UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM
10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended:
July 31, 2014
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period
from _____________ to _____________
Commission File No.
333-191175
Songbird
Development Inc.
(Exact name of registrant
as specified in its charter)
Nevada |
90-0925768 |
(State or other jurisdiction
of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
14 Hayward Brook
Drive, Concord, NH 03301
(Address of principal
executive offices)
108
Dnipropetrovska Doroha, Apt. 110, Odesa, Ukraine 65000
(Former address, if changed
since last report.)
Issuer’s telephone
number: (505) 603-4150
Securities Registered pursuant
to Section 12(b) of the Act: None
Securities Registered pursuant
to Section 12(g) of the Exchange Act: None
Indicate by check mark
if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
Indicate by check mark
if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes o No x
Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes x No o
Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
o
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
o |
|
Accelerated filer |
o |
|
|
|
|
|
Non-accelerated filer |
o
(Do not check if a smaller reporting company) |
|
Smaller reporting company |
x
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
The aggregate market
value of the voting and non-voting common equity held by non-affiliates of the registrant was $0 as of January 31, 2014, the last
business day of the registrant’s most recently completed second fiscal quarter.
At October 22, 2014, there
were 47, 625,000 shares of the registrant’s common stock outstanding.
DOCUMENTS INCORPORATED
BY REFERENCE
None
TABLE OF CONTENTS
PART I |
3 |
Item 1. Business. |
3 |
Item 1a. Risk Factors. |
11 |
Item 1b. Unresolved Staff Comments. |
23 |
Item 2. Properties. |
23 |
Item 3. Legal Proceedings. |
23 |
Item 4. Mine Safety Disclosures. |
24 |
PART II |
24 |
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
24 |
Item 6. Selected Financial Data. |
24 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
24 |
Item 7a. Quantitative and Qualitative Disclosures About Market Risk. |
28 |
Item 8. Financial Statements and Supplementary Data. |
28 |
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure. |
28 |
Item 9a. Controls and Procedures. |
29 |
Item 9b. Other Information |
29 |
PART III |
29 |
Item 10. Directors, Executive Officers and Corporate Governance. |
29 |
Item 11. Executive Compensation |
30 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
30 |
Item 13. Certain Relationships and Related Transactions, Director Independence. |
31 |
Item 14. Principal Accounting Fees and Services. |
32 |
PART IV |
33 |
Item 15. Exhibits, Financial Statement Schedules. |
33 |
SIGNATURES |
35 |
Throughout this report,
unless otherwise designated, the terms “we,” “us,” “our,” “the Company” and “our
company” refer to Songbird Development Inc., a Nevada corporation, and its subsidiary, Knowledge Machine, Inc. All amounts
in this report are in U.S. Dollars, unless otherwise indicated.
FORWARD-LOOKING STATEMENTS
This Annual Report on
Form 10-K contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform
Act of 1995. The use of words such as “anticipates,” “estimates,” “expects,” “intends,”
“plans” and “believes,” among others, generally identify forward-looking statements. These forward-looking
statements are based on our management's expectations and assumptions about future events as of the date of this Annual Report
on Form 10-K, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict.
Forward-looking statements include statements about our expectations, beliefs or intentions regarding our product offerings, business,
financial condition, results of operations, strategies or prospects. You can identify forward-looking statements by the fact that
these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated
or expected events, activities, trends or results as of the date they are made. Because forward-looking statements relate to matters
that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results
to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our
actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These
forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events
and financial performance. We undertake no obligation to update, and we do not have a policy of updating or revising, these forward-looking
statements.
PART I
ITEM 1. BUSINESS.
