probable and can be reasonably estimated, it establishes the necessary accruals. As of December 31, 2020, the Company is not aware
of any contingent liabilities that should be reflected in the financial statements.
The
Company entered into employment agreements with its President and Chief Executive Officer as of March 15, 2020. Under the terms of these
agreements the Company will be liable for severance and other payments under certain conditions. The employment agreements are for a
period of 36 months and may be terminated by the Chief Executive Officer or President upon three months written notice.
The
Company entered into a facilities’ lease on January 1, 2020 for a premise located at 6968 Professional Parkway East, Sarasota,
FL 34240. The lease period is for one year. Under Topic 842, a short-term lease is a lease that, at the commencement date, has a ‘lease
term’ of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain
to exercise. Although short-term leases are in the scope of Topic 842, a simplified form of accounting is permitted. A lessee can elect,
by class of underlying asset, not to apply the recognition requirements of Topic 842 and instead to recognize the lease payments as lease
cost on a straight-line basis over the lease term. The Company has elected the short-term method to account for these leases.
NOTE
10 – GOING CONCERN
The
Company’s financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of business. At
March 31, 2021 and December 31, 2020, the Company had $695,841 and $68,493 in cash and $2,833,926 and $1,987,853 in negative working
capital, respectively. For the three months ended March 31, 2021 and 2020, the Company had a net loss of $654,004 and $352,049,
respectively. Continued losses may adversely affect the liquidity of the Company in the future. In view of the matters described
in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets
is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital,
obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability
and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
NOTE
11 – OPERATING LEASE RIGHT-OF-USE ASSET AND OPERATING LEASE LIABILITY
The
Company leases 3,562 square feet of office space located at The Cannon Building at 6710 Professional Parkway West, Sarasota, FL 34240.
The Company entered into a third party lease agreement commencing on February 1, 2021 through February 1, 2024 with a base rent of $6,530
per month for year 1, $6,726 for year 2 and $6,928 for year 3.
Operating
lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement
date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 10%, as the interest rate
implicit in most of our leases is not readily determinable. Operating lease expense is recognized on a straight-line basis over the lease
term. During the three months ended March 31, 2021, the Company recorded $14,331 as operating lease expense which is included in general
and administrative expenses on the statements of operations.
Right-of-
use assets are summarized below:
|
|
March 31, 2021
|
|
Office lease
|
|
$
|
223,481
|
|
Less: accumulated amortization
|
|
|
(10,765
|
)
|
Right-of-use assets, net
|
|
$
|
212,716
|
|
Operating
lease liabilities are summarized below:
|
|
March 31, 2021
|
|
Office lease
|
|
$
|
213,137
|
|
Less: current portion
|
|
|
(66,224
|
)
|
Long term portion
|
|
$
|
146,913
|
|
|
|
|
|
|
Maturity of lease liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
Year ending December 31, 2021
|
|
$
|
62,593
|
|
Year ending December 31, 2022
|
|
|
85,753
|
|
Year ending December 31, 2023
|
|
|
88,326
|
|
Year ending December 31, 2024
|
|
|
7,378
|
|
|
|
|
244,050
|
|
Less: imputed interest
|
|
|
(30,913
|
)
|
Lease liability
|
|
$
|
213,137
|
|
NOTE
12 – RELATED PARTY TRANSACTIONS
The
Company reimbursed $39,600 of rent paid by the CEO, Hassan Kotob, for an office rented by a company he controls. The rent is paid to
a third-party rental agency. Piezo Motion is not a party to the lease; however, the space has been used extensively for Company business
since April 2020.
NOTE
13 – SUBSEQUENT EVENTS
On
June 11, 2021 and June 28, 2021 respectively, the Company issued 10% convertible notes for $500,000 and $1,000,000, for a total of $1,500,000.
The notes mature on August 12, 2021. They are convertible to common stock at a 120% multiplier of the conversion rate of a public or
private placement of $1,000,000 or greater.
On
June 11, 2021, the Company entered into an Agreement and Plan of Merger and Reorganization with Brain Scientific, Inc., a Nevada Corporation,
and BRSF Acquisition, Inc., a Delaware Corporation. The merger was unanimously approved by the Board of Directors and consented to by
the majority of shareholders.
Appendix A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
Among
BRAIN SCIENTIFIC INC., a Nevada corporation,
BRSF ACQUISITION INC., a Delaware corporation,
And
PIEZO MOTION CORP., a Delaware corporation
June 11, 2021
TABLE OF CONTENTS
|
|
Page
|
ARTICLE I
|
THE MERGER
|
1
|
1.1
|
The Merger
|
1
|
1.2
|
The Closing
|
1
|
1.3
|
Actions at the Closing
|
2
|
1.4
|
Additional Actions
|
2
|
1.5
|
Conversion of Company and Acquisition Subsidiary Securities
|
2
|
1.6
|
Dissenting Shares
|
3
|
1.7
|
Fractional Shares
|
4
|
1.8
|
Options and Warrants
|
4
|
1.9
|
Directors and Officers
|
4
|
1.10
|
Certificate of Incorporation and Bylaws
|
4
|
1.11
|
No Further Rights
|
4
|
1.12
|
Closing of Transfer Books
|
5
|
1.13
|
Exemption from Registration; Rule 144
|
5
|
1.14
|
Certain Tax Matters
|
5
|
|
|
|
ARTICLE II
|
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
|
5
|
2.1
|
Organization, Qualification and Corporate Power
|
6
|
2.2
|
Capitalization
|
6
|
2.3
|
Authorization of Transaction
|
7
|
2.4
|
Compliance with Laws
|
7
|
2.5
|
Non-contravention
|
7
|
2.6
|
Litigation
|
8
|
2.7
|
Employees and Employee Benefits
|
8
|
2.8
|
Assets
|
8
|
2.9
|
Owned Real Property
|
8
|
2.10
|
Real Property Leases
|
8
|
2.11
|
Powers of Attorney
|
8
|
2.12
|
Warranties
|
8
|
2.13
|
Environmental Matters
|
9
|
2.14
|
Brokers’ Fees
|
9
|
2.15
|
Disclosure
|
9
|
2.16
|
Interested Party Transactions
|
9
|
2.17
|
Duty to Make Inquiry
|
10
|
2.18
|
Minute Books
|
10
|
2.19
|
Board Action
|
10
|
2.20
|
Intellectual Property
|
10
|
2.21
|
International Trade; Anti-Corruption
|
10
|
2.22
|
Takeover Laws
|
11
|
2.23
|
Continuity of Business
|
12
|
2.24
|
Contracts
|
12
|
2.25
|
Tax Matters
|
13
|
2.26
|
Absence of Certain Changes
|
13
|
2.27
|
Undisclosed Liabilities
|
13
|
2.28
|
No Additional Representations
|
13
|
ARTICLE III
|
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE ACQUISITION SUBSIDIARY
|
14
|
3.1
|
Organization, Qualification and Corporate Power
|
14
|
3.2
|
Capitalization
|
15
|
3.3
|
Authorization of Transaction
|
15
|
3.4
|
Noncontravention
|
16
|
3.5
|
Subsidiaries
|
16
|
3.6
|
SEC Reports and Prior Registration Statement Matters
|
17
|
3.7
|
Compliance with Laws
|
17
|
3.8
|
Financial Statements
|
17
|
3.9
|
Absence of Certain Changes
|
18
|
3.10
|
Undisclosed Liabilities
|
18
|
3.11
|
Off-Balance Sheet Arrangements
|
18
|
3.12
|
Tax Matters
|
18
|
3.13
|
Assets
|
19
|
3.14
|
Owned Real Property
|
19
|
3.15
|
Real Property Leases
|
19
|
3.16
|
Contracts
|
19
|
3.17
|
Accounts Receivable
|
20
|
3.18
|
Powers of Attorney
|
20
|
3.19
|
Insurance
|
20
|
3.20
|
Warranties
|
20
|
3.21
|
Litigation
|
20
|
3.22
|
Employees
|
20
|
3.23
|
Employee Benefits
|
21
|
3.24
|
Environmental Matters
|
21
|
3.25
|
Permits
|
21
|
3.26
|
Certain Business Relationships with Affiliates
|
21
|
3.27
|
Tax-Free Reorganization
|
22
|
3.28
|
Transfer
|
22
|
3.29
|
Brokers’ Fees
|
22
|
3.30
|
Disclosure
|
22
|
3.31
|
Interested Party Transactions
|
22
|
3.32
|
Duty to Make Inquiry
|
23
|
3.33
|
Accountants
|
23
|
3.34
|
Minute Books
|
23
|
3.35
|
Board Action
|
23
|
3.36
|
Takeover Laws
|
23
|
3.37
|
No Additional Representations
|
24
|
3.38
|
Intellectual Property
|
24
|
3.39
|
International Trade; Anti-Corruption
|
25
|
|
|
|
ARTICLE IV
|
COVENANTS
|
25
|
4.1
|
Closing Efforts
|
25
|
4.2
|
Governmental and Thirty-Party Notices and Consents
|
25
|
4.3
|
8-K
|
26
|
4.4
|
Operation of Company Business
|
26
|
4.5
|
Access to Company Information
|
27
|
4.6
|
Operation of Parent Business
|
27
|
4.7
|
Access to Parent Information
|
28
|
4.8
|
Expenses
|
29
|
4.9
|
Indemnification
|
29
|
4.10
|
Quotation of Parent Common Stock
|
29
|
4.11
|
D&O Insurance
|
29
|
4.12
|
Transfer
|
29
|
4.13
|
Directors and Officers of Parent
|
29
|
4.14
|
Assignment and Assumption Agreement
|
30
|
4.15
|
Information Provided to Stockholders
|
30
|
4.16
|
Issuance of Stock Options and Additional Payments
|
30
|
4.17
|
Note Offering
|
31
|
4.18
|
Company Financial Statements
|
31
|
|
|
|
ARTICLE V
|
CONDITIONS TO CONSUMMATION OF MERGER
|
31
|
5.1
|
Conditions to Each Party’s Obligations
|
31
|
5.2
|
Conditions to Obligations of the Parent and the Acquisition Subsidiary
|
31
|
5.3
|
Conditions to Obligations of the Company
|
32
|
|
|
|
ARTICLE VI
|
DEFINITIONS
|
34
|
|
|
|
ARTICLE VIII
|
TERMINATION
|
36
|
7.1
|
Termination by Mutual Agreement
|
36
|
7.2
|
Termination for Failure to Close
|
36
|
7.3
|
Termination by Operation of Law
|
36
|
7.4
|
Termination for Failure to Perform Covenants or Conditions
|
36
|
7.5
|
Effect of Termination or Default; Remedies
|
37
|
7.6
|
Remedies; Specific Performance
|
37
|
|
|
|
ARTICLE VIII
|
MISCELLANEOUS
|
37
|
8.1
|
Press Releases and Announcements
|
37
|
8.2
|
No Third-Party Beneficiaries
|
37
|
8.3
|
Entire Agreement
|
37
|
8.4
|
Succession and Assignment
|
37
|
8.5
|
Counterparts and Facsimile Signature
|
37
|
8.6
|
Headings
|
37
|
8.7
|
Notices
|
38
|
8.8
|
Governing Law
|
38
|
8.9
|
Amendments and Waivers
|
38
|
8.10
|
Severability
|
38
|
8.11
|
Submission to Jurisdiction
|
39
|
8.12
|
Waiver of Jury Trial
|
39
|
8.13
|
Survival
|
39
|
8.14
|
Construction
|
39
|
EXHIBITS
Exhibit A - Form of Securities Purchase Agreement
Exhibit B - Form of Assignment and Assumption Agreement
SCHEDULES
Schedule A – [Intentionally Omitted]
Schedule B - Company Disclosure Schedule
Schedule C - Parent Disclosure Schedule
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION (this “Agreement”), dated as of June 11, 2021(the “Signing Date”), by and among Brain Scientific
Inc., a Nevada corporation (the “Parent”), BRSF Acquisition Inc., a Delaware corporation (the “Acquisition
Subsidiary”) and Piezo Motion Corp., a Delaware corporation (the “Company”). The Parent, the Acquisition Subsidiary
and the Company are each a “Party” and referred to collectively herein as the “Parties.”
WHEREAS, this Agreement contemplates
a merger of the Acquisition Subsidiary with and into the Company, with the Company remaining as the surviving entity after the merger
(the “Merger”), whereby the stockholders of the Company will receive shares of Parent’s Common Stock (as defined below)
in exchange for their capital stock of the Company; and
WHEREAS, simultaneously with
the closing of the Merger, the Parent will have a first closing of a private placement offering (the “Private Placement Offering”)
of at least $5.0 million in units, including any interim bridge financing raised by either Company or Parent that is convertible into
the Private Placement Offering, consisting of a 10% convertible promissory note with one year maturity dates (the “Notes”)
and common stock purchase warrants upon the terms and subject to the conditions of a separate securities purchase agreement substantially
in the form of Exhibit A attached hereto (the “Securities Purchase Agreement”); and
WHEREAS, simultaneously with
the closing and as a condition to the Merger, the Parent shall transfer all of the Parent’s operating assets and liabilities (the
“Transfer”) to MemoryMD, Inc., a Delaware corporation and a wholly owned subsidiary of the Parent (“MemoryMD”)
so that immediately following the closing of the Merger, Parent will be a holding company with, in addition to any current subsidiaries
of the Parent, two direct wholly owned subsidiaries, namely, the Company and MemoryMD. The terms and conditions of the Transfer are set
forth in the assignment and assumption agreement (the “Assignment and Assumption Agreement”), in form and substance customary
and usual to consummate the Transfer as agreed to in good faith by the Parent and the Company prior to the Closing (as defined below);
and
WHEREAS, the Parent, the Acquisition
Subsidiary and the Company intend for the Merger to qualify as a “reorganization” under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the “Code”), and that this Agreement constitute a “plan of reorganization” within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
NOW, THEREFORE, in consideration
of the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt, adequacy
and sufficiency of which are hereby acknowledged, the Parties hereto, intending legally to be bound, agree as follows:
ARTICLE I
THE MERGER
1.1 The
Merger. Upon and subject to the terms and conditions set forth in this Agreement, the Acquisition Subsidiary shall merge with and
into the Company at the Effective Time (as defined below). From and after the Effective Time, the separate corporate existence of the
Acquisition Subsidiary shall cease and the Company shall continue as the surviving corporation in the Merger (the “Surviving Corporation”).
The “Effective Time” shall be the time at which a certificate of merger in proper form and duly executed, reflecting the Merger
(the “Certificate of Merger”) pursuant to Section 251(c) of General Corporation Law of the State of Delaware (the “Delaware
Act”) is filed with the Secretary of State of the State of Delaware. The Merger shall have the effects set forth herein and in the
applicable provisions of the Delaware Act.
1.2 The
Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices
of Lucosky Brookman LLP, in Woodbridge, New Jersey, commencing at 10:00 a.m. local time (or such other place and time as is mutually agreed
to by the Parties) on July 30, 2021, or, if all of the conditions to the obligations of the Parties to consummate the transactions contemplated
hereby have not been satisfied or waived by such date, on such mutually agreeable later date as soon as practicable (and in any event
not later than three (3) Business Days) after the satisfaction or waiver of all conditions (excluding the delivery of any documents to
be delivered at the Closing by any of the Parties) set forth in Article V hereof (the “Closing Date”). As used in this Agreement,
the term “Business Day” means any day other than a Saturday, a Sunday or a day on which banks in the state of New York are
required or authorized by applicable Law to close.
1.3 Actions
at the Closing. At the Closing:
(a) the Company shall deliver or cause
to be delivered to the Parent and the Acquisition Subsidiary the various certificates, instruments and documents pursuant to Sections
5.1 and 5.2;
(b) the Parent, the Memory MD and the
Acquisition Subsidiary shall deliver or cause to be delivered to the Company the various certificates, instruments and documents pursuant
to Sections 5.1 and 5.3;
(c) the Surviving Corporation shall file
the Certificate of Merger with the Secretary of State of the State of Delaware;
(d) the Parent shall have completed the
Private Placement Offering upon the terms and subject to the conditions of the Securities Purchase Agreement;
(e) the Parent shall have delivered to
the Company the Parent Disclosure Schedule;
(f) the Company shall have delivered
to the Parent the Company Disclosure Schedule; and
(g) the Company shall have delivered
or caused to be delivered to the Parent customary investor questionnaires, in form acceptable to the Parent, completed by each of the
Company’s stockholders, which are necessary for the Parent to determine whether each of the Company’s stockholders are “accredited
investors”.
1.4 Additional
Actions. If at any time after the Effective Time the Surviving Corporation or Parent shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper (a) to vest, perfect or confirm,
of record or otherwise, in the Surviving Corporation or Parent, its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either the Company or the Acquisition Subsidiary or (b) otherwise to carry out the purposes
of this Agreement, the Surviving Corporation, Parent and its officers and directors or their designees shall be authorized (to the fullest
extent allowed under applicable Law) to execute and deliver, in the name and on behalf of either the Company, Parent or the Acquisition
Subsidiary, as the case may be, all such deeds, bills of sale, assignments and assurances and do, in the name and on behalf of the Company,
Parent or the Acquisition Subsidiary, as the case may be, all such other acts and things necessary, desirable or proper to vest, perfect
or confirm its right, title or interest in, to or under any of the rights, privileges, powers, franchises, properties or assets of the
Company, Parent or the Acquisition Subsidiary, as applicable, and otherwise to carry out the purposes of this Agreement.