Historical Background
Our
Company was incorporated in the State of Nevada on December 27, 2012, to engage in the development and operation of a business
engaged in the distribution of high end cutlery sets produced in China. We conducted this business through October 22, 2014. On
October 22, 2014, we acquired an operating subsidiary, Knowledge Machine, Inc., a Nevada corporation, (“Knowledge Machine”)
and subsequently sold off our current business. Knowledge Machine is a development stage technology company focused on targeting
new technologies, acquiring licensing rights to those technologies, forming joint ventures for initial product launch and commercialization
wherever feasible, and marketing our licensed technologies. Knowledge Machine is our only subsidiary.
Our
principal offices are located at 14 Hayward Brook Drive, Concord, NH 03301.
The
Company qualifies as an “emerging growth company” as defined in the Jumpstart our Business Startups Act (the “JOBS
Act”).
Acquisition of Knowledge
Machine and Change of Management
On October 22, 2014,
we entered into a contract with and completed the acquisition of Knowledge Machine in a stock-for-stock exchange in which we issued
37,625,000 shares of our common stock on a pro rata basis to the shareholders of Knowledge Machine in return of all of the outstanding
shares of Knowledge Machine (the “Reorganization Agreement”). Knowledge Machine also entered into a Stock
Purchase Agreement (the “SPA”) with Igor Kaspruk, the sole officer, director and principal shareholder
of the Company at the time, to acquire 2,464,716 shares of restricted stock held by him for $35,800. Following the closing of the
Reorganization Agreement and the SPA, we sold the assets relating to the prior business of the Company to Mr. Kaspruk in return
of 1,535,284 shares owned by him pursuant to an Asset Purchase Agreement between the Company and Mr. Kaspruk (the “APA”).
In addition, Knowledge Machine loaned $14,200 to the Company to repay outstanding prior cash advances made by Mr. Kaspruk to the
Company.
At the closing of the
Reorganization Agreement, Mr. Kaspruk appointed Vivek R. Dave and Taylor Caswell to serve as directors of the Company and subsequently
resigned as an officer and director of the Company. Thereafter, in connection with the closing of the SPA and the APA, the 4,000,000
restricted shares of common stock purchased by Knowledge Machine and the Company from Mr. Kaspruk in the above transactions were
cancelled and returned the authorized but unissued common stock of the Company.
As a result of the above
transactions a change of control of the Company occurred from Mr. Kaspruk to Messrs. Dave and Caswell who assumed management control
of the Company.
In connection with the
closing of the Reorganization Agreement, the board of directors approved a one-for-ten forward stock split of the pre-closing outstanding
shares and a change of the Company’s name to “Knowledge Machine International, Inc.” The forward stock split
and name change were approved by written consent of Mr. Kaspruk as a majority shareholder immediately prior to the closing of the
Reorganization Agreement. The name change and forward stock split are being processed through FINRA with an expected effective
date of November 10, 2014. We also filed articles of amendment with the State of Nevada to reflect the forward stock split and
name change to be effective November 10, 2014.
Upon completion of the
above transactions, giving effect to the forward split of the pre-closing shares and cancellation of Mr. Kaspruk’s shares,
we have 47,625,000 shares of our common stock outstanding. Of these shares Messrs. Dave and Caswell will own 6,500,000 shares or
approximately 13.7% of our Company’s outstanding stock. Former shareholders of Knowledge Machine, including Messrs. Dave
and Caswell, will own 37,625,000 shares of the Company, representing approximately 80% of the outstanding shares. The securities
issued in the closing of the Reorganization Agreement were not and will not be registered under the Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
Business Overview
In connection with the
closing of the above transactions, we ceased our prior principal business operations (which were sold and transferred to Mr. Kaspruk
pursuant to the APA). Upon completion of these transactions, we acquired Knowledge Machine (which is now our wholly-owned subsidiary)
and became a technology company focused on targeting new technologies, acquiring licensing rights to those technologies, and marketing
our licensed technologies. Whenever feasible and supported by business plans, we intend to form joint ventures and partnerships
to share risks and rewards associated with bringing new and innovative products and services to market. We do not intend to acquire
significant equity interests in these companies or become an investment company as defined in the Investment Company Act of 1940,
as amended. Knowledge Machine was incorporated in the State of Nevada on December 12, 2013, and commenced its operations in 2013.