1.5 Conversion
of Company and Acquisition Subsidiary Securities. At the Effective Time, by virtue of the Merger and without any action on the part
of any Party or the holder of any of the following securities:
(a) Each share of common stock, par
value $0.0001 per share, of the Company (“Company Stock” or “Company Common Stock”) issued and outstanding immediately
prior to the Effective Time (other than Dissenting Shares (as defined below), all of which shall be owned by “accredited investors”
as such term is defined in Rule 501(a) under the Securities Act of 1933, as amended (“Securities Act”), or owned by non-“US
Persons”, as such term is defined in Regulation S under the Securities Act (other than up to 35 holders who are not accredited
investors), shall be converted into and represent the right to receive (subject to the provisions of Section 1.6), that certain number
of shares of Parent’s Common Stock, $0.001 par value per share (“Parent Common Stock”) as calculated by the 50% Calculation.
The number of shares of Parent Common Stock (including Dissenting Shares), subject to adjustment as necessary due to rounding as set forth
in Section 1.7 and as calculated by the 50% Calculation, shall be issuable to the stockholders of record of the Company outstanding immediately
prior to the Effective Time (the “Company Stockholders”) in connection with the Merger (such shares of Parent Common Stock,
the “Merger Shares”). For the avoidance of doubt, immediately following the Effective Time and the implementation of the Transfer,
as of such time and without giving effect to the Private Placement Offering, the number of shares comprising the Merger Shares will be
equal to the number of shares resulting from the 50% Calculation. The “50% Calculation” shall be determined as follows: (x)
100% of (y) the number of issued and outstanding shares of Parent Common Stock calculated on a Fully Diluted Basis. “Fully Diluted
Basis” means all shares issuable upon conversion or exercise of any outstanding convertible, exercisable and exchangeable securities,
including all convertible debt and all warrants (the “Securities”) of the Parent, including any shares issuable in connection
with any anti-dilution adjustments contained in any such outstanding convertible, exercisable and exchangeable Securities of the Parent
as of the Effective Time; provided, however, any debt that the Company determines is converted into the Private Placement Offering, shall
be excluded for purposes of calculating the Fully Diluted Basis (the “Exclusion”). Parent shall set forth such 50% Calculation
on Schedule 1.5 of Parent Disclosure Schedule that calculates the Exclusion and includes any other adjustments.
(b) The Parent shall deliver certificates
for the Merger Shares to each Company Stockholder entitled thereto who shall have presented a certificate, or book entry statement as
applicable, that immediately prior to the Effective Time represented Company Stock to be converted into Merger Shares pursuant to this
Section 1.5 (the “Company Stock Certificates”) to the Parent’s transfer agent. If any Company Stock Certificates shall
have been lost, stolen or destroyed, the Parent’s transfer agent may, in its sole discretion and as a condition to the issuance
of any certificates representing Merger Shares, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide
an appropriate affidavit with respect to such Company Stock Certificate and post or deliver such bond or indemnity as may be required
by the Parent’s transfer agent (at the sole cost of such holder of lost, stolen or destroyed Company Stock Certificate). Notwithstanding
the foregoing, all Parent Common Stock shall be issued solely in book entry form.
(c) Each issued and outstanding share
of common stock, no par value per share, of the Acquisition Subsidiary shall be automatically converted to one validly issued, fully paid
and nonassessable share of common stock of the Surviving Corporation.
(d) No dividends or other distributions
declared or made with respect to Parent Common Stock with a record date after the Effective Time will be paid to the holder of any unsurrendered
Company Stock Certificate with respect to the Merger Shares that such holder has the right to receive in the Merger until such holder
surrenders such Company Stock Certificate in accordance with this Section 1.5 (at which time such holder will be entitled, subject to
the effect of applicable escheat or similar laws, to receive all such dividends and distributions, without interest).
1.6 Dissenting
Shares.
(a) For purposes of this Agreement,
“Dissenting Shares” means shares of Company Stock held as of the Effective Time by a Company Stockholder who has not voted
such Company Stock in favor of the adoption of this Agreement and the Merger and with respect to which appraisal shall have been duly
demanded and perfected in accordance with Section 262 of the Delaware Act and not effectively withdrawn or forfeited prior to the Effective
Time. Dissenting Shares shall not be converted into or represent the right to receive Merger Shares unless such Company Stockholder’s
right to appraisal shall have ceased in accordance with the Delaware Act. If such Company Stockholder has so forfeited or withdrawn his,
her or its right to appraisal of Dissenting Shares, then (i) as of the occurrence of such event, such holder’s Dissenting Shares
shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the Merger Shares issuable in respect
of such Company Stock pursuant to Section 1.5(a), and (ii) promptly following the occurrence of such event and, if requested
by Parent, the proper surrender of such person’s Company Stock Certificate, the Parent shall deliver to such Company Stockholder
a certificate representing the Merger Shares to which such holder is entitled pursuant to Section 1.5(a).
(b) The Company shall give the Parent
prompt notice of any written demands for appraisal of any Company Stock, withdrawals of such demands, and any other instruments that relate
to such demands received by the Company. The Company shall not, except with the prior written consent of the Parent (such consent not
to be unreasonably withheld), make any payment with respect to any demands for appraisal of Company Stock or offer to settle or settle
any such demands unless required by the court of the State of Delaware having jurisdiction thereof.
1.7 Fractional
Shares. No certificates or scrip representing fractional Merger Shares shall be issued to Company Stockholders on the surrender for
exchange of shares of Company Stock, and such Company Stockholders shall not be entitled to any voting rights, rights to receive any dividends
or distributions or other rights as a stockholder of the Parent with respect to any fractional Merger Shares that would have otherwise
been issued to such Company Stockholders. In lieu of any fractional Merger Share to which the holder would otherwise be entitled, the
Company shall round up such fractional Merger Share to the next full Merger Share.
1.8 Options
and Warrants. There are no outstanding stock options or warrants of the Company and there shall be no outstanding stock options or
warrants of the Company immediately prior to the Effective Time.
1.9 Directors
and Officers. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Acquisition Subsidiary,
the Company or the holders of any shares of capital stock of any of the foregoing, the directors and officers of the Company shall be
the directors and officers of the Surviving Corporation until the earlier of their resignation or removal or until their respective successors
are duly appointed and qualified, as the case may be, and the Surviving Corporation and the Parent shall take any necessary actions (whether
prior to, at or after the Effective Time) as shall be necessary or appropriate to effectuate or carry out the purpose of this Section
1.9.
1.10 Certificate
of Incorporation and Bylaws. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Acquisition
Subsidiary, the Company or the holders of any shares of capital stock of any of the foregoing; provided that the Surviving Corporation
or Parent may make any necessary filings in the State of Delaware as shall be necessary or appropriate to effectuate or carry out fully
the purpose of this Section 1.10:
(a) the certificate of incorporation
of the Company in effect immediately prior to the Effective Time shall be the certificate of incorporation of the Surviving Corporation
until duly amended or repealed;
(b) the bylaws of the Company in effect
immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until duly amended or repealed;
(c) the articles of incorporation of
the Parent, as amended and restated to date, in effect immediately prior to the Effective Time shall be the articles of incorporation
of the Parent until duly amended or repealed; and
(d) the bylaws of the Parent, as amended
and restated to date, in effect immediately prior to the Effective Time shall be the bylaws of the Parent until duly amended or repealed.
1.11 No
Further Rights. From and after the Effective Time, except as otherwise provided herein, no shares of Company Stock shall be deemed
to be outstanding, and holders of Company Stock, certificated or uncertificated, shall cease to have any rights with respect thereto,
except as provided herein or by applicable Law, other than the right to receive Merger Shares in connection with the Merger.
1.12 Closing
of Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Company Stock
shall thereafter be made. If, after the Effective Time, Company Stock Certificates are presented to the Parent or the Surviving Corporation,
they shall be cancelled and exchanged for Merger Shares in accordance with Section 1.5, subject to the provisions hereof and applicable
Law in the case of Dissenting Shares.
1.13 Exemption
from Registration; Rule 144. Each of the Merger Shares shall be issued in a transaction exempt from registration under the Securities
Act, by reason of Section 4(a)(2) of the Securities Act, Rule 506 of Regulation D promulgated by the Securities and Exchange Commission
(the “SEC”) thereunder, and/or Regulation S promulgated by the SEC and that all recipients of Merger Shares shall either be
“accredited investors” or not “U.S. Persons” as such terms are defined in Regulation D and Regulation S, respectively.
The Merger Shares will be “restricted securities” within the meaning of Rule 144 under the Securities Act and may not be offered,
sold, pledged, assigned or otherwise transferred unless (i) a registration statement with respect thereto is effective under the Securities
Act and any applicable state securities laws, or (ii) an exemption from such registration exists and the Parent receives an opinion of
counsel to the holder of such securities, which counsel and opinion are satisfactory to the Parent, that such securities may be offered,
sold, pledged, assigned or transferred in the manner contemplated without an effective registration statement under the Securities Act
or applicable state securities laws, or the holder complies with the requirements of Regulation S, if applicable; and the certificates
representing such Merger Shares will bear an appropriate legend and restriction on the books of the Parent’s transfer agent to that
effect.
1.14 Certain
Tax Matters. Each of the Parties shall use its Reasonable Best Efforts to cause the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code. None of the Parties shall (and each of the Parties shall cause their respective Subsidiaries
not to) take any action, or fail to take any action, that could reasonably be expected to cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code. The Parties intend to report and, except to the extent otherwise required by a “final
determination” within the meaning of Section 1313(a) of the Code, shall report, for all tax purposes, the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The Company represents and warrants
to the Parent that the statements contained in this Article II are and shall be true and correct, except as set forth in the disclosure
schedule provided by the Company to the Parent on the date hereof and as of the Effective Time (the “Company Disclosure Schedule”).
The Company Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this
Article II; and to the extent that it is reasonably apparent from the context thereof that such disclosure also applies to any other
numbered paragraph contained in this Article II, the disclosures in any numbered paragraph of the Company Disclosure Schedule shall
qualify such other corresponding numbered paragraph in this Article II. Notwithstanding the foregoing, it is agreed and acknowledged that
the Company Disclosure Schedule is not being delivered at the Signing Date and will be delivered prior to Closing. In
the event the Company delivers the Company Disclosure Schedule within three days of any date scheduled for Closing, the Parent shall be
entitled to extend, by written notice to the Company, the scheduled date for Closing to the
third day after it receives the Company Disclosure Schedule, or if such day is not a Business Day, to the next Business Day. Parent
shall have the right to terminate this Agreement within three (3) days after receipt of the Company Disclosure Schedule if the Company
Disclosure Schedule disclose any facts and circumstances that would cause a failure of a Closing Condition set forth in Article V; provided,
however, that if the Parent consummates the Closing, the Parent shall, in any such case, be deemed to have accepted the Company Disclosure
Schedule to have qualified the relevant representations and warranties contained in Article II as of the Closing, and to have cured any
breach of any representation or warranty that otherwise might have existed hereunder by reason of such event or circumstance.
2.1 Organization,
Qualification and Corporate Power. The Company is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each subsidiary of the Company, which are all listed on the Company Disclosure Schedule 2.1 (each a “Company
Subsidiary”) is an entity duly organized, validly existing and in corporate and tax good standing under the laws of the jurisdiction
of its organization. The Company and each Company Subsidiary is duly qualified to conduct business and is in good standing under the laws
of each jurisdiction in which the nature of its businesses or the ownership or leasing of its properties requires such qualification,
except where the failure to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably
be expected to have a Company Material Adverse Effect (as defined below). The Company and each Company Subsidiary has all requisite corporate
power and authority to carry on the businesses in which it is engaged and to own and use the properties owned and used by it. The Company
has furnished or made available to the Parent complete and accurate copies of its and each Company Subsidiary certificate of incorporation,
bylaws and other organization documents, each as amended to date. Neither the Company nor any Company Subsidiary is in default under or
in violation of any provision of its certificate of incorporation, its bylaws, or any other organizational document, each as amended to
date, except where such default or violation would not be reasonably expected to have a Company Material Adverse Effect. For purposes
of this Agreement, “Company Material Adverse Effect” means a material adverse effect on the assets, business, financial condition,
or results of operations of the Company and the Company Subsidiaries (as defined below) taken as a whole; provided, that, in no event
shall any effects (whether alone or in combination) resulting from or arising in connection with any of the following be deemed to constitute,
nor shall any of the following be taken into account in determining whether there has occurred, a Company Material Adverse Effect: (a)
conditions generally affecting the industries in which the Company or the Company Subsidiaries participate or the U.S. or global economy
or capital markets as a whole; (b) any failure by the Company to meet internal projections or forecasts or revenue or earnings predictions;
(c) the execution, delivery, announcement or performance of the obligations under this Agreement or the announcement, pendency or anticipated
consummation of the Merger; (d) any pandemic (including COVID-19), natural disaster or any acts of terrorism, sabotage, military action
or war or any escalation or worsening thereof; (e) any changes (after the date of this Agreement) in generally accepted accounting principles
(“GAAP”), other applicable accounting rules or applicable Law, or changes or developments in political, regulatory or legislative
conditions, or (f) the taking of any action required by this Agreement. The Company does not control directly or indirectly or have any
direct or indirect participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust
or other business association which is not a Company Subsidiary.
2.2 Capitalization.
The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock and 10,000,000 shares of the Company’s
blank check preferred stock, $0.0001 par value per share (the “Company Preferred Stock”). Without giving effect to the transactions
contemplated by this Agreement or any of the other Transaction Documents, 10,058,259 shares of Company Common Stock are or will be issued
and outstanding and no shares of Company Preferred Stock are or will be issued and outstanding. No shares of Company Common Stock are
held in the treasury of the Company. There are no outstanding options or warrants to purchase shares of Company Common Stock or Company
Preferred Stock and there is and will be no outstanding debt convertible into Company Preferred Stock. Schedule 2.2 of the Company
Disclosure Schedule sets forth a complete and accurate list of (i) all stockholders of the Company, indicating the number and class
of Company Common Stock held by each stockholder, (ii) all stock option plans and other stock or equity-related plans of the Company (“Company
Equity Plans”) and the number of shares of Company Common Stock remaining available for future awards thereunder, and (iii) all
outstanding debt convertible into Company Common Stock, indicating (A) the date of issue, (B) the holder thereof, (C) the unpaid principal
amount thereof, (D) the interest rate thereon, (E) the accrued and unpaid interest thereon, (F) the number and class of shares of Company
Common Stock into which such debt is convertible, and (G) the conversion price thereof. All of the issued and outstanding shares of Company
Common Stock are, and all shares of Company Common Stock that may be issued upon conversion of convertible debt will be (upon issuance
in accordance with their terms), duly authorized, validly issued, fully paid, nonassessable and, effective as of the Effective Time, free
of all preemptive rights, and have been or will be issued in accordance with applicable laws, including but not limited to, the Securities
Act. Other than the convertible debt listed in Schedule 2.2 of the Company Disclosure Schedule, there are no outstanding or authorized
options, warrants, securities, rights, agreements or commitments to which the Company is a party or which are binding upon the Company
providing for the issuance or redemption of any Company Common Stock or pursuant to which any outstanding Company Common Stock is subject
to vesting. There are no outstanding or authorized stock appreciation, phantom stock or similar rights with respect to the Company. Other
than as listed in Schedule 2.2 of the Company Disclosure Schedule, there are no agreements to which the Company is a party or by which
it is bound with respect to the voting (including without limitation voting trusts or proxies), registration under the Securities Act,
or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights of first refusal, co-sale rights or
“drag-along” rights) of any securities of the Company. To the knowledge of the Company, there are no agreements among other
parties, to which the Company is not a party and by which it is not bound, with respect to the voting (including without limitation voting
trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or
“drag-along” rights) of any securities of the Company. All of the issued and outstanding shares of Company Common Stock were
issued in compliance in all material respects with applicable securities laws. All of the issued and outstanding shares of capital stock
of each Company Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All issued and
outstanding shares of capital stock of each Company Subsidiary are owned by the Company free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws), claims, Security Interests (as defined below), options,
warrants, rights, contracts, calls, commitments, equities and demands. Except as set forth in 2.2 of the Company Disclosure Schedule,
there are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company or a Company Subsidiary
is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of the Company
or a Company Subsidiary (except as contemplated by this Agreement and the other Transaction Documents). There are no outstanding stock
appreciation, phantom stock or similar rights with respect to a Company Subsidiary. There are no voting trusts, proxies or other agreements
or understandings with respect to the voting of any capital stock of a Company Subsidiary. “Security Interest” means any mortgage,
pledge, lien, encumbrance, charge, or other security interest, other than (a) mechanic’s, materialmen’s, and similar
liens, (b) liens for taxes not yet due and payable or for taxes that the taxpayer is contesting in good faith through appropriate proceedings,
(c) purchase money liens and liens securing rental payments under capital lease arrangements, and (d) other liens arising in the ordinary
course of business and not incurred in connection with the borrowing of money.
2.3 Authorization
of Transaction. The Company has all requisite power and authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by the Company of this Agreement and the other Transaction Documents, and, subject to the adoption
of this Agreement and (a) the approval of the Merger by the vote of stockholders of the Company required by Delaware law and (b) the approvals
and waivers set forth in Schedule 2.3 of the Company Disclosure Schedule (collectively, the “Company Consents”), the consummation
by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the
part of the Company. Without limiting the generality of the foregoing, the board of directors of the Company (i) determined that
the Merger is fair and in the best interests of the Company and the Company Stockholders, (ii) adopted this Agreement in accordance
with the provisions of the Delaware Act, and (iii) directed that this Agreement and the Merger be submitted to the Company Stockholders
for their adoption and approval and resolved to recommend that the Company Stockholders vote in favor of the adoption of this Agreement
and the approval of the Merger. This Agreement has been duly and validly executed and delivered by the Company and constitutes a valid
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may
be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies
generally and to general principles of equity, whether applied in a court of law or a court of equity.
2.4 Compliance
with Laws. Each of the Company and its Subsidiaries:
(a) and the conduct and operations of
their respective businesses, are in compliance with each Law applicable to the Company, any Company Subsidiary or any of their properties
or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably be expected
to have a Company Material Adverse Effect;
(b) has complied with all federal and
state securities laws and regulations, except for any violations or defaults that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect, and all prior issuances of its securities have been either
registered under the Securities Act or exempt from registration;
(c) has not been the subject of any
voluntary or involuntary bankruptcy proceeding, nor has it been a party to any material litigation or, within the past two years, the
subject of any threat of material litigation; and
(d) is not and has not, and the past
and present officers, directors and any other person or entity directly or indirectly controlling, controlled by or under direct or indirect
common control with such person or entity (each an “Affiliate”). Affiliates of the Company are not and have not, been the
subject of, nor does any officer or director of the Company have any reason to believe that the Company or any of its officers, directors
or Affiliates are the subject of, any civil, criminal or administrative investigation or proceeding brought by any federal or state agency
having regulatory authority over such entity or person or alleging a violation of securities laws.
(e) holds, to the extent required by
any applicable Legal Requirement, all permits, licenses, authorizations, variances, exemptions, Orders and approvals from governmental
authorities which are material and necessary to the operation of the business of the Company (collectively, the “Company Permits”).
No suspension or cancellation of any such Company Permit is pending or, to the knowledge of the Company, threatened. Each such Company
Permit is valid and in full force and effect, and the Company is in compliance in all material respects with the terms of such Company
Permits.
2.5 Noncontravention.
Subject to the filing of the Certificate of Merger as required by the Delaware Act, neither the execution and delivery by the Company
of this Agreement or the Transaction Documents, nor the consummation by the Company of the transactions contemplated hereby or thereby,
will (a) conflict with or violate any provision of the organizational documents or bylaws of the Company or any Company Subsidiary, as
the case may be, (b) require on the part of the Company or any Company Subsidiary, as the case may be, any filing with, or permit, authorization,
consent or approval of, any federal, state or local court, administrative or regulatory agency or commission or other governmental authority
or instrumentality, domestic or foreign (“Governmental Entity”), other than required notification to the Financial Industry
Regulatory Authority, Inc., (c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both)
a default under, result in the acceleration of obligations under, create in any party any right to terminate, modify or cancel, or require
any notice, consent or waiver under, any contract or instrument to which the Company or any Company Subsidiary, as the case may be, is
a party or by which either is bound or to which any of their assets are subject, except for (i) any conflict, breach, default, acceleration,
termination, modification or cancellation which would not reasonably be expected to have a Company Material Adverse Effect and would not
reasonably be expected to adversely affect the consummation of the transactions contemplated hereby or by any of the other Transaction
Documents or (ii) any notice, consent or waiver the absence of which would not reasonably be expected to have a Company Material Adverse
Effect and would not reasonably be expected to adversely affect the consummation of the transactions contemplated hereby or by any of
the other Transaction Documents, (d) result in the imposition of any new Security Interest upon any assets of the Company or any Company
Subsidiary or (e) violate any laws applicable to the Company or any Company Subsidiary, except for any violation which would not reasonably
be expected to have a Company Material Adverse Effect.
2.6 Litigation. Except as
set forth in Schedule 2.6 of the Company Disclosure Schedule, as of the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation before any Governmental Entity or before any arbitrator (a “Legal Proceeding”) which is
pending or, to the Company’s knowledge, threatened against the Company or any Company Subsidiary.
2.7 Employees and Employee Benefits.
(a) Each employee of the Company is
a party to a non-disclosure and assignment of inventions agreement with the Company or a Company Subsidiary. To the knowledge of the Company,
no key employee (within the meaning of Section 416 of the Code) or group of employees acting in concert has given written notice of any
plans to terminate employment with the Company or any Company Subsidiary.
(b) Neither the Company nor any Company
Subsidiary is a party to or bound by any collective bargaining agreement, nor has any of them experienced any strikes, grievances, claims
of unfair labor practices or other collective bargaining disputes. To the knowledge of the Company, (i) no organizational effort has been
made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the
Company or any Company Subsidiary, and (ii) to the Company’s knowledge, there are no circumstances or facts which could individually
or collectively give rise to a suit against the Company or any Company Subsidiary by any current or former employee or applicant for employment
based on discrimination prohibited by fair employment practices laws.
(c) The
Company and Company Subsidiaries have 16 employees. All employment agreements of the Company as of the Closing Date are listed on Schedule
2.7.
(d) Neither the Company nor any of the
Company Subsidiaries is a party to or bound by any collective bargaining agreement, nor have any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The Company has no knowledge of any organizational effort made
or threatened, either currently or since the date of organization of the Company, by or on behalf of any labor union with respect to employees
of the Company or any of the Company Subsidiaries.
(e) Neither the Company nor any of the
Company Subsidiaries or trade or business, that is a member of a group described in Section 414(b), (c), (m) or (o) of the Code or Section
4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) that includes the first entity, trade
or business, or that is a member of the same “controlled group” as the first entity, trade or business pursuant to Section
4001(a)(14) of ERISA(“ERISA Affiliates”) maintains, sponsors or contributes to or in the past has maintained, sponsored or
contributed to any Employee Benefit Plan or multiemployer plan (as defined in Section 4001(a)(3) of ERISA).
2.8 Assets. Each of the Company
and its Subsidiaries owns or leases, and has good, valid and marketable title to, all tangible assets necessary for the conduct of its
respective businesses as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from material
defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used. No asset of the Company or any Company Subsidiary (tangible
or intangible) is subject to any Security Interest.
2.9 Owned Real Property. Except
as disclosed in Schedule 2.9 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries owns any real property.
2.10 Real
Property Leases. Schedule 2.10 of the Company Disclosure Schedule lists all real property leased or subleased to or by the Company
or any of its Subsidiaries and lists the term of such lease, any extension and expansion options, and the rent payable thereunder.
2.11 Powers
of Attorney. There are no outstanding powers of attorney executed on behalf of the Company or any of its Subsidiaries.
2.12 Warranties.
No product or service sold or delivered by the Company or any of its Subsidiaries is subject to any guaranty, warranty, right of credit
or other indemnity other than the applicable standard terms and conditions of sale of the Company or the appropriate Subsidiary and as
outlined on the Company’s website www.piezomotion.com.
2.13 Environmental
Matters.
(a) Each of the Company and its Subsidiaries
has complied with all applicable Environmental Laws, except for violations of Environmental Laws that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material Adverse Effect. There is no pending or, to the knowledge
of the Company, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or investigation,
inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Company or any of its Subsidiaries,
except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries or information requests that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. Environmental
Laws means any law, statute, ordinance, regulation, order or rule relating to: (a) the environment, including pollution, contamination,
cleanup, preservation, protection and reclamation of the environment, (b) the protection of human health with respect to, or the
exposure of employees or third parties to, any hazardous materials, (c) any release or threatened release of any hazardous materials,
including investigation, assessment, testing, monitoring, containment, removal, remediation and cleanup of any such release or threatened
release, (d) the management of any hazardous materials, including the use, labeling, processing, disposal, storage, treatment, transport,
or recycling of any hazardous materials, or (e) the presence of hazardous materials in any building, physical structure, product
or fixture.
(b) Set forth in Schedule 2.13(b)
of the Company Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental
reports, investigations and audits relating to premises currently or previously owned or operated by the Company or any of its Subsidiaries
(whether conducted by or on behalf of the Company or its Subsidiaries or a third party, and whether done at the initiative of the Company
or any of its Subsidiaries or directed by a Governmental Entity or other third party) which were issued or conducted during the past five
years and which the Company has possession of or access to. A complete and accurate copy of each such document has been provided to the
Parent.
(c) To the knowledge of the Company,
there is no material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that
has been used by the Company or any of its Subsidiaries.
2.14 Brokers’
Fees. Except as set forth on Schedule 2.14 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries has
any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated
by this Agreement or any of the other Transaction Documents.
2.15 Disclosure.
No representation or warranty by the Company or a Company Subsidiary contained in this Agreement, and no statement contained in the any
document, certificate or other instrument delivered or to be delivered by or on behalf of the Company or a Company Subsidiary pursuant
to this Agreement, including any of the other Transaction Documents, contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in order
to make the statements herein or therein not misleading. The Company has disclosed to the Parent all material information relating to
the business of the Company and its Subsidiaries in order to effect the transactions contemplated by this Agreement and the other Transaction
Documents.
2.16 Interested
Party Transactions. To the knowledge of the Company, no officer, director or stockholder of the Company or any “affiliate”
(as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) or “associate”
(as such term is defined in Rule 405 under the Securities Act) of any such person or entity currently has or has had since the date of
the Company’s organization, either directly or indirectly, (a) an interest in any person that (i) furnishes or sells services or
products that are furnished or sold or are proposed to be furnished or sold by the Company or any of its Subsidiaries or (ii) purchases
from or sells or furnishes to the Company or any of its Subsidiaries any goods or services, or (b) a beneficial interest in any contract
or agreement to which the Company or any of its Subsidiaries is a party or by which it may be bound or affected. Neither the Company nor
any of its Subsidiaries has extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in
the form of a personal loan to or for any director or executive officer (or equivalent thereof) of the Company or any of its Subsidiaries.
2.17 Duty
to Make Inquiry. To the extent that any of the representations or warranties in this Article II are qualified by “knowledge”
or “belief,” each of the Company and its Subsidiaries represents and warrants that it has made due and reasonable inquiry
and investigation concerning the matters to which such representations and warranties relate, including, but not limited to, diligent
inquiry by its directors, officers and key personnel and the directors, officers and key personnel of any such Subsidiary.
2.18 Minute
Books. The minute books and other similar records of the Company and each of its Subsidiaries contain, in all material respects, complete
and accurate records of all actions taken at any meetings of directors (or committees thereof) and stockholders or actions by written
consent in lieu of the holding of any such meetings since the time of organization of each such corporation through the date of this Agreement.
The Company has provided true and complete copies of all such minute books and other similar records to the Parent’s representatives.
2.19 Board
Action. The Company Board of Directors (a) has unanimously determined that the Merger and the other transactions contemplated by this
Agreement and the other Transaction Documents are advisable and in the best interests of the Company’s stockholders and are on terms
that are fair to such Company stockholders, (b) has caused the Company, in its capacity as the sole stockholder of each Company Subsidiary,
to approve the Merger, this Agreement and all other applicable Transaction Documents by unanimous written consent, (c) adopted this Agreement
and all other applicable Transaction Documents in accordance with the provisions of the Delaware Act, and (d) directed that this Agreement,
all other Transaction Documents and the Merger and all other transactions related thereto be submitted to the Company’s stockholders
for their adoption and approval and resolved to recommend that the Company’s stockholders vote in favor of the adoption of this
Agreement and the other Transaction Documents and the approval of the Merger and the transactions contemplated hereby and thereby.
2.20 Intellectual
Property. The Company and the Company Subsidiaries are the sole and exclusive owner of all right, title and interest in and to, or
has a valid and enforceable license or right to use, all Intellectual Property that is necessary for the operation of Company’s
business as currently conducted (collectively, the “Company Intellectual Property”), and, with respect to owned and licensed
Intellectual Property, free and clear of any Security Interests or other encumbrances. “Intellectual Property” means any or
all of the following in any jurisdiction throughout the world (a) trademarks, service marks, trade dress, trade names, logos, corporate
names, Internet domain names, and all other designations of origin (together with the goodwill of the business symbolized by the foregoing),
including all registrations and registration applications therefor, (b) inventions (whether or not patentable or reduced to practice),
patents, patent applications and patent disclosures (together with all reissuances, continuations, continuations-in-part, divisionals,
revisions, extensions and reexaminations thereof), (c) copyrights mask works, and other works of authorship, and registrations and registration
applications therefor, (d) rights or interests protected by non-statutory or common law evidenced by or embodied in any idea, design,
concept, process, technology, invention, discovery, enhancement, improvement or information and data (including formulae, procedures,
protocols, techniques and results of experimentation and testing), regardless of patentability, including trade secrets and know how,
(e) computer software, including operating systems, applications, routines, interfaces, and algorithms, whether in source code or object
code, (f) moral and economic rights of authors and inventors, however denominated, (g) all other proprietary and intellectual property
rights however denominated, (h) all derivative works and improvements of any of the foregoing and (i) all applications, registrations,
extensions and renewals related to any of the foregoing, regardless of whether any of such rights arise under the laws of the United States
or any other state, country or jurisdiction. Schedule 2.20 of the Company Disclosure Schedule sets forth each registered Company Intellectual
Property.
2.21 International
Trade; Anti-Corruption.
(a) The Company and each of the Company
Subsidiaries, their respective directors, officers, and key employees (the “Company Relevant Persons”), and, to the knowledge
of the Company, any agent, distributor, reseller or other Person acting on behalf of any of them (the “Other Relevant Persons”)
are and have in the past five (5) years been in compliance with: (i) all applicable sanctions laws, including the economic sanctions laws
administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (“OFAC”), the United Kingdom and the
European Union; (ii) any laws or regulations regarding the importation of goods, including those administered by U.S. Customs and Border
Protection; (iii) all applicable export control laws, including the Export Administration Regulations and the International Traffic in
Arms Regulations, related to the regulation of exports (including deemed exports), re-exports, transfers, releases, shipments, transmissions,
imports or similar transfer of goods, technology, data, software or services, or any other transactions or business dealings, by or on
behalf of the Company or the Company Subsidiaries; and (iv) U.S. anti-boycott regulations ((i) through (iv) collectively, “Customs
& International Trade Laws”).
(b) None of the Company nor any of the
Company Subsidiaries, nor the Company Relevant Persons, nor, to the knowledge of the Company, any Other Relevant Persons (i) have been
or are designated on, or are owned or controlled by a party that has been or is designated on, any list of restricted parties (“Sanctioned
Persons”) maintained by any applicable Governmental Authority, including OFAC’s Specially Designated Nationals and Blocked
Persons List, OFAC’s list of Foreign Sanctions Evaders, OFAC’s Sectoral Sanctions Identifications List, the U.S. Department
of Commerce’s (“DOC”) Denied Persons List, the DOC’s Entity List, the Debarred List maintained by the U.S. Department
of State or the EU Consolidated List; (ii) have been resident, located, or organized in a jurisdiction that is or has in the last five
(5) years been subject to a U.S. comprehensive embargo (including Cuba, Iran, North Korea, Sudan, Syria, Venezuela and the Crimea region
of Ukraine) (a “Sanctioned Country”); or (iii) have engaged in any dealings or transactions with or for the benefit of any
Sanctioned Person or in any Sanctioned Country.
(c) In the last five (5) years, neither
the Company nor any Company Relevant Person or Other Relevant Person has (i) made, authorized, solicited or received any bribe, unlawful
rebate, payoff, influence payment, or kickback, (iii) established or maintained any unlawful fund of corporate monies or properties, (iii)
used any corporate funds for any illegal contributions, gifts, entertainment, hospitality, travel, or other unlawful expenses, (iv) directly
or indirectly, made, offered, authorized, facilitated, or promised any payment, contribution, gift, entertainment, bribe, rebate, kickback,
financial or other advantage, or anything else of value, regardless of form or amount, to any official of a Governmental Authority or
any other third party or (v) violated in any respect the U.S. Foreign Corrupt Practices Act, the UK Bribery Act 2010 or other applicable
anti-corruption or anti-money laundering laws (“Anti-Corruption Laws”), in each case of (i) - (v), in connection with or relating
to the business of the Company.
(d) There is no current investigation,
allegation, request for information, notice, internal or, to the knowledge of the Company, external investigation or other inquiry by
any Governmental Authority or any other third party regarding the actual or possible violation of Anti-Corruption Laws or Customs &
International Trade Laws by the Company or any of its subsidiaries and in the last five (5) years neither the Company nor any of its subsidiaries
have received any written notice that there is any investigation, allegation, request for information, or other inquiry by any Governmental
Authority or any other third party, or made any voluntary or involuntary disclosure or conducted any internal investigation or audit,
regarding any actual or possible violation of Anti-Corruption Laws or Customs & International Trade Laws.
2.22 Takeover
Laws. The Company’s Board of Directors has granted all approvals and taken all actions necessary to exempt this Agreement or
the other Transaction Documents and the transactions contemplated hereby and thereby from the provisions of Section 203 of the Delaware
Act so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement. No other anti-takeover,
“fair price”, “moratorium”, “control share acquisition”, “business combination statute or regulation”,
“supermajority”, “affiliate transactions” state or regulations, or other similar restrictions on business combinations
or voting requirements, or other similar U.S., foreign, state or local anti-takeover Law or regulations (including Section 203 of the
Delaware Act) (each a “Takeover Law”), applies, purports to apply or will apply at the date hereof or as of the Effective
Time to this Agreement or the other Transaction Documents or the transactions contemplated hereby and thereby. The Company does not have
any stockholder rights plan or “poison pill” in effect, including without limitation any agreement with a third-party trust
or fiduciary entity with respect thereto.
2.23 Continuity
of Business. Following the Merger, the Surviving Corporation will continue the Company’s historic business or use a significant
portion of the Company’s historic business assets in a business as required by Section 368 of the Code and the Treasury Regulations
promulgated thereunder.