All references to business of the Company after the closing of the Reorganization Agreement refer to Songbird Development Inc.
and Knowledge Machine, Inc., collectively.
At its core, the business
processes of Knowledge Machine are anticipated to involve the following aspects:
| · | Identification of promising early–stage
technologies that have significant revenue potential within validated markets or within emerging markets |
| · | Technologies in the category above that
have issued patents or have patents pending |
| · | Creation and utilization of an IP-specific
search engine tool which will enable us to better match licensable IP across organizational and national boundaries, thereby resulting
in superior IP bundles for product definition and launch |
| · | Vetting of such early stage technologies
by our Science Advisory Board comprised of individuals with significant private and public sector experience with technology and
innovation |
| · | Structuring of licensing agreements, marketing
agreement, joint ventures, joint technology development agreements, or materials supply agreements depending on the specific business
opportunity and what would be best for advancing the purposes of the business plan |
| · | Specific technology focus areas such as
advanced materials, manufacturing, internet technologies and Big Data, biotech, and health care, especially in emerging markets
like India |
Products or Services
Targeting New Technologies
OmniScience™
Deep Web Technologies
of Santa Fe, New Mexico has agreed to collaborate with Knowledge Machine by providing engineering services and expertise to develop
a new and unique deep web search tool specifically targeted at IP. The deep web is the hidden part of the Internet, which is estimated
to be 1,000 to 10,000 greater in information content than what is accessible on the surface through commonly available search engines
such as Google. We believe OmniScience™ Deep Web search tool would solve such problems through its proprietary deep web software
technology designed to locate non-obvious relationships in deep web space specifically aimed at licensable IP from universities,
national laboratories, and international research centers around the world. This search tool would be developed specifically for
Knowledge Machine by Deep Web with possible additional licensing opportunities for the two companies through possible licensing
to research institutions, universities, or corporations seeking to optimize the bundling of their IP. We intend to use this deep
web technology to create IP bundles of several patents from several organizations that assist in creating IP and patent portfolios
that enable sustainable competitive advantage. This is in contrast to the current approach of licensing a single patent or series
of patents from a single institution. For example, there is currently little motivation for a university to search out potentially
complimentary patents at an outside entity whether it is a company or research institution. Typically, universities are only concerned
with their own IP. However, a particular product or service might be much stronger and more competitive and more lucrative if several
patents from several different organizations could be identified and licensed as a bundle. OmniScienceTM would provide
users with the ability to identify such joint licensing opportunities in a manner that is not easy or obvious to accomplish today.
Science Advisory
Board
Our Science Advisory Board will perform
several critical functions including, but not limited to the following:
| · | Keep our list of target technologies up
to date, and fill in detail below each category as to which areas within the board technology focus areas are most attractive and
potentially profitable in the current environment. |
| · | Assist oversee the application of a systematic
project review process and take part in critical reviews/strategy meetings to closely advise our personnel; and |
| · | Assist our personnel identify promising
technology by reviewing and analyzing results of OmniScience™ Deep Web search tool. |
| · | The Science Advisory Board is compensated
through our Equity Incentive Plan |
The initial members of our Science Advisory Board are:
Chief Scientist: Dr. Vivek R. Dave,
Ph.D., CEO. Dr. Dave has degrees from Caltech and MIT and has extensive previous experience in the aerospace, defense, and
additive manufacturing / 3D Printing industries. He has held positions including Senior Engineer at Pratt and Whitney, Group Leader
at Los Alamos National Lab, and Chief Scientist at Sigma Labs (SGLB). He is currently the Chief Scientist for Sigma Labs Inc. He
has over 50 publications and 10 patents or patents pending. He is a recognized expert in advanced aerospace and defense technology
as well as materials and materials processing.