2.24 Contracts.
(a) Schedule 2.24 of the Company Disclosure Schedule lists the following agreements (written or oral) to which the Company or any of the
Company Subsidiaries is a party as of the date of this Agreement which do not exceed $25,000 in the aggregate:
(i) any agreement (or group of related
agreements) for the lease of personal property from or to third parties;
(ii) any agreement (or group of related
agreements) for the purchase or sale of products or for the furnishing or receipt of services;
(iii) any agreement establishing a partnership
or joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement that purports to limit
in any material respect the right of the Company or any of the Company Subsidiaries to engage in any line of business, or to compete with
any person or operate in any geographical location;
(vi) any employment or consulting agreement;
(vii) any agreement involving any current
or former officer, director or stockholder of the Company or any Affiliate thereof;
(viii) any agreement under which the
consequences of a default or termination would reasonably be expected to have a Company Material Adverse Effect;
(ix) any agreement which contains any
provisions requiring the Company or any of the Company Subsidiaries to indemnify any other party thereto (excluding indemnities contained
in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(x) any other agreement (or group of
related agreements) either involving more than $25,000 or not entered into in the Ordinary Course of Business; and
(xi) any agreement, other than as contemplated
by this Agreement and the Transfer, relating to the sales of securities of the Company or any of the Company Subsidiaries to which the
Company or such Company Subsidiary is a party.
(b) The Company has delivered or made
available to the Parent a complete and accurate copy of each agreement listed in Schedule 2.24 of the Company Disclosure Schedule. With
respect to each agreement so listed: (i) the agreement is legal, valid, binding and enforceable and in full force and effect, except as
such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’
rights and remedies generally and to general principles of equity whether applied in a court of law or a court of equity; (ii) the agreement
will not, as a result of the execution and delivery by the Company of this Agreement or any of the other Transaction Documents or the
consummation by the Company of the transactions contemplated hereby or thereby, cease to be a legal, valid, binding and enforceable obligation
of the Company, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations
affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court of law or a court
of equity, or to be in full force and effect in accordance with the terms thereof as in effect immediately prior to the Closing; and (iii)
neither the Company nor any of the Company Subsidiaries nor, to the knowledge of the Company, any other party, is in breach or violation
of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the Company, is threatened, which,
after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the Company or any of the Company
Subsidiaries or, to the knowledge of the Company, any other party under such contract.
2.25 Tax
Matters. (a) with the exception of the Company’s 2019 and 2020 tax returns, since inception, the Company and the Company Subsidiaries
has filed on a timely basis any return (including any information return), report, election, estimated tax filing, custom filing, declaration,
claim for refund, statement, schedule, notice, form, or other document or information filed with or submitted to, or required to be filed
with or submitted to, any Governmental Entity in connection with the determination, assessment, collection, or payment of any Tax or in
connection with the administration, implementation, or enforcement of or compliance with any legal requirement relating to any Tax, including
any amendments, supporting schedules or attachments thereto (“Company Tax Returns”) that it was required to file, and all
such Company Tax Returns were complete and accurate in all material respects. Neither the Company nor any of the Company Subsidiaries
is or has ever been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary
Company Tax Returns, other than a group of which only the Company and the Company Subsidiaries are or were members. Each of the Company
and the Company Subsidiaries has paid on a timely basis all means any federal, state, local, foreign or other taxes, including without
limitation income taxes, estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, employment and
payroll related taxes, withholding taxes, stamp taxes, transfer taxes and property taxes, whether or not measured in whole or in part
by net income (“Company Taxes”) that were due and payable. The unpaid Company Taxes of the Company and the Company Subsidiaries
for tax periods through the date of the balance sheet contained in the most recent Company Report do not exceed the accruals and reserves
for Company Taxes (excluding accruals and reserves for deferred Company Taxes established to reflect timing differences between book and
Tax income) set forth on such balance sheet. Neither the Company nor any of the Company Subsidiaries has any actual or potential liability
for any Tax obligation of any taxpayer (including without limitation any affiliated group of corporations or other entities that included
the Company or any of the Company Subsidiaries during a prior period) other than the Company and the Company Subsidiaries. All Company
Taxes that the Company or any of the Company Subsidiaries is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental Entity.
(b) The Company has delivered or made
available to the Parent complete and accurate copies of all federal income Tax Returns filed to date, examination reports and statements
of deficiencies assessed against or agreed to by the Company or any of the Company Subsidiaries since inception. No examination or audit
of any Tax Return of the Company or any of the Company Subsidiaries by any Governmental Entity is currently in progress or, to the knowledge
of the Company, threatened or contemplated. Neither the Company nor any of the Company Subsidiaries has been informed by any jurisdiction
that the jurisdiction believes that the Company or any of the Company Subsidiaries was required to file any Tax Return that was not filed.
Neither the Company nor any of the Company Subsidiaries has waived any statute of limitations with respect to Taxes or agreed to an extension
of time with respect to a Tax assessment or deficiency.
2.26 Absence
of Certain Changes. Except as set forth in Schedule 2.26 of the Company Disclosure Schedule, since inception, (a) there has occurred
no event or development which, individually or in the aggregate, has had, or could reasonably be expected to have in the future, a Company
Material Adverse Effect and (b) none of the Company nor the Company Subsidiary has taken any of the actions set forth in paragraphs (a)
through (l) of Section 4.4.
2.27 Undisclosed
Liabilities. None of the Company and the Company Subsidiaries has any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the most recent balance sheet,
(b) liabilities which have arisen since the date of the balance sheet in the ordinary course of business which do not exceed $25,000 in
the aggregate as disclosed on Schedule 2.27 and (c) contractual and other liabilities incurred in the Ordinary Course of Business which
are not required by GAAP to be reflected on a balance sheet.
2.28 No
Additional Representations. Company and its subsidiaries expressly acknowledge that each of them and their representatives have been
permitted full and complete access to the books and records, facilities, equipment, contracts, insurance policies (or summaries thereof)
and other properties and assets of the Parent and the Parent Subsidiaries, that each of them and their representatives have desired or
requested to see or review, and that each of them and their representatives have had a full opportunity to meet with the officers, directors
and employees of the Parent and the Parent Subsidiaries to discuss the business of the Parent and the Parent Subsidiaries. Company and
its subsidiaries acknowledge that (i) neither the Parent nor any other person has made any representation or warranty, express or implied,
as to the Parent or any Parent subsidiary or the accuracy or completeness of any information regarding the Parent and the Parent subsidiaries
furnished or made available to parent and its representatives, except as expressly set forth in this Agreement, (ii) Company has not relied
on any representation or warranty from the Parent, any Parent Subsidiaries or any other person in determining to enter into this agreement,
except those representations and warranties expressly set forth in this Agreement, and (iii) no person shall have or be subject to any
liability to Company or any other person resulting from the distribution to Company, or Company’s use, of any such information,
including any information, documents or material made available to Company in any physical or electronic “data rooms”, management
presentations or in any other form in expectation of the transactions. Without limiting the generality of the foregoing, Company and its
subsidiaries acknowledge that neither the Parent nor any other person has made any representation or warranty, express or implied, as
to the financial projections, forecasts, cost estimates and other predictions relating to the Parent and the Parent Subsidiaries made
available to Company.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE PARENT
AND THE ACQUISITION
SUBSIDIARY
The Parent and
the Acquisition Subsidiary each represents and warrants to the Company that the statements contained in this Article III are, and shall
be, after giving effect to the Transfer (unless otherwise stated to the contrary), true and correct, except as set forth in the disclosure
schedule provided by the Parent to the Company on the date hereof and as of the Effective Time (the “Parent Disclosure Schedule”).
The Parent Disclosure Schedule shall be arranged in paragraphs corresponding to the numbered and lettered paragraphs contained in this
Article III; and to the extent that it is reasonably apparent from the context thereof that such disclosure also applies to any other
numbered paragraph contained in this Article III, the disclosures in any numbered paragraph of the Parent Disclosure Schedule shall
qualify such other corresponding numbered paragraph in this Article III. For purposes of this Article III, the phrase “to the
knowledge of the Parent” or any phrase of similar import shall be deemed to refer to the actual knowledge of Boris Goldstein, the
Parent’s Co-Founder and Executive Chairman, as well as any other knowledge which such person would have possessed had such person
made reasonable inquiry of the accountants and attorneys of the Parent. Notwithstanding the foregoing, it is agreed and acknowledged that
the Parent Disclosure Schedule is not being delivered at the Signing Date and will be delivered prior to Closing. In
the event the Parent delivers the Parent Disclosure Schedule within three days of any date scheduled for Closing, the Company shall be
entitled to extend, by written notice to the Parent, the scheduled date for Closing to the
third day after it receives the Parent Disclosure Schedule, or if such day is not a Business Day, to the next Business Day. The
Company shall have the right to terminate this Agreement within three (3) days after receipt of the Parent Disclosure Schedule if the
Parent Disclosure Schedule disclose any facts and circumstances that would cause a failure of a Closing Condition set forth in Article
V; provided, however, that if Company consummates the Closing, Company shall, in any such case, be deemed to have accepted the Parent
Disclosure Schedule to have qualified the relevant representations and warranties contained in Article III as of the Closing, and to have
cured any breach of any representation or warranty that otherwise might have existed hereunder by reason of such event or circumstance.
3.1 Organization, Qualification
and Corporate Power. The Parent is a corporation duly organized, validly existing and in good standing under the laws of the State
of Nevada and the Acquisition Subsidiary and each is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Parent is duly qualified to conduct business and is in good standing under the laws of each jurisdiction
in which the nature of its businesses or the ownership or leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect (as defined below). The Parent has all requisite corporate power and authority to carry on the businesses in which
it is engaged and to own and use the properties owned and used by it. The Parent has furnished or made available to the Company complete
and accurate copies of (i) the articles of incorporation and bylaws of each of the Parent, as amended to date, and (ii) Acquisition Subsidiary’s
certificate of incorporation and bylaws, as amended to date. None of the Parent or the Acquisition Subsidiary is in default under or in
violation of any provision of its certificate or articles of incorporation, each as amended to date, its bylaws, as amended to date, or
any agreement referred to in Section 3.15 or 3.16, except where such default or violation would not reasonably be expected to have a Parent
Material Adverse Effect. For purposes of this Agreement, “Parent Material Adverse Effect” means a material adverse effect
on the assets, business, financial condition, or results of operations of the Parent and the Parent Subsidiaries (defined in Section 3.5),
taken as a whole, provided that in no event shall any effects (whether alone or in combination) resulting from or arising in connection
with any of the following be deemed to constitute, nor shall any of the following be taken into account in determining whether there has
occurred, a Parent Material Adverse Effect: (a) conditions generally affecting the industries in which the Parent or the Parent Subsidiaries
participate or the U.S. or global economy or capital markets as a whole; (b) any failure by the Parent to meet internal projections or
forecasts or revenue or earnings predictions; (c) the execution, delivery, announcement or performance of the obligations under this Agreement
or the announcement, pendency or anticipated consummation of the Merger; (d) any pandemic (including COVID-19), natural disaster or any
acts of terrorism, sabotage, military action or war or any escalation or worsening thereof; (e) any changes (after the date of this Agreement)
in GAAP, other applicable accounting rules or applicable Law, or changes or developments in political, regulatory or legislative conditions,
or (f) the taking of any action required by this Agreement.
3.2 Capitalization. As of
immediately prior to the Effective Time, but prior to giving effect to the issuance of the Merger Shares or the Private Placement Offering,
the authorized capital stock of the Parent will consist of 200,000,000 shares of Parent Common Stock, and 10,000,000 shares of Parent
Preferred Stock. 20,062,704 shares of the Parent Common Stock is outstanding as of the Signing Date. 0 shares of the Parent Preferred
Stock is outstanding as of the Signing Date. The Parent Common Stock is presently eligible for quotation and trading on the OTC Markets
Group Inc. (“OTC Markets”) and is not subject to any notice of suspension or delisting. All of the issued and outstanding
shares of Parent Common Stock and Parent Preferred Stock are duly authorized, validly issued, fully paid, nonassessable and free of all
preemptive rights and have been issued in accordance with applicable laws, including, but not limited to, the Securities Act. Except as
contemplated by the Transaction Documents or as described in Section 3.2 of the Parent Disclosure Schedule, there are no outstanding or
authorized options, warrants, convertible notes, rights, agreements or commitments to which the Parent is a party or which are binding
upon the Parent providing for the issuance or redemption of any of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock or similar rights with respect to the Parent. Except as contemplated by the Transaction Documents, there are no agreements
to which the Parent is a party or by which it is bound with respect to the voting (including without limitation voting trusts or proxies),
registration under the Securities Act, or sale or transfer (including without limitation agreements relating to pre-emptive rights, rights
of first refusal, co-sale rights or “drag-along” rights) of any securities of the Parent. There are no agreements among other
parties, to which the Parent is not a party and by which it is not bound, with respect to the voting (including without limitation voting
trusts or proxies) or sale or transfer (including without limitation agreements relating to rights of first refusal, co-sale rights or
“drag-along” rights) of any securities of the Parent. All of the issued and outstanding shares of Parent Common Stock and
Parent Preferred Stock were issued in compliance in all material respects with applicable federal and state securities laws. The Merger
Shares to be issued at the Closing pursuant to Section 1.5 hereof, when issued and delivered in accordance with the terms hereof and of
the Certificate of Merger, shall be duly and validly issued, fully paid and nonassessable and free of all preemptive rights and will be
issued in compliance with applicable federal and state securities laws.
3.3 Authorization of Transaction.
Each of the Parent, and the Acquisition Subsidiary has all requisite power and authority to execute and deliver this Agreement and (in
the case of the Parent) the Assignment and Assumption Agreement and to perform its respective obligations hereunder and thereunder. The
execution and delivery by the Parent, and the Acquisition Subsidiary of this Agreement and (in the case of the Parent) the Assignment
and Assumption Agreement and the agreements contemplated hereby and thereby (collectively, the “Transaction Documents”), and
the consummation by the Parent, and the Acquisition Subsidiary of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of the Parent, , and the Acquisition Subsidiary, respectively. Each of
the documents included in the Transaction Documents has been duly and validly executed and delivered by the Parent, or the Acquisition
Subsidiary, as the case may be, and constitutes a valid and binding obligation of the Parent or the Acquisition Subsidiary, as the case
may be, enforceable against each of them in accordance with the terms of such documents, except as such enforceability may be limited
under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’ rights and remedies generally
and to general principles of equity, whether applied in a court of law or a court of equity.
3.4 Noncontravention. Subject
to the filing of the Certificate of Merger, neither the execution and delivery by the Parent, or the Acquisition Subsidiary, as the case
may be, of this Agreement or the Transaction Documents, nor the consummation by the Parent, or the Acquisition Subsidiary, as the case
may be, of the transactions contemplated hereby or thereby, will (a) conflict with or violate any provision of the organizational
documents or bylaws of the Parent, or the Acquisition Subsidiary, as the case may be, (b) require on the part of the Parent, or the
Acquisition Subsidiary, as the case may be, any filing with, or permit, authorization, consent or approval of, any Governmental Entity,
other than required notification to the Financial Industry Regulatory Authority, Inc., (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create
in any party any right to terminate, modify or cancel, or require any notice, consent or waiver under, any contract or instrument to which
the Parent, or the Acquisition Subsidiary, as the case may be, is a party or by which either is bound or to which any of their assets
are subject, except for (i) any conflict, breach, default, acceleration, termination, modification or cancellation which would not
reasonably be expected to have a Parent Material Adverse Effect and would not reasonably be expected to adversely affect the consummation
of the transactions contemplated hereby or by any of the other Transaction Documents or (ii) any notice, consent or waiver the absence
of which would not reasonably be expected to have a Parent Material Adverse Effect and would not reasonably be expected to adversely affect
the consummation of the transactions contemplated hereby or by any of the other Transaction Documents, (d) result in the imposition
of any security interest upon any assets of the Parent, or the Acquisition Subsidiary or (e) violate any laws applicable to the Parent,
or the Acquisition Subsidiary, except for any violation which would not reasonably be expected to have a Parent Material Adverse Effect.
3.5 Subsidiaries.
(a) The Parent has no subsidiaries other
than Memory MD, Inc., MemoryMD – Russia, MemoryMD – Europe, the Acquisition Subsidiary (collectively, the “Parent Subsidiaries”).
The Acquisition Subsidiary is an entity duly organized, validly existing and in corporate and tax good standing under the laws of the
jurisdiction of its organization. The Acquisition Subsidiary was formed solely to effectuate the Merger and has not conducted any business
operations since its organization. The Parent has delivered or made available to the Company complete and accurate copies of the charter,
bylaws or other organizational documents of the Acquisition Subsidiary and The Acquisition Subsidiary has no assets other than minimal
paid-in capital, has no liabilities or other obligations, and is not in default under or in violation of any provision of its certificate
or articles of incorporation, bylaws or other organizational documents. All of the issued and outstanding shares of capital stock of the
Acquisition Subsidiary are duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights. All issued and outstanding
shares of capital stock of the Acquisition Subsidiary are owned by the Parent free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which
the Parent, or the Acquisition Subsidiary is a party or which are binding on any of them providing for the issuance, disposition or acquisition
of any capital stock of the Parent or the Acquisition Subsidiary (except as contemplated by this Agreement and the Assignment and Assumption
Agreement). There are no outstanding stock appreciation, phantom stock or similar rights with respect to the Acquisition Subsidiary. There
are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Acquisition
Subsidiary or .
(b) At all times from September 21,
2018 through the date of this Agreement, the business and operations of the Parent have been conducted exclusively through the Parent
or the Parent Subsidiaries.
(c) The Parent does not control directly
or indirectly or have any direct or indirect participation or similar interest in any corporation, partnership, limited liability company,
joint venture, trust or other business association which is not Memory MD, Inc., MemoryMD – Russia, MemoryMD – Europe, or
the Acquisition Subsidiary.
3.6 SEC Reports and Prior Registration
Statement Matters. The Parent has furnished or made available to the Company (it being acknowledged and understood that anything filed
with the SEC on EDGAR shall be deemed “made available” to the Company) complete and accurate copies, as amended or supplemented,
of its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC, which contained audited balance
sheets of the Parent as of December 31, 2020 and the related statements of operation, changes in shareholders’ equity and cash flows
for the two years then ended; and (b) Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021; (c) any Regulation
A offering circular and/or Registration Statement on Form S-1 filed by the Parent with the SEC and declared effective or under the SEC
review and (d) all other reports filed by the Parent under Section 13 or subsections (a) or (c) of Section 14 of the Exchange
Act with the SEC (such reports are collectively referred to herein as the “Parent Reports”). The Parent Reports constitute
all of the documents required to be filed or furnished by the Parent with the SEC, including under Section 13 or subsections (a)
or (c) of Section 14 of the Exchange Act, through the date of this Agreement. The Parent Reports complied in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder when filed. As of the date hereof, there are no outstanding
or unresolved comments in comment letters received from the staff of the SEC with respect to any of the Parent Reports. As of their respective
dates, the Parent Reports, including any financial statements, schedules or exhibits included or
incorporated by reference therein, did 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 under which they were made, not misleading.
None of the Parent Subsidiaries is required to file or furnish any forms, reports or other documents
with the SEC. No order suspending the effectiveness of any registration statement of Parent under the Securities Act or the Exchange Act
has been issued by the SEC and, to Parent’s knowledge, no proceedings for that purpose have been initialed or threatened by the
SEC.
3.7 Compliance with Laws.
Each of the Parent and the Parent Subsidiaries:
(a) and the conduct and operations of
their respective businesses, are in compliance with each Law applicable to the Parent, any Parent Subsidiary or any of their respective
properties or assets, except for any violations or defaults that, individually or in the aggregate, have not had and would not reasonably
be expected to have a Parent Material Adverse Effect;
(b) has complied with all federal and
state securities laws and regulations, including being current in all of its respective reporting obligations under such federal and state
securities laws and regulations, except for any violations or defaults that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Parent Material Adverse Effect, and all prior issuances of its respective securities have been either
registered under the Securities Act or exempt from registration;
(c) has not been the subject of any
voluntary or involuntary bankruptcy proceeding, and has not been a party to any material litigation or, within the past two years, the
subject of any threat of material litigation;
(d) is not and has not, and the past
and present officers, directors and Affiliates of the Parent are not and have not, been the subject of, nor does any officer or director
of the Parent have any reason to believe that the Parent or any of its officers, directors or Affiliates are the subject of, any civil,
criminal or administrative investigation or proceeding brought by any federal or state agency having regulatory authority over such entity
or person or alleging a violation of securities laws; and
(f) is not and since September 21, 2018
has not been a shell company and/or “blank check company” as such term is defined by Rule 419 of the Securities Act.
3.8 Financial Statements.
The audited financial statements and unaudited interim financial statements of the Parent included in the Parent Reports (collectively,
the “Parent Financial Statements”) (i) complied as to form in all material respects with applicable accounting requirements
and, as appropriate, the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto,
and in the case of quarterly financial statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly present in all material
respects the financial condition, results of operations and cash flows of the Parent as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent in all material respects with the books and records of the Parent.
3.9 Absence of Certain Changes.
Except as set forth in Schedule 3.9 of the Parent Disclosure Schedule, since the date of the balance sheet contained in the most recent
Parent Report, (a) there has occurred no event or development which, individually or in the aggregate, has had, or could reasonably be
expected to have in the future, a Parent Material Adverse Effect and (b) none of the Parent, nor the Acquisition Subsidiary has taken
any of the actions set forth in paragraphs (a) through (m) of Section 4.6.
3.10 Undisclosed
Liabilities. None of the Parent and the Parent Subsidiaries has any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet contained
in the most recent Parent Report, (b) liabilities which have arisen since the date of the balance sheet contained in the most recent
Parent Report in the ordinary course of business which do not exceed $25,000 in the aggregate and (c) contractual and other liabilities
incurred in the Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.
3.11 Off-Balance
Sheet Arrangements. Neither the Parent nor any of the Parent Subsidiaries is a party to, or
has any commitment to become a party to, any joint venture, off balance sheet partnership or any similar contract or arrangement (including
any contract or arrangement relating to any transaction or relationship between or among
the Parent and any of the Parent Subsidiaries, on the one hand, and any unconsolidated affiliate, including any structured finance, special
purpose or limited purpose entity or person, on the other hand, or any “off balance sheet arrangements” (as defined in Item
303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such contract is to avoid disclosure
of any material transaction involving, or material liabilities of, the Parent or any of the Parent Subsidiaries in the Parent’s
or such Parent Subsidiary’s published financial statements or other Parent Reports.
3.12 Tax
Matters.
(a) Since November 18, 2013, Parent
and the Parent Subsidiaries has filed on a timely basis any return (including any information return),
report, election, estimated tax filing, custom filing, declaration, claim for refund, statement, schedule, notice, form, or other document
or information filed with or submitted to, or required to be filed with or submitted to, any Governmental
Entity in connection with the determination, assessment, collection, or payment of any Tax or in connection with the administration, implementation,
or enforcement of or compliance with any legal requirement relating to any Tax, including any amendments, supporting schedules or attachments
thereto(“Tax Returns”) that it was required to file, and all such Tax Returns were complete and accurate in all material
respects. Neither the Parent nor any of the Parent Subsidiaries is or has ever been a member of a group of corporations with which it
has filed (or been required to file) consolidated, combined or unitary Tax Returns, other than a group of which only the Parent and the
Parent Subsidiaries are or were members. Each of the Parent and the Parent Subsidiaries has paid on a timely basis all means any federal,
state, local, foreign or other taxes, including without limitation income taxes, estimated taxes, excise taxes, sales taxes, use taxes,
gross receipts taxes, franchise taxes, employment and payroll related taxes, withholding taxes, stamp taxes, transfer taxes and property
taxes, whether or not measured in whole or in part by net income (“Taxes”) that were due and payable. The unpaid Taxes of
the Parent and the Parent Subsidiaries for tax periods through the date of the balance sheet contained in the most recent Parent Report
do not exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on such balance sheet. Neither the Parent nor any of the Parent Subsidiaries has any actual or
potential liability for any Tax obligation of any taxpayer (including without limitation any affiliated group of corporations or other
entities that included the Parent or any of the Parent Subsidiaries during a prior period) other than the Parent and the Parent Subsidiaries.
All Taxes that the Parent or any of the Parent Subsidiaries is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental Entity.
(b)
The Parent has delivered or made available to the Company complete and accurate copies of all federal income Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the Parent or any of the Parent Subsidiaries since November 18,
2013. No examination or audit of any Tax Return of the Parent or any of the Parent Subsidiaries by any Governmental Entity is currently
in progress or, to the knowledge of the Parent, threatened or contemplated. Neither the Parent nor any of the Parent Subsidiaries has
been informed by any jurisdiction that the jurisdiction believes that the Parent or any of the Parent Subsidiaries was required to file
any Tax Return that was not filed. Neither the Parent nor any of the Parent Subsidiaries has waived any statute of limitations with respect
to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency.
3.13 Assets.
Each of the Parent, and the Acquisition Subsidiary owns or leases all tangible assets necessary for the conduct of its respective
businesses as presently conducted and as presently proposed to be conducted. Each such tangible asset is free from material defects, has
been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear)
and is suitable for the purposes for which it presently is used. No asset of the Parent, or the Acquisition Subsidiary (tangible or intangible)
is subject to any Security Interest.
3.14 Owned
Real Property. Neither the Parent nor any of the Parent Subsidiaries owns any real property.
3.15 Real
Property Leases. Neither the Parent nor any of the Parent Subsidiaries leases or subleases any real property.
3.16 Contracts.
(a) Schedule 3.16 of the Parent Disclosure
Schedule lists the following agreements (written or oral) to which the Parent or any of the Parent Subsidiaries is a party as of the date
of this Agreement which do not exceed $25,000 in the aggregate:
(i) any agreement (or group of related
agreements) for the lease of personal property from or to third parties;
(ii) any agreement (or group of related
agreements) for the purchase or sale of products or for the furnishing or receipt of services;
(iii) any agreement establishing a partnership
or joint venture;
(iv) any agreement (or group of related
agreements) under which it has created, incurred, assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) or under which it has imposed (or may impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement that purports to limit
in any material respect the right of the Parent or any of the Parent Subsidiaries to engage in any line of business, or to compete with
any person or operate in any geographical location;
(vi) any employment or consulting agreement;
(vii) any agreement involving any current
or former officer, director or stockholder of the Parent or any Affiliate thereof;
(viii) any agreement under which the
consequences of a default or termination would reasonably be expected to have a Parent Material Adverse Effect;
(ix) any agreement which contains any
provisions requiring the Parent or any of the Parent Subsidiaries to indemnify any other party thereto (excluding indemnities contained
in agreements for the purchase, sale or license of products entered into in the Ordinary Course of Business);
(x) any other agreement (or group of
related agreements) either involving more than $25,000 or not entered into in the Ordinary Course of Business; and
(xi) any agreement, other than as contemplated
by this Agreement and the Transfer, relating to the sales of securities of the Parent or any of the Parent Subsidiaries to which the Parent
or such Parent Subsidiary is a party.
(b) The Parent has delivered or made
available to the Company a complete and accurate copy of each agreement listed in Schedule 3.16 of the Parent Disclosure Schedule. With
respect to each agreement (i) the agreement is legal, valid, binding and enforceable and in full force and effect, except as such
enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules or regulations affecting creditors’
rights and remedies generally and to general principles of equity whether applied in a court of law or a court of equity; (ii) the
agreement will not, as a result of the execution and delivery by the Parent of this Agreement or any of the other Transaction Documents
or the consummation by the Parent of the transactions contemplated hereby or thereby, cease to be a legal, valid, binding and enforceable
obligation of the Parent, except as such enforceability may be limited under applicable bankruptcy, insolvency and similar laws, rules
or regulations affecting creditors’ rights and remedies generally and to general principles of equity, whether applied in a court
of law or a court of equity, or to be in full force and effect in accordance with the terms thereof as in effect immediately prior to
the Closing; and (iii) neither the Parent nor any of the Parent Subsidiaries nor, to the knowledge of the Parent, any other party,
is in breach or violation of, or default under, any such agreement, and no event has occurred, is pending or, to the knowledge of the
Parent, is threatened, which, after the giving of notice, with lapse of time or otherwise, would constitute a breach or default by the
Parent or any of the Parent Subsidiaries or, to the knowledge of the Parent, any other party under such contract. The Parent has delivered
or made available to the Company a complete and accurate copy each agreement of the Parent or Parent Subsidiary described in or filed
as an exhibit to a Parent Report.
3.17 Accounts
Receivable. The Parent and the Parent Subsidiaries have no current receivables.
3.18 Powers
of Attorney. There are no outstanding powers of attorney executed on behalf of the Parent or any of the Parent Subsidiaries.
3.19 Insurance.
Schedule 3.19 of the Parent Disclosure Schedule lists each insurance policy (including fire, theft, casualty, general liability,
workers compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements)
to which the Parent or any of the Parent Subsidiaries is a party. Such insurance policies are of the type and in amounts customarily carried
by organizations conducting businesses or owning assets similar to those of the Parent and the Parent Subsidiaries. There is no material
claim pending under any such policy as to which coverage has been questioned, denied or disputed by the underwriter of such policy. All
premiums due and payable under all such policies have been paid, neither the Parent nor any of the Parent Subsidiaries may be liable for
retroactive premiums or similar payments, and the Parent and the Parent Subsidiaries are otherwise in compliance in all material respects
with the terms of such policies. The Parent has no knowledge of any threatened termination of, or material premium increase with respect
to, any such policy.
3.20 Warranties.
No product or service sold or delivered by the Parent or any of the Parent Subsidiaries is subject to any guaranty, warranty, right of
credit or other indemnity other than the applicable standard terms and conditions of sale of such product or service of the Parent or
the appropriate Parent Subsidiary.
3.21 Litigation.
Except as disclosed in a Parent Report or in Schedule 3.21 of the Parent Disclosure Schedule, as of the date of this Agreement, there
is no Legal Proceeding which is pending or, to the Parent’s knowledge, threatened against the Parent or any of the Parent Subsidiaries
which, if determined adversely to the Parent or such Parent Subsidiary, could have, individually or in the aggregate, a Parent Material
Adverse Effect or which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement
or any of the other Transaction Documents.
3.22 Employees.
(a) The Parent and Parent Subsidiaries
have ten (10) employees.
(b) Neither the Parent nor any of the
Parent Subsidiaries is a party to or bound by any collective bargaining agreement, nor have any of them experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. The Parent has no knowledge of any organizational effort made
or threatened, either currently or since the date of organization of the Parent, by or on behalf of any labor union with respect to employees
of the Parent or any of the Parent Subsidiaries.
3.23 Employee
Benefits. Neither the Parent nor any of the Parent Subsidiaries or trade or business, that is a member of a group described in Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)
that includes the first entity, trade or business, or that is a member of the same “controlled group” as the first entity,
trade or business pursuant to Section 4001(a)(14) of ERISA(“ERISA Affiliates”) maintains, sponsors or contributes to
or in the past has maintained, sponsored or contributed to any Employee Benefit Plan or multiemployer plan (as defined in Section 4001(a)(3)
of ERISA).
3.24 Environmental
Matters.
(a) Each of the Parent and the Parent
Subsidiaries has complied with all applicable Environmental Laws, except for violations of Environmental Laws that, individually or in
the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. There is no pending or, to
the knowledge of the Parent, threatened civil or criminal litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity, relating to any Environmental Law involving the Parent or any
of the Parent Subsidiaries, except for litigation, notices of violations, formal administrative proceedings or investigations, inquiries
or information requests that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material
Adverse Effect.
(b) Set forth in Schedule 3.24(b)
of the Parent Disclosure Schedule is a list of all documents (whether in hard copy or electronic form) that contain any environmental
reports, investigations and audits relating to premises currently or previously owned or operated by the Parent or any of the Parent Subsidiaries
(whether conducted by or on behalf of the Parent or the Parent Subsidiaries or a third party, and whether done at the initiative of the
Parent or any of the Parent Subsidiaries or directed by a Governmental Entity or other third party) which were issued or conducted during
the past five years and which the Parent has possession of or access to. A complete and accurate copy of each such document has been provided
to the Company.
(c) To the knowledge of the Parent, there
is no material environmental liability of any solid or hazardous waste transporter or treatment, storage or disposal facility that has
been used by the Parent or any of the Parent Subsidiaries.
3.25 Permits.
Schedule 3.25 of the Parent Disclosure Schedule sets forth a list of all authorizations, approvals, clearances, permits, licenses, registrations,
certificates, orders, approvals or exemptions from any Governmental Entity (including without limitation those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased real property) (“Parent Permits”) issued
to or held by the Parent or any of the Parent Subsidiaries. Such listed permits are the only Parent Permits that are required for the
Parent and any of the Parent Subsidiaries to conduct their respective businesses as presently conducted except for those the absence of
which, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each
such Parent Permit is in full force and effect and, to the knowledge of the Parent, no suspension or cancellation of such Parent Permit
is threatened and there is no basis for believing that such Parent Permit will not be renewable upon expiration. Each such Parent Permit
will continue in full force and effect immediately following the Closing.
3.26 Certain
Business Relationships with Affiliates. No Affiliate of the Parent or of any of the Parent Subsidiaries (a) owns any property
or right, tangible or intangible, which is used in the business of the Parent or any of the Parent Subsidiaries, (b) has any claim
or cause of action against the Parent or any of the Parent Subsidiaries, or (c) owes any money to, or is owed any money by, the Parent
or any of the Parent Subsidiaries.
3.27 Tax-Free
Reorganization.
(a) The Parent (i) is not an “investment
company” as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code; (ii) has no present plan or intention to liquidate
the Surviving Corporation or to merge the Surviving Corporation with or into any other corporation or entity, or to sell or otherwise
dispose of the capital stock of the Surviving Corporation which the Parent will acquire in the Merger, or to cause the Surviving Corporation
to sell or otherwise dispose of its assets, all except in the ordinary course of business or if such liquidation, merger or disposition
is described in Section 368(a)(2)(C) or Treasury Regulation Section 1.368-2(d)(4) or Section 1.368-2(k); and (iii) has
no present plan or intention, following the Merger, to issue any additional shares of capital stock of the Surviving Corporation or to
create any new class of capital stock of the Surviving Corporation.
(b) The Acquisition Subsidiary is a wholly-owned
subsidiary of the Parent, formed solely for the purpose of engaging in the Merger, and will carry on no business prior to the Merger.
(c) Immediately prior to the Merger,
the Parent will be in control of Acquisition Subsidiary within the meaning of Section 368(c) of the Code.
(d) [Intentionally Omitted]
(e) The Parent has no present plan or
intention to reacquire any of the Merger Shares.
(f) The Acquisition Subsidiary will have
no liabilities assumed by the Surviving Corporation and will not transfer to the Surviving Corporation any assets subject to liabilities
in the Merger.
(g) Intentionally Omitted.
(h) Each of the Assignment and Assumption
Agreement will constitute a legally binding obligation among the Parent and Memory MD prior to the Effective Time. Immediately prior to
the consummation of the Merger, the Parent will distribute the operating assets and liabilities of the Parent to Memory MD.
3.28 Transfer.
As of the Effective Time, the Parent will have transferred all of its operating assets and liabilities which it conducted prior to the
Effective Time by closing the transactions contemplated by the Assignment and Assumption Agreement. Upon the closing of the transactions
contemplated by the Assignment and Assumption Agreement, except as set forth on Schedule 3.28 of the Parent Disclosure Schedule, the Parent
will have no liabilities, contingent or otherwise, in any way related to its pre-Effective Time business operations or to Memory MD.