Mr. Harshal Shah, Board Member and Asian
Market Advisor. Mr. Shah was a Truman Gray Scholar at MIT and MIT Sloan School of Management from which he has two Bachelors’
degrees in Electrical Engineering and Computer Science, and Management, with a minor in Economics. He has an MBA in Finance, Marketing
and Strategy from The Wharton School, University of Pennsylvania, and is an Andover Scholar from Phillips Academy in Andover, MA,
USA. Mr. Shah was with the Reliance Group, one of India’s largest conglomerates, which he joined in June 2005, as a member
of its Senior Leadership Team. At Reliance, he founded and spearheaded the Group’s corporate venture capital arm as CEO,
Reliance Venture Asset Management Ltd. and President, Reliance Capital Ltd. He was also keenly involved in strategy and implementation
for Reliance Capital Ltd since 2005. In 2010, he was elected, for three consecutive terms, as the President of American Alumni
Association of India. He is also a member of the MIT Sloan Executive Board and is on the Phillips Academy, Andover Asia Advisory
Council. Mr. Shah will be instrumental in generating Asian deal flow for Knowledge Machine.
Mr. Richard Mah, Board Member and Technology
Evaluation Lead. Mr. Mah is a high level executive within the commercial and government sectors having held positions of Principal
Associate Lab Director of Los Alamos National Lab and CEO of Sigma Labs (SGLB). At Los Alamos, Mr. Mah was in charge of all aspects
of the nuclear weapons program and ran a 5000+ person organization with annual budgets of $1B. He was also the Technology Licensing
Director for Los Alamos as well as a prominent figure in the University of California’s governance of the National Labs.
Mr. Mah has a background in metallurgy and degrees from the University of Illinois.
Dr. Charles Farrar, Ph.D.
Dr. Farrar is the Director of the Los Alamos Engineering Institute and is an Adjunct Professor at the University of California
– San Diego. A Civil Engineer by training, he is a world-recognized authority on smart structures and smart materials for
a wide range of applications. He is also a Fellow of the ASME, distinguished member of the Technical Staff and Laboratory Fellow
at Los Alamos National Laboratory.
Dr. Daniel Thoma, Ph.D. Dr. Thoma
is one of the premier metallurgists and materials scientists in the U.S. as well as internationally and currently serves as the
Deputy Division Director for the Materials Science and Engineering division at Los Alamos National Laboratory. Dr. Thoma is a Fellow
of many International technical societies include ASM and AIME. In his position at Los Alamos, he is significantly involved with
IP matters within the Materials Science and Engineering Division.
Mr. William H. King. Mr. King is
a pioneer in the aviation industry and has achieved many firsts including an advanced engine manufacturing process that allows
military aircraft to supercruise, i.e. reach supersonic speeds without afterburner. Mr. King was a Technology Manager at the Pratt
and Whitney in East Hartford, CT. He was very successful in technology transfer and commercialization from National Labs, Universities,
and Research Centers around the world. He has degrees in metallurgy from the University of Washington. He is a Fellow of the American
Welding Society.
Our Science Advisory
Board will not only use their own efforts to target breakthrough technologies but will also be involved in the evaluation of such
technologies prior to entering into license or marketing agreements.
On April 25, 2014, an
aggregate of 11,250,000 shares of Knowledge Machine were granted to the members of our Science Advisory Board which were converted
into a like number of shares of the Company in connection with the closing of the Reorganization Agreement. Of these shares, 7,416,667
are vested and the remaining shares vest as follows: 1,916,667 on April 22, 2014 and 1,916,666 on April 22, 2015. Vesting is contingent
on membership on the Science Advisory Board as of the vesting date. Any unvested shares which lapse will be cancelled and returned
to the authorized but unissued shares of the Company.