3.29 Brokers’
Fees. Neither the Parent nor any of the Parent Subsidiaries has any liability or obligation to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this Agreement or any of the other Transaction Documents.
3.30 Disclosure.
No representation or warranty by the Parent, or the Acquisition Subsidiary contained in this Agreement, and no statement contained in
the any document, certificate or other instrument delivered or to be delivered by or on behalf of the Parent, or the Acquisition Subsidiary
pursuant to this Agreement, including any of the other Transaction Documents, contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading. The Parent has disclosed to the Company all material information relating
to the business of the Parent and it’s the Parent Subsidiaries in order to effect the transactions contemplated by this Agreement
and the other Transaction Documents.
3.31 Interested
Party Transactions. Since November 18, 2013, to the knowledge of the Parent, no officer, director or stockholder of the Parent or
any “affiliate” (as such term is defined in Rule 12b-2 under the Exchange Act) or “associate” (as such term
is defined in Rule 405 under the Securities Act) of any such person or entity currently has or has had since the date of the Parent’s
organization, either directly or indirectly, (a) an interest in any person that (i) furnishes or sells services or products that are furnished
or sold or are proposed to be furnished or sold by the Parent or any of the Parent Subsidiaries or (ii) purchases from or sells or furnishes
to the Parent or any of the Parent Subsidiaries any goods or services, or (b) a beneficial interest in any contract or agreement to which
the Parent or any of the Parent Subsidiaries is a party or by which it may be bound or affected. Neither the Parent nor any of the Parent
Subsidiaries has extended or maintained credit, arranged for the extension of credit, or renewed an extension of credit, in the form of
a personal loan to or for any director or executive officer (or equivalent thereof) of the Parent or any of the Parent Subsidiaries.
3.32 Duty
to Make Inquiry. To the extent that any of the representations or warranties in this Article III are qualified by “knowledge”
or “belief,” each of the Parent, and the Acquisition Subsidiary represents and warrants that it has made due and reasonable
inquiry and investigation concerning the matters to which such representations and warranties relate, including, but not limited to, diligent
inquiry by its directors, officers and key personnel and the directors, officers and key personnel of any Parent Subsidiary.
3.33 Accountants.
Sadler, Gibb & Associates, LLC (the “Parent Auditor”) is and has been throughout the periods covered by the financial
statements of the Parent for the most recently completed fiscal year and, to the knowledge of the Parent, through the date hereof (a)
a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002), (b) “independent”
with respect to the Parent within the meaning of Regulation S-X and (c) in compliance with subsections (g) through (l) of Section 10A
of the Exchange Act and the related rules of the SEC and the Public Company Accounting Oversight Board. During the Parent’s most
recent fiscal year and the subsequent interim periods, there were no disagreements with the Parent Auditor on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or procedures. Since September 21, 2018, none of the reportable
events listed in Item 304(a)(1)(iv) or (v) of Regulation S-K occurred with respect to the Parent Auditor.
3.34 Minute
Books. The minute books and other similar records of the Parent and each of the Parent Subsidiaries contain, in all material respects,
complete and accurate records of all actions taken at any meetings of directors (or committees thereof) and stockholders or actions by
written consent in lieu of the holding of any such meetings since September 21, 2018 of each such corporation through the date of this
Agreement. The Parent has provided true and complete copies of all such minute books and other similar records to the Company’s
representatives.
3.35 Board
Action. The Parent’s Board of Directors (a) has unanimously determined that the Merger and the other transactions contemplated
by this Agreement and the other Transaction Documents are advisable and in the best interests of the Parent’s stockholders and are
on terms that are fair to such Parent stockholders, (b) has caused the Parent, in its capacity as the sole stockholder of each of the
Acquisition Subsidiary , and the Board of Directors of each of the Acquisition Subsidiary and , to approve the Merger, this Agreement
and all other applicable Transaction Documents by unanimous written consent, (c) adopted this Agreement and all other applicable Transaction
Documents in accordance with the provisions of the Delaware Act, and (d) directed that this Agreement, all other Transaction Documents
and the Merger and all other transactions related thereto be submitted to the Parent’s stockholders for their adoption and approval
and resolved to recommend that the Parent stockholders vote in favor of the adoption of this Agreement and the other Transaction Documents
and the approval of the Merger and the transactions contemplated hereby and thereby.
3.36 Takeover
Laws. The Parent’s Board of Directors has granted all approvals and taken all actions necessary to exempt this Agreement or
the other Transaction Documents and the transactions contemplated hereby and thereby from the provisions of the Nevada Revised Statutes
or the Delaware Act, as applicable, so that such transactions may be consummated as promptly as practicable on the terms contemplated
by this Agreement. No other anti-takeover, “fair price”, “moratorium”, “control share acquisition”,
“business combination statute or regulation”, “supermajority”, “affiliate transactions” state or regulations,
or other similar restrictions on business combinations or voting requirements, or other similar U.S., foreign, state or local anti-takeover
Law or regulations (including Section 203 of the Delaware Act), applies, purports to apply or will apply at the date hereof or as of the
Effective Time to this Agreement or the other Transaction Documents or the transactions contemplated hereby and thereby. The Parent does
not have any stockholder rights plan or “poison pill” in effect, including without limitation any agreement with a third-party
trust or fiduciary entity with respect thereto.
3.37 No
Additional Representations. Parent and its subsidiaries expressly acknowledge that each of them and their representatives have been
permitted full and complete access to the books and records, facilities, equipment, contracts, insurance policies (or summaries thereof)
and other properties and assets of the Company and the Company Subsidiaries, that each of them and their representatives have desired
or requested to see or review, and that each of them and their representatives have had a full opportunity to meet with the officers,
directors and employees of the Company and the Company Subsidiaries to discuss the business of the Company and the Company Subsidiaries.
Parent and its subsidiaries acknowledge that (i) neither the Company nor any other person has made any representation or warranty, express
or implied, as to the Company or any Company subsidiary or the accuracy or completeness of any information regarding the Company and the
Company subsidiaries furnished or made available to parent and its representatives, except as expressly set forth in this Agreement, (ii)
Parent has not relied on any representation or warranty from the Company, any Company Subsidiaries or any other person in determining
to enter into this agreement, except those representations and warranties expressly set forth in this Agreement, and (iii) no person shall
have or be subject to any liability to Parent or any other person resulting from the distribution to Parent, or Parent’s use, of
any such information, including any information, documents or material made available to Parent in any physical or electronic “data
rooms”, management presentations or in any other form in expectation of the transactions. Without limiting the generality of the
foregoing, Parent and its subsidiaries acknowledge that neither the Company nor any other person has made any representation or warranty,
express or implied, as to the financial projections, forecasts, cost estimates and other predictions relating to the Company and the Company
Subsidiaries made available to Parent.
3.38 Intellectual
Property.
(a) Schedule 3.38(a) sets forth an accurate
and complete list of all (i) trademark and service mark registrations and pending registration applications, unregistered trademarks or
service marks, Internet domain name registrations and trade names, (ii) patents and pending patent applications, and (iii) copyright registrations
and pending registration applications, in each case, that are owned by the Parent or any of the Parent Subsidiaries, including, to the
extent applicable, the date of registration or application and name of registration body where the registration or application was made.
(b) The conduct of Parent’s business,
as currently conducted by Parent and the Parent Subsidiaries, does not infringe, misappropriate, dilute or otherwise violate any Person’s
Intellectual Property rights, and there is no claim of any such infringement or violation pending or to the knowledge of Parent threatened
against Parent or any of the Parent Subsidiaries.
(c) To the knowledge of the Parent, no
Person is infringing, misappropriating, diluting or otherwise violating any Parent Intellectual Property, and no claim of any such infringement,
misappropriation, dilution or violation is pending or threatened against any Person by the Parent and /or the Parent Subsidiaries. Since
the date of Parent’s organization, neither Parent nor any of the Parent Subsidiaries has received written notice from any third
party alleging that the operation of Parent’s business as currently conducted or of the Parent’s or any of the Parent Subsidiaries’
products infringes, misappropriates, dilutes or otherwise violates the Intellectual Property of any third party in a manner that has or
could reasonably be expected to result in a Parent Material Adverse Effect.
(d) Neither the Parent nor any of the
Parent Subsidiaries has transferred ownership of, or granted any exclusive license with respect to, any material Parent Intellectual Property
used in the conduct of Parent’s business as currently conducted to any third party. Neither the Parent nor any of the Parent Subsidiaries
has performed developments for any third party, except where the Parent or any such subsidiary owns or retains a right to use any Intellectual
Property developed in connection therewith that is used in or necessary for the operation of Parent’s business.
(e) The Parent and each of the Parent
Subsidiaries has taken commercially reasonable steps to protect such entity’s rights in confidential information and trade secrets
or any trade secrets or confidential information of third parties provided to the Parent or any of the Parent Subsidiaries.
(f) No Parent Intellectual Property is
subject to any Legal Proceeding that (i) restricts in any manner the use, sale, assignment, license or lease thereof by the Parent or
any of the Parent Subsidiaries; or (ii) may affect, in full or in part, the validity, subsistence, enforceability or force and effect
thereof.
3.39 International
Trade; Anti-Corruption.
(a) The Parent and each of the Parent
Subsidiaries, and, to the knowledge of the Parent, their respective directors, officers, and employees (the “Parent Relevant Persons”),
and, to the knowledge of the Parent, any agent, distributor, reseller or other Person acting on behalf of any of them (the “Other
Relevant Persons”) are and have in the past five (5) years been in compliance with all Customs & International Trade Laws.
(b) None of the Parent nor any of its
subsidiaries, nor, to the knowledge of the Parent, the Parent Relevant Persons, nor, to the knowledge of the Parent, any Other Relevant
Persons (i) Sanctioned Persons on OFAC’s list of Foreign Sanctions Evaders, OFAC’s Sectoral Sanctions Identifications List,
the DOC’s Denied Persons List, the DOC’s Entity List, the Debarred List maintained by the U.S. Department of State or the
EU Consolidated List; (ii) have been resident, located, or organized in a jurisdiction that is a Sanctioned Country; or (iii) have engaged
in any dealings or transactions with or for the benefit of any Sanctioned Person or in any Sanctioned Country.
(c) In the last five (5) years, neither
the Parent nor any Parent Relevant Person or Other Relevant Person has (i) made, authorized, solicited or received any bribe, unlawful
rebate, payoff, influence payment, or kickback, (iii) established or maintained any unlawful fund of corporate monies or properties, (iii)
used any corporate funds for any illegal contributions, gifts, entertainment, hospitality, travel, or other unlawful expenses, (iv) directly
or indirectly, made, offered, authorized, facilitated, or promised any payment, contribution, gift, entertainment, bribe, rebate, kickback,
financial or other advantage, or anything else of value, regardless of form or amount, to any official of a Governmental Authority or
any other third party or (v) violated in any respect any Anti-Corruption Laws, in each case of (i) - (v), in connection with or relating
to the business of the Parent.
(d) To the knowledge of the Parent, there
is no current investigation, allegation, request for information, notice, internal or, to the knowledge of the Parent, external investigation
or other inquiry by any Governmental Authority or any other third party regarding the actual or possible violation of Anti-Corruption
Laws or Customs & International Trade Laws by the Parent or any of the Parent Subsidiaries and in the last five (5) years neither
the Parent nor any of the Parent Subsidiaries have received any written notice that there is any investigation, allegation, request for
information, or other inquiry by any Governmental Authority or any other third party, or made any voluntary or involuntary disclosure
or conducted any internal investigation or audit, regarding any actual or possible violation of Anti-Corruption Laws or Customs &
International Trade Laws.
ARTICLE IV
COVENANTS
4.1 Closing Efforts.
Each of the Parties shall use its best efforts, to the extent commercially reasonable in light of the circumstances (“Reasonable
Best Efforts”), to take all actions and to do all things necessary, proper or advisable to consummate the transactions contemplated
by this Agreement, including without limitation using its Reasonable Best Efforts to ensure that (i) its representations and warranties
remain true and correct in all material respects through the Closing Date and (ii) the conditions to the obligations of the other
Parties to consummate the Merger, the Transfer and the Private Placement are satisfied.
4.2 Governmental and
Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable
Best Efforts to obtain, at its expense, all waivers, permits, consents, approvals or other authorizations from Governmental Entities,
and to effect all registrations, filings and notices with or to Governmental Entities, as may be required for such Party to consummate
the transactions contemplated by this Agreement and the other Transaction Documents and to otherwise comply with all applicable Laws in
connection with the consummation of the transactions contemplated by this Agreement and the other Transaction Documents.
(b) The Company shall use its Reasonable
Best Efforts to obtain, at its expense, all such waivers, consents or approvals from third parties, and to give all such notices to third
parties.
4.3 8-K. Promptly
after the execution of this Agreement, the Parties shall prepare a Current Report on Form 8-K relating to this Agreement and the other
Transaction Documents and the transactions contemplated hereby and thereby (the “8-K”). Each of the Company and the Parent
shall use its Reasonable Best Efforts to cause the Parent to file the 8-K with the SEC within four (4) Business Days of the execution
of the Agreement and to otherwise comply with all requirements of applicable federal and state securities laws.
4.4 Operation of Company
Business. Except as contemplated by this Agreement, during the period from the date of this Agreement to the Effective Time, the Company
shall (and shall cause each Company Subsidiary to) conduct its respective operations in the Ordinary Course of Business and in material
compliance with all laws applicable to the Company, any Company Subsidiary or any of their respective properties or assets and, to the
extent consistent therewith, use Reasonable Best Efforts to preserve intact its respective current business organization, keep its respective
physical assets in good working condition, keep available the services of its respective current officers and employees and preserve its
respective relationships with customers, suppliers and others having business dealings with the Company and any Company Subsidiary to
the end that its respective goodwill and ongoing business shall not be impaired in any material respect. Without limiting the generality
of the foregoing, prior to the Effective Time, the Company shall not (and shall cause each Company Subsidiary not to), without the written
consent of the Parent (which shall not be unreasonably withheld or delayed) and except as contemplated by this Agreement:
(a) Issue or sell, or redeem or repurchase,
any stock or other securities of the Company or any warrants, options or other rights to acquire any such stock or other securities (except
pursuant to the conversion or exercise of outstanding convertible securities or Company Options or Company Warrants outstanding on the
date hereof), or amend any of the terms of (including without limitation the vesting of) any such convertible securities or options or
warrants;
(b) Split, combine or reclassify any
shares of its capital stock; declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock;
(c) Create, incur or assume any indebtedness
for borrowed money (including obligations in respect of capital leases) except in the Ordinary Course of Business or in connection with
the transactions contemplated by this Agreement or any of the other Transaction Documents; assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or entity;
(d) Acquire, sell, lease, license or
dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any Company Subsidiary
or any corporation, partnership, association or other business organization or division thereof), other than purchases and sales of assets
in the Ordinary Course of Business;
(e) Mortgage or pledge any of its property
or assets (including without limitation any shares or other equity interests in or securities of any Company Subsidiary or any corporation,
partnership, association or other business organization or division thereof), or subject any such property or assets to any Security Interest;
(f) Discharge or satisfy any Security
Interest or pay any obligation or liability other than in the Ordinary Course of Business;
(g) Amend its charter, by-laws or other
organizational documents;
(h) Change in any material respect its
accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(i) Enter into, amend, terminate, take
or omit to take any action that would constitute a violation of or default under, or waive any rights under, any material contract or
agreement;
(j) Institute or settle any Legal Proceeding;
(k) Take any action or fail to take any
action permitted by this Agreement with the knowledge that such action or failure to take action would result in (i) any of the representations
and warranties of the Company set forth in this Agreement becoming untrue in any material respect or (ii) any of the conditions to
the Merger set forth in Article V not being satisfied; or
(l) Agree in writing or otherwise to
take any of the foregoing actions.
4.5 Access to Company Information.
(a) During the period from the date of
this Agreement to the Effective Time, the Company shall (and shall cause each Company Subsidiary to) permit representatives of the Parent
to have reasonable access (at all reasonable times, and in a manner so as not to interfere with the normal business operations of the
Company and the Company Subsidiaries) to all premises, properties, financial and accounting records, contracts, other records and documents,
and personnel, of or pertaining to the Company and each Company Subsidiary.
(b) The Parent and each of its Subsidiaries
(i) shall treat and hold as confidential any Company Confidential Information (as defined below), (ii) shall not use any of the Company
Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason whatsoever,
shall return to the Company all tangible embodiments (and all copies) thereof which are in its possession. For purposes of this Agreement,
“Company Confidential Information” means any information of the Company or any Company Subsidiary that is furnished to the
Parent or any of the Parent Subsidiaries by the Company or any Company Subsidiary in connection with this Agreement and any other Transaction
Documents; provided, however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other
than as a result of non-permitted disclosure by the Parent, any of the Parent Subsidiaries or their respective directors, officers, or
employees, (B) which, after disclosure, becomes available publicly through no fault of the Parent, any of the Parent Subsidiaries or their
respective directors, officers, or employees, (C) which the Parent or any of the Parent Subsidiaries knew or to which the Parent or any
of the Parent Subsidiaries had access prior to disclosure, provided that the source of such information is not known by the Parent or
any of the Parent Subsidiaries to be bound by a confidentiality obligation to the Company or any Company Subsidiary, or (D) which the
Parent or any of the Parent Subsidiaries rightfully obtains from a source other than the Company or a Company Subsidiary, provided that
the source of such information is not known by the Parent or any of the Parent Subsidiaries to be bound by a confidentiality obligation
to the Company or any Company Subsidiary.
4.6 Operation of Parent Business.
Except as contemplated by this Agreement, any other Transaction Document, the Transfer and/or the Private Placement Offering, during the
period from the date of this Agreement to the Effective Time, the Parent shall (and shall cause each of the Parent Subsidiaries to) conduct
its respective operations in the Ordinary Course of Business and in material compliance with all laws applicable to the Parent, any Parent
Subsidiary or any of their respective properties or assets and, to the extent consistent therewith, use Reasonable Best Efforts to preserve
intact its respective current business organization, keep its respective physical assets in good working condition, keep available the
services of its respective current officers and employees and preserve its respective relationships with customers, suppliers and others
having business dealings with Parent and any Parent Subsidiary to the end that its respective goodwill and ongoing business shall not
be impaired in any material respect. Without limiting the generality of the foregoing, prior to the Effective Time, the Parent shall not
(and shall cause each of the Parent Subsidiaries not to), without the written consent of the Company (which shall not be unreasonably
withheld or delayed):
(a) Issue or sell, or redeem or repurchase,
any stock or other securities of the Parent or any Parent Subsidiary, or any rights, warrants or options to acquire any such stock or
other securities, except as contemplated by, and in connection with, the Merger, the Transfer and the Private Placement Offering, except
(i) as may be required pursuant to any existing convertible indebtedness or other convertible security of the Parent or (ii) pursuant
to the Parent’s existing offering of securities pursuant Regulation A+;
(b) Split, combine or reclassify any
shares of the capital stock of Parent or any Parent Subsidiary; declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of the capital stock of Parent or any Parent Subsidiary;
(c) Create, incur or assume any indebtedness,
other than in connection with the Agreement, any other Transaction Document, the Transfer or the Private Placement Offering (including
obligations in respect of capital leases); assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person or entity; or make any loans, advances or capital contributions to, or investments
in, any other person or entity;
(d) Enter into, adopt or amend any Parent
benefit plan or any employment or severance agreement or arrangement or increase in any manner the compensation or fringe benefits of,
or materially modify the employment terms of, its respective directors, officers or employees, generally or individually;
(e) Acquire, sell, lease, license or
dispose of any assets or property (including without limitation any shares or other equity interests in or securities of any Parent Subsidiary
or any corporation, partnership, association or other business organization or division thereof), except as contemplated by, and in connection
with, the Transfer, or in the ordinary course of business;
(f) Mortgage or pledge any of its property
or assets or subject any such property or assets to any Security Interest;
(g) Discharge or satisfy any Security
Interest or pay any obligation or liability other than in the Ordinary Course of Business or pursuant to existing obligations;
(h) Amend its respective certificate
or articles of incorporation, as applicable, by-laws or other organizational documents (except as contemplated hereby);
(i) Change in any material respect its
accounting methods, principles or practices, except insofar as may be required by a generally applicable change in GAAP;
(j) Enter into, amend, terminate, take
or omit to take any action that would constitute a violation of or default under, or waive any rights under, any contract or agreement;
(k) Institute or settle any Legal Proceeding;
(l) Take any action or fail to take any
action permitted by this Agreement or any other Transaction Document with the knowledge that such action or failure to take action would
result in (i) any of the representations and warranties of the Parent, Memory MD and/or the Acquisition Subsidiary set forth in this Agreement
or such other Transaction Document becoming untrue in any material respect or (ii) any of the conditions to the Merger set forth in Article
V not being satisfied; or
(m) Agree in writing or otherwise to
take any of the foregoing actions.
4.7 Access to Parent Information.
(a) The Parent shall (and shall cause
the Acquisition Subsidiary and Memory MD to) permit representatives of the Company to have full access (at all reasonable times, and in
a manner so as not to interfere with the normal business operations of the Parent, Memory MD and the Acquisition Subsidiary) to all premises,
properties, financial and accounting records, contracts, other records and documents, and personnel of or pertaining to the Parent, the
Acquisition Subsidiary and Memory MD.
(b) Each of the Company and any Company
Subsidiary (i) shall treat and hold as confidential any Parent Confidential Information (as defined below), (ii) shall not use any of
the Parent Confidential Information except in connection with this Agreement, and (iii) if this Agreement is terminated for any reason
whatsoever, shall return to the Parent all tangible embodiments (and all copies) thereof which are in its possession. For purposes of
this Agreement, “Parent Confidential Information” means any information of the Parent or any Parent Subsidiary that is furnished
to the Company or any Company Subsidiary by the Parent or any of the Parent Subsidiaries in connection with this Agreement; provided,
however, that it shall not include any information (A) which, at the time of disclosure, is available publicly other than as a result
of non-permitted disclosure by the Company, any Company Subsidiary or their respective directors, officers, or employees, (B) which, after
disclosure, becomes available publicly through no fault of the Company or any Company Subsidiary or their respective directors, officers,
or employees, (C) which the Company or any Company Subsidiary knew or to which the Company or Company Subsidiary had access prior to disclosure,
provided that the source of such information is not known by the Company or any Company Subsidiary to be bound by a confidentiality obligation
to the Parent or any Parent Subsidiary or (D) which the Company or any Company Subsidiary rightfully obtains from a source other than
the Parent or a Parent Subsidiary, provided that the source of such information is not known by the Company or any Company Subsidiary
to be bound by a confidentiality obligation to the Parent or any Parent Subsidiary.
4.8 Expenses. The costs and
expenses of the Parent and the Company (including legal fees and expenses of the Parent and the Company) incurred in connection with this
Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby shall be paid by the Party incurring
such costs and expenses; provided, that in the event that the Merger and Private Placement Offering are consummated, such costs and expenses
shall be payable at Closing from the proceeds of the Private Placement Offering.
4.9 Indemnification. The Parent
shall not, and shall cause the Surviving Corporation not to, after the Effective Time, take any action to alter or impair any exculpatory
or indemnification provisions now existing in the certificate of incorporation or bylaws of the Company for the benefit of any individual
who served as a director or officer of the Company at any time prior to the Effective Time, except for any changes which may be required
to conform with changes in applicable Law and any changes which do not affect the application of such provisions to acts or omissions
of such individuals prior to the Effective Time.
4.10 Quotation
of Parent Common Stock. The Parent shall take whatever steps are necessary to cause the shares of Parent Common Stock to remain eligible
for quotation on the OTC Markets.
4.11 D&O
Insurance. At or prior to the Closing, the Parent and the Company shall obtain for the benefit of all of the persons serving as directors
and officers of Parent immediately prior to the Closing, a directors’ and officers’ liability insurance policy (from the Parent’s
current insurance carrier or an insurance carrier with the same or better credit rating, as of the Closing) that provides coverage for
actions and claims relating to this Merger, Agreement, the Transaction Documents and transactions contemplated by this Agreement, and
arising or occurring prior to or after the Closing (the “D&O Insurance”) against the Parent and all of the persons serving
as directors and officers of Parent immediately prior to the Closing. The Parties shall fund the D&O Insurance with from the proceeds
from the Private Placement Offering on the Closing Date. Failure to obtain D&O Insurance on the Closing shall not be deemed to be
a breach of this Agreement by the Parent.
4.12 Transfer.
The Parent shall take, and shall cause the Acquisition Subsidiary and Memory MD to take, whatever steps are necessary to enable it to
effect the Transfer pursuant to the terms of the Assignment and Assumption Agreement immediately prior to the Effective Time.
4.13 Directors
and Officers of Parent. At or prior to the Closing, the Board of Directors of Parent shall take the following action, to be effective
upon the Effective Time: (i) increase the size of Parent’s Board of Directors from 2 to 5 members, (ii) elect to the Board of Directors
of Parent Hassan Kotob; and (iii) appoint as the officers of Parent Hassan Kotob and Bonnie-Jeanne Gerety, or, in either case with regard
to clauses (ii) and (iii), such other persons designated by the Company. Boris Goldstein will resign from his positions as Chairman of
the Board, Secretary and Executive Vice President and Mark Corrao will resign as Chief Financial Officer upon consummation of the Merger
and the concurrent appointment of the new officers. Mr. Goldstein will remain with the Parent as Chief Scientific Officer. Notwithstanding
the foregoing, any increase or change in the Parent’s Board of Directors shall be subject to the terms, conditions, and limitations
of Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
4.14. Assignment and Assumption Agreement.
Simultaneous with the Closing, the Parent shall enter into an Assignment and Assumption Agreement in a form reasonably acceptable to
the Company, whereby the Parent will assign any and all rights, title and interest to all assets and liabilities as set forth in Schedule
4.14 of the Parent Disclosure Schedule, to the extent assignable, which pertain to the operations of the Parent to the Parent’s
wholly owned subsidiary MemoryMD, Inc.
4.15 Information
Provided to Stockholders. The Company shall prepare, with the cooperation of the Parent, information to be sent to the holders of
shares of Company Stock in connection with receiving their approval of the Merger, this Agreement and related transactions (including,
without limitation, a substantially complete draft of the 8-K), and the Parent shall prepare, with the cooperation of the Company, information
to be sent to the holders of shares of Parent Common Stock and Parent Preferred Stock in connection with receiving their approval of the
Merger, this Agreement and related transactions. The Parent and the Company shall each use Reasonable Best Efforts to cause information
provided to such party’s stockholders to comply with applicable federal and state securities laws requirements. Each of the Parent
and the Company agrees to provide promptly to the other such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be required or appropriate for inclusion in the information
sent, or in any amendments or supplements thereto, and to cause its counsel and auditors to cooperate with the other’s counsel and
auditors in the preparation of the information to be sent to the stockholders of each Party. The Company will promptly advise the Parent,
and the Parent will promptly advise the Company, in writing if at any time prior to the Effective Time either the Company or the Parent
shall obtain knowledge of any facts that might make it necessary or appropriate to amend or supplement the information provided to such
stockholders in order to make the statements contained or incorporated by reference therein not misleading or to comply with applicable
Law. The information sent by the Company shall contain the recommendation of the Board of Directors of the Company that the holders of
shares of Company Common Stock approve the Merger and this Agreement and the related transactions and the conclusion of the Board of Directors
of the Company that the terms and conditions of the Merger are advisable and fair and in the best interests of the Company and such holders.
The information sent by the Parent shall contain the recommendation of the Board of Directors of the Parent that the holders of shares
of Parent Common Stock approve the Merger and this Agreement and the related transactions and the conclusion of the Board of Directors
of the Parent that the terms and conditions of the Merger are advisable and fair and in the best interests of the Parent and such holders.
Anything to the contrary contained herein notwithstanding, neither the Company nor the Parent shall include in the information provided
to its respective stockholders any information with respect to the other party or its Affiliates or associates, the form and content of
which information shall not have been approved by such party in its reasonable discretion prior to such inclusion.
4.16 Issuance
of Stock Options and Additional Payments.
(a)
Within five days of the Closing, the Parent shall issue that certain number of stock options or warrants equaling 20% of the issued and
outstanding shares of Parent Common Stock immediately after Closing to the persons or entities as listed in Schedule 4.16 of Parent Disclosure
Schedule.
(b) Simultaneously
with the Closing, the Parent shall make a payment of $300,000 to Baruch Goldstein in the form of cash in order to (i) extinguish $147,000
in accrued salary owed to Mr. Goldstein and (2) as a bonus for the closing of the Merger. Notwithstanding Section 4.13 hereof, simultaneously
with the Closing, Mr. Goldstein shall be appointed to serve as Chief Science Officer of MemoryMD for a one year term and shall have an
annual compensation of $250,000. Additionally, Mr. Goldstein shall be entitled to receive from Parent a cash payment of $200,000 upon
the earlier of Parent raising an aggregate of $10,000,000 in capital after the Closing (but including the Private Placement Offering)
or 60 days from the Closing. Further, the Company will pay Mr. Goldstein an additional $250,000 bonus upon the Company listing its securities
on a senior exchange such as NASDAQ or New York Stock Exchange.
4.17 Note
Offering. In conjunction with the Closing, Parent shall have a first closing of the Private Placement Offering.
4.18 Company
Financial Statements. The Company shall, within the number of days of Closing required by applicable securities law, deliver audited
financial statements for its two most recently completed fiscal years, and unaudited but reviewed financial statements for any interim
stub periods prepared in accordance with GAAP by an accounting firm that is a member of the Public Company Accounting Oversight Board.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each
Party’s Obligations. The respective obligations of each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) The Company shall have obtained (and
shall have provided copies thereof to the Parent) the written consents of (i) all of the members of its Board of Directors, (ii) a majority
of the issued and outstanding shares of Company Common Stock to approve the execution, delivery and performance by the Company of this
Agreement and the other Transaction Documents to which the Company is a party, in form and substance reasonably satisfactory to the Parent;
(b) The Parent and Memory MD shall have
executed and delivered the Assignment and Assumption Agreement, and all other documents anticipated by such agreements, and the Transfer
shall be effective immediately prior to the Effective Time;
(c) The Parties shall have mutually agreed
to the 50% Calculation and Schedule 1.5;
(d) Intentionally Omitted;
(e) The Parent and the Company have completed
all necessary legal due diligence to their reasonable satisfaction; and
(f) the closing of the Private Placement
Offering shall have occurred, or shall occur simultaneously with the Closing, on the terms and conditions set forth in the Securities
Purchase Agreement.
5.2 Conditions to Obligations
of the Parent and the Acquisition Subsidiary. The obligation of each of the Parent and the Acquisition Subsidiary to consummate the
Merger is subject to the satisfaction (or waiver by the Parent) of the following additional conditions:
(a) The number of Dissenting Shares shall
not exceed 10% of the number of outstanding shares of Company Stock as of the Effective Time;
(b) The Company and the Company Subsidiaries
shall have obtained (and shall have provided copies thereof to the Parent) all other waivers, permits, consents, approvals or other authorizations,
and effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Company
or any Company Subsidiary, except such waivers, permits, consents, approvals or other authorizations the failure of which to obtain or
effect does not, individually or in the aggregate, have a Company Material Adverse Effect or a material adverse effect on the ability
of the Parties to consummate the transactions contemplated by this Agreement;
(c) The representations and warranties
of the Company set forth in this Agreement (when read without regard to any qualification as to materiality or Company Material Adverse
Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective
Time as though made as of the Effective Time (provided, however, that to the extent such representation and warranty expressly relates
to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect
representations and warranties that, individually or in the aggregate, do not have a Company Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(d) The Company shall have performed
or complied with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Effective
Time, except for such non-performance or non-compliance as does not have a Company Material Adverse Effect or a material adverse effect
on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(e) No Legal Proceeding shall be pending
wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions
contemplated by this Agreement or (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation,
and no such judgment, order, decree, stipulation or injunction shall be in effect; (f) the Company shall have delivered to the Parent
and the Acquisition Subsidiary a copy of each written consent received from a Company Stockholder consenting to the Merger together with
a certification from each such Company Stockholder that such person is either an “accredited investor” or not a “U.S.
Person” as such terms are defined in Regulation D and Regulation S, respectively, under the Securities Act;
(f) The Company shall have delivered
to the Parent and the Acquisition Subsidiary a certificate (the “Company Certificate”) to the effect that each of the conditions
specified in clauses (a) and (e) (with respect to the Company’s due diligence of the Parent) of Section 5.1 and clauses
(a) through (e) (insofar as clause (e) relates to Legal Proceedings involving the Company or a Company Subsidiary) of this Section 5.2
is satisfied in all respects; and
(g) The Company shall have delivered
to the Parent and the Acquisition Subsidiary a certificate, validly executed by the Secretary of the Company, certifying as to (i) true,
correct and complete copies of the certificate of incorporation and bylaws of the Company; (ii) the valid adoption of resolutions
of the board of directors and stockholders of the Company (whereby this Agreement, the Merger and the transactions contemplated hereunder
were unanimously approved by the board of directors and the requisite vote of the stockholders of the Company); (iii) a good standing
certificate from the Secretary of State of the State of Delaware dated within five (5) Business Days prior to the Closing Date; and (iv)
incumbency and signatures of the officers of the Company executing this Agreement or any other agreement contemplated by this Agreement.
(h) The Company shall have delivered
to the Parent the Company Disclosure Schedule.
(i)
The Company shall have delivered to the Parent customary investor questionnaires, in form acceptable to the Parent, completed by each
of the Company’s stockholders, which are necessary for the Parent to determine whether each of the Company’s stockholders
are “accredited investors”.
5.3 Conditions to Obligations
of the Company. The obligation of the Company to consummate the Merger is subject to the satisfaction of the following additional
conditions:
(a) The Parent shall have obtained (and
shall have provided copies thereof to the Company) the written consents of (i) all of the members of its Board of Directors, (ii) all
of the members of the Board of Directors of Acquisition Subsidiary, (iii) the sole stockholder of Acquisition Subsidiary, and (iii) holders
of more than 50% of the Parent Common Stock outstanding immediately prior to the Effective Time, in each case to the execution, delivery
and performance by the each such entity of this Agreement and/or the other Transaction Documents to which each such entity a party, in
form and substance reasonably satisfactory to the Company;
(b) The Parent shall have obtained (and
shall have provided copies thereof to the Company) all of the other waivers, permits, consents, approvals or other authorizations, and
effected all of the registrations, filings and notices, referred to in Section 4.2 which are required on the part of the Parent or any
of the Parent Subsidiaries, except for waivers, permits, consents, approvals or other authorizations the failure of which to obtain or
effect does not, individually or in the aggregate, have a Parent Material Adverse Effect or a material adverse effect on the ability of
the Parties to consummate the transactions contemplated by this Agreement;
(c) The representations and warranties
of the Parent set forth in this Agreement (when read without regard to any qualification as to materiality or Parent Material Adverse
Effect contained therein) shall be true and correct as of the date of this Agreement and shall be true and correct as of the Effective
Time as though made as of the Effective Time (provided, however, that to the extent such representation and warranty expressly relates
to an earlier date, such representation and warranty shall be true and correct as of such earlier date), except for any untrue or incorrect
representations and warranties that, individually or in the aggregate, do not have a Parent Material Adverse Effect or a material adverse
effect on the ability of the Parties to consummate the transactions contemplated by this Agreement;
(d) Each of the Parent and the Acquisition
Subsidiary shall have performed or complied with its agreements and covenants required to be performed or complied with under this Agreement
as of or prior to the Effective Time, except for such non-performance or non-compliance as does not have a Parent Material Adverse Effect
or a material adverse effect on the ability of the Parties to consummate the transactions contemplated by this Agreement and the other
Transaction Documents;
(e) No Legal Proceeding shall be pending
wherein an unfavorable judgment, order, decree, stipulation or injunction would (i) prevent consummation of any of the transactions
contemplated by this Agreement and the other Transaction Documents or (ii) cause any of the transactions contemplated by this Agreement
and the other Transaction Documents to be rescinded following consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(f) The Parent shall have delivered to
the Company a certificate to the effect that each of the conditions specified in clauses (a) and (e) (with respect to the Parent’s
due diligence of the Company) of Section 5.1 and clauses (a) through (e) (insofar as clause (e) relates to Legal Proceedings involving
the Parent, or the Acquisition Subsidiary) of this Section 5.3 is satisfied in all respects;
(g) Each of the Parent and Acquisition
Subsidiary shall have delivered to the Company a certificate, validly executed by Secretary of the Parent or the Acquisition Subsidiary,
as applicable, certifying as to (i) true, correct and complete copies of its respective articles or certificate of incorporation, as applicable,
and bylaws; (ii) the valid adoption of resolutions of the board of directors and stockholders of the Parent or Acquisition Subsidiary,
as applicable (whereby this Agreement and the other Transaction Documents, the Merger and the transactions contemplated hereunder and
thereunder were unanimously approved by the board of directors and the requisite vote of the stockholders of Parent or the Acquisition
Subsidiary, as applicable); (iii) a good standing certificate from the Secretary of State of each of the State of Nevada and the State
of Delaware, as applicable, dated within five (5) Business Days prior to the Closing Date; and (iv) incumbency and signatures of the officers
of the Parent or the Acquisition Subsidiary, as applicable, executing this Agreement or any other agreement contemplated by this Agreement;
(h) Memory MD shall have delivered to
the Company a certificate, certifying as to (i) true, correct and complete copies of its articles of incorporation and bylaws; (ii) the
valid adoption of resolutions of the board of directors and stockholders of Memory MD (whereby the Assignment and Assumption Agreement
and the transactions contemplated thereunder were unanimously approved by the board of directors and the requisite vote of the stockholders
of Memory MD); (iii) a good standing certificate from the Secretary of State of the State of Nevada dated within five (5) Business Days
prior to the Closing Date; and (iv) incumbency and signatures of the officers of Memory MD executing the Assignment and Assumption Agreement
and any ancillary agreements to which Memory MD is a party;
(i) The Company shall have received an
official stockholder list from Parent’s transfer agent and registrar showing that as of immediately prior to the Effective Time
there are such number of shares of Parent Common Stock issued and outstanding to confirm the calculation in Schedule 1.5;
(j) The Parent shall have delivered to
the Company (i) evidence that the Parent’s Board of Directors is authorized to consist of the persons listed on Schedule 5.3(j)(i)
of Parent Disclosure Schedule, (ii) evidence of the resignations of all individuals who served as directors and/or officers of the Parent
immediately prior to the Effective Time, which resignations shall be effective as of the Effective Time, (iii) evidence of the appointment
of the persons listed on Schedule 5.3(j)(i) of Parent Disclosure Schedule to serve as directors of the Parent immediately following the
Effective Time and (iv) evidence of the appointment of such executive officers of the Parent to serve immediately following the Effective
Time as shall have been designated by the Company, as listed in Schedule 5.3(j)(ii) of Parent Disclosure Schedule.
(k) The Parent shall have disclosed on
Schedule 3.28 of the Parent Disclosure Schedules to the Company all debt of Parent and its subsidiaries retained by the Company.
(l) The Parent shall have delivered the
D&O Insurance binder to the Company at Closing.
(m) The Parent shall have delivered to
the Company the Parent Disclosure Schedule.
ARTICLE VI
DEFINITIONS
For purposes of this Agreement, each
of the following defined terms is defined in the Section of this Agreement indicated below.
Defined Term
|
Section
|
Accredited Investor
|
1.5(a)
|
Acquisition Subsidiary
|
Introduction
|
Affiliate
|
2.4(d)
|
Agreement
|
Introduction
|
Anti-Corruption Laws
|
2.21(c)
|
Assignment and Assumption Agreement
|
Recitals
|
Business Day
|
1.2
|
Certificate of Merger
|
1.1
|
Closing
|
1.2
|
Closing Date
|
1.2
|
Code
|
Recitals
|
Company
|
Introduction
|
Company Certificate
|
5.2(f)
|
Company Common Stock
|
1.5(a)
|
Company Confidential Information
|
4.5(b)
|
Company Consents
|
2.3
|
Company Disclosure Schedule
|
Article II
|
Company Employee Plans
|
2.7(c)
|
Company Equity Plans
|
2.2
|
Company Intellectual Property
|
2.2
|
Company Material Adverse Effect
|
2.1
|
Company Permits
|
2.4(e)
|
Parent Common Stock
|
1.5(a)
|
Company Preferred Stock
|
2.2
|
Company Relevant Persons
|
2.21
|
Company Stock
|
1.5(a)
|
Company Stockholders
|
1.5(a)
|
Company Stock Certificates
|
1.5(b)
|
Company Subsidiary
|
2.1
|
Contemplated Transactions
|
7.3
|
Customs & International Trade Laws
|
2.21
|
Defaulting Party
|
7.6
|
Delaware Act
|
1.1
|
Dissenting Shares
|
1.6(a)
|
D&O Insurance
|
4.11
|
DOC
|
2.21
|
Effective Time
|
1.1
|
Employee Benefit Plan
|
3.23
|
Environmental Law
|
2.22(a)
|
ERISA
|
3.23
|
ERISA Affiliates
|
2.23
|
Exchange Act
|
2.1(b)
|
GAAP
|
2.1
|
Governmental Entity
|
2.5
|
Indemnified Executives
|
4.9(b)
|
Indemnifying Stockholders
|
6.1
|
Intellectual Property
|
2.2
|
Legal Proceeding
|
2.6
|
Memory MD
|
Recitals
|
Merger
|
Recitals
|
Merger Shares
|
1.5(a)
|
Non-Defaulting Party
|
7.6
|
Notes
|
Recitals
|
OFAC
|
2.21
|
OTC Markets
|
3.2
|
Other Relevant Persons
|
2.21
|
Parent
|
Introduction
|
Parent Auditor
|
3.33
|
Parent Common Stock
|
1.3(e)
|
Parent Confidential Information
|
4.7(b)
|
Parent Disclosure Schedule
|
Article III
|
Parent Financial Statements
|
3.8
|
Parent Intellectual Property
|
3.38(b)
|
Parent Material Adverse Effect
|
3.1
|
Parent Permits
|
3.25
|
Parent Preferred Stock
|
1.3(e)
|
Parent Relevant Persons
|
3.39(a)
|
Parent Reports
|
3.6
|
Parent Subsidiaries
|
2.5(a)
|
Party
|
Introduction
|
Private Placement Offering
|
Recitals
|
Reasonable Best Efforts
|
4.1
|
Sanctioned Country
|
2.21
|
Sanctioned Persons
|
2.21
|
SEC
|
1.13(a)
|
Securities Act
|
1.5(a)
|
Security Interest
|
2.2
|
Common Stock
|
1.5(a)
|
Intentionally Omitted
|
1.3(e)
|
8-K
|
4.3
|
Securities Purchase Agreement
|
Recitals
|
Signing Date
|
Recitals
|
Takeover Law
|
2.2
|
Tax Returns
|
3.12
|
Transaction Documents
|
3.3
|
Transfer
|
Recitals
|
ARTICLE VII
TERMINATION
7.1 Termination by Mutual
Agreement. This Agreement may be terminated at any time by mutual consent of the Parties, provided that such consent to terminate
is in writing and is signed by each of the Parties.
7.2 Termination for
Failure to Close. This Agreement may be terminated, by any Party, if the Closing Date shall not have occurred by September 30, 2021;
provided, that the right to terminate this Agreement pursuant to this Section 7.2 shall not be available to any Party whose breach of
any provision of this Agreement results in the failure of the Closing to have occurred by such time.
7.3 Termination by Operation
of Law. This Agreement may be terminated by any Party hereto if there shall be any statute, rule or regulation issued by a Governmental
Entity of competent jurisdiction that renders consummation of the transactions contemplated by this Agreement and the other Transaction
Documents (the “Contemplated Transactions”) illegal or otherwise prohibited, or a court of competent jurisdiction or any Governmental
Entity of competent jurisdiction shall have issued an order, decree or ruling, or has taken any other action restraining, enjoining or
otherwise prohibiting the consummation of such transactions and such order, decree, ruling or other action shall have become final and
non-appealable.
7.4 Termination for
Failure to Perform Covenants or Conditions. This Agreement may be terminated prior to the Effective Time:
(a) By the Parent and the Acquisition
Subsidiary if: (i) any of the conditions set forth in Section 5.2 hereof have not been fulfilled in all material respects by the
Closing Date or otherwise waived by the Parent; (ii) the Company shall have breached or failed to observe or perform in any material
respect any of its covenants or obligations under this Agreement if such breach is not cured within ten (10) days of written notice of
such breach from Parent (to the extent such breach is curable) or (iii) as otherwise set forth herein; provided that Parent and Acquisition
Subsidiary may not exercise the right in this Section 7.4(a) if either of them are then in breach of any provision of this Agreement;
or
(b) By the Company if: (i) any of
the conditions set forth in Section 5.3 hereof have not been fulfilled in all material respects by the Closing Date or otherwise waived
by the Company; (ii) the Parent or the Acquisition Subsidiary shall have breached or failed to observe or perform in any material
respect any of its covenants or obligations under this Agreement if such breach is not cured within ten (10) days of written notice of
such breach from the Company (to the extent such breach is curable) or (iii) as otherwise set forth herein; provided that Company
may not exercise the right in this Section 7.4(b) if it is then in breach of any provision of this Agreement;.
7.5 Effect of Termination
or Default; Remedies. In the event of termination of this Agreement as set forth above, this Agreement shall forthwith become void
and there shall be no liability on the part of any Party hereto to any other Party, after the date of such termination, provided that
such Party is a Non-Defaulting Party (as defined below). The foregoing shall not relieve any Party from liability for damages actually
incurred as a result of such Party’s breach of any term or provision of this Agreement.
7.6 Remedies; Specific
Performance. In the event that any Party shall fail or refuse to consummate the Contemplated Transactions or if any default under
or breach of any representation, warranty, covenant or condition of this Agreement on the part of any Party (the “Defaulting Party”)
shall have occurred that results in the failure to consummate the Contemplated Transactions, then in addition to the other remedies provided
herein, the non-defaulting Party (the “Non-Defaulting Party”) shall be entitled to seek and obtain money damages from the
Defaulting Party, or may seek to obtain an order of specific performance thereof against the Defaulting Party from a court of competent
jurisdiction, provided that the Non-Defaulting Party seeking such protection must file its request with such court within forty-five (45)
days after it becomes aware of the Defaulting Party’s failure, refusal, default or breach. In addition, the Non-Defaulting Party
shall be entitled to obtain from the Defaulting Party court costs and reasonable attorneys’ fees incurred in connection with or
in pursuit of enforcing the rights and remedies provided hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 Press Releases and
Announcements. No Party shall issue any press release or public announcement relating to the subject matter of this Agreement without
the prior written approval of all of the other Parties; provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable Law (in which case the disclosing Party shall use Reasonable Best Efforts to advise the other Parties
and provide them with a copy of the proposed disclosure prior to making the disclosure).
8.2 No Third-Party Beneficiaries.
Except for the Purchasers under the Securities Purchase Agreement, this Agreement shall not confer any rights or remedies upon any person
other than the Parties and their respective successors and permitted assigns; provided, however, that the provisions in Article I
concerning issuance of the Merger Shares is intended for the benefit of the Company Stockholders.
8.3 Entire Agreement.
This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior
or (other than as set forth in the Transaction Documents) contemporaneous understandings, agreements or representations by or among the
Parties, written or oral, with respect to the subject matter hereof.
8.4 Succession and Assignment.
This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted
assigns. No Party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties.
8.5 Counterparts and
Facsimile Signature. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. Facsimile or electronic signatures delivered by fax and/or e-mail/.pdf
transmission shall be sufficient and binding as if they were originals and such delivery shall constitute valid delivery of this Agreement.
8.6 Headings. The
section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation
of this Agreement.
8.7 Notices. All
notices, requests, demands, claims and other communications hereunder shall be in writing. Any notice, request, demand, claim or other
communication hereunder shall be deemed duly delivered four Business Days after it is sent by registered or certified mail, return receipt
requested, postage prepaid, or one Business Day after it is sent for next Business Day delivery via a reputable nationwide overnight courier
service, in each case to the intended recipient as set forth below:
If to the Company or the Company Stockholders:
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Copy to
(which copy shall not constitute notice hereunder):
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Piezo Motion Corp.
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Lucosky Brookman LLP
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6700 Professional Parkway
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101 Wood Avenue South
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Sarasota, FL 34240
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Woodbridge, NJ 08830
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Attn: Hassan Kotob, CEO
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Attn: Lawrence Metelitsa
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Facsimile: [●]
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Facsimile: (732) 395-4401
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Email: hk@piezomotion.com
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Email: lmetelitsa@lucbro.com
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If to the Parent or the Acquisition Subsidiary
(prior to the Closing):
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Copy to
(which copy shall not constitute notice hereunder):
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Brain Scientific Inc.
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Ruskin Moscou Faltischek, PC
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125 Wilbur Place, Suite 170
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1425 RXR Plaza
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Bohemia, NY 11716
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15th Floor, East Tower
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Uniondale, New York 11556
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Attn: Boris Goldstein
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Attn: Stephen E. Fox
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Facsimile: [●]
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Facsimile: 516-663-6780
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Email: boris@memorymd.com
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Email: sfox@rmfpc.com
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Any Party may give any notice, request, demand,
claim or other communication hereunder using any other means (including personal delivery, expedited courier, messenger service, telecopy,
telex, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication shall be deemed to have been
duly given unless and until it actually is received by the Party for whom it is intended. Any Party may change the address to which notices,
requests, demands, claims and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein
set forth.
8.8 Governing Law. This Agreement shall
be governed by and construed in accordance with the internal laws of the State of New York without giving effect to any choice or conflict
of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of laws of any
jurisdictions other than those of the State of New York.
8.9 Amendments and Waivers. The Parties
may mutually amend any provision of this Agreement at any time prior to the Effective Time. No amendment of any provision of this Agreement
shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver of any right or remedy hereunder shall
be valid unless the same shall be in writing and signed by the Party giving such waiver. No waiver by any Party with respect to any default,
misrepresentation or breach of warranty or covenant hereunder 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.
8.10 Severability.
Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity
or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction declares that any term or
provision hereof is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability
shall have the power to limit the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid
or unenforceable term or provision, and this Agreement shall be enforceable as so modified.
8.11 Submission
to Jurisdiction. Each of the Parties irrevocably consents to the exclusive jurisdiction and venue of New York and any state appellate
court therefrom within the State of New York in connection with any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner authorized by the laws of the State of New York for such
Parties and irrevocably waives, to the fullest extent permitted by applicable Law, and covenants not to assert or plead any objection
it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding brought in any such court has been brought in an inconvenient forum. Any Party may make service on another Party
by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices
in Section 8.7. Nothing in this Section 8.11, however, shall affect the right of any Party to serve legal process in any other manner
permitted by Law. If any litigation or other court action, arbitration or similar adjudicatory proceeding is commenced by any Party
to enforce its rights under this Agreement against any other Party, all fees, costs and expenses, including, without limitation, reasonable
attorneys’ fees and court costs, incurred by the prevailing Party in such litigation, action, arbitration or proceeding shall be
reimbursed by the losing Party; provided, that if a Party to such litigation, action, arbitration or proceeding prevails in part, and
loses in part, the court, arbitrator or other adjudicator presiding over such litigation, action, arbitration or proceeding shall award
a reimbursement of the fees, costs and expenses incurred by such Party on an equitable basis.
8.12 WAIVER
OF JURY TRIAL. EACH OF THE PARTIES IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BETWEEN THE
PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
8.13 Survival.
Except with respect to the Article III, none of the representations or warranties in this Agreement or in any certificate delivered pursuant
to this Agreement shall survive the Effective Time.
8.14 Construction.
(a) The language used in this Agreement
shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied
against any Party.
(b) Any reference to any federal, state,
local or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Parties
have executed this Agreement and Plan of Merger and Reorganization as of the date first above written.
PARENT:
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BRAIN SCIENTIFIC INC.
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By:
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/s/ Boris Goldstein
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Name:
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Boris Goldstein
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Title:
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Chairman of the Board and Executive Vice President
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ACQUISITION SUBSIDIARY:
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BRSF ACQUISITION INC.
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By:
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/s/ Boris Goldstein
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Name:
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Boris Goldstein
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Title:
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President
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COMPANY:
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PIEZO MOTION CORP.
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By:
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/s/ Hassan Kotob
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Name:
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Hassan Kotob
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Title:
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CEO
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[Signature Page to Merger Agreement]
Appendix B