Evaluation Process
Once a technology is
targeted on the deep web, either through web-based tools such as OmniScience™ or through the efforts of our Science Advisory
Board, management and our Science Advisory Board will use various analytical techniques to evaluate the potential of the technology
and whether it would be profitable to either license or market. The process will include a checklist of expectations and will be
systems engineering based.
Once the evaluation process
has been completed and we have decided that either licensing or marketing the technology may be profitable, we would enter into
negotiations with the owner of the technology. Negotiated arrangements could include licensing of the technology, a joint venture
arrangement with the owner, and markeing agreements. Licensing agreements would typically have two principal components: licensing
fees and royalties payments to the owner. Joint ventures would involve the development of joint work plans and allocation of resources
(monetary as well as personnel) from the two entities involved to achieve a commonly defined business plan and revenue target.
Marketing agreements may involve fees as well as royalty payments to enable Knowledge Machine to sell certain products or services
over different geographical regions. For both licensing and marketing agreements, we intend to always seek exclusivity for the
specific application of interest or the geographical region of interest. We may also attempt to jointly develop new technology.
Joint technology development agreements are agreements in which specific technologies are co-developed by Knowledge Machine and
a partner company. Both companies would retain possession of their pre-existing IP, and co-developed IP could be jointly assigned.
An integral part of such joint development agreements is a marketing and sales plan that would clearly define the revenue splits
between the two companies as it relates to the respective efforts put forth by both entities during the development of the specific
product or service in question. We feel that the combined experience of both management and our Science Advisory Board provides
us the ability to 1) acquire the licensing rights to a technology and to modify that technology to create a new and profitable
technology; or 2) acquire the marketing rights to a technology and to directly market the technology for a profit. We intend to
provide value by creating faster time to market, shorter times to revenues, and better chances for success through technology
and market risk reduction. We can also offer these services as outside consultants to our partner companies as part of our specific
agreement with them.
Score Technologies
On July 8, 2014, Knowledge Machine entered
into a Stock Subscription Agreement with Score Technologies, Inc., a Colorado corporation, (“Score”)
for the purchase of 100,000 shares of common stock of Score for $50,000. On August 4, 2014, the Stock Subscription Agreement was
subsequently cancelled and rescinded retroactively. The $50,000 payment made pursuant to the Stock Subscription Agreement is being
held as a deposit towards partial payment on any future license agreements entered into between Score and us.
In addition, on July 2, 2014, we entered
into an Option Agreement with Score wherein Knowledge Machine paid a total of $25,000 for the option of entering into a license
agreement granting it the exclusive right to market and sell an app known as SCOREISPAPP (the “App”), currently
being developed by Score, in the country of India. The option to enter into this license agreement expires six months after the
date that Score notifies KMI that the App is available for general sale and solicitation to the public. Knowledge Machine will
decide whether or not to exercise this option before the end of this calendar year.
Score has developed a unique platform that
has evolved into an entirely new protocol for interfacing with the internet. We seek to obtain exclusive marketing and sales rights
of Score’s technology in India. X-Platform Ltd. is an affiliated European company that shares the Score underlying technology
and is uniquely positioned to take advantage of major upcoming EU cyber security initiatives. The Score platform is extremely fast
as compared to existing technologies, while simultaneously encompassing a higher threshold of secure communication between users.
The speed with which large amounts of data is transferred across the Score platform has been demonstrated to be viable. Security
of communications is taken to an entirely new level as interlopers have found that the system is virtually impossible to penetrate.
ARMS Technology
On June 23, 2014, Knowledge Machine entered
into a Stock Purchase Agreement with Allotrope Sciences Corporation, a Delaware corporation (“Allotrope”)
to purchase twelve percent of the total number of shares of Allotrope’s common stock for $150,000. Three payments of $50,000
each were due within ten, 30, and 90 business days of the signing of the agreement. The first payment of $50,000 was made prior
to June 30, 2014. On October 14, 2014, the Company and Allotrope rescinded the original agreement and are in the process of renegotiating
the transaction, with the intent that the $50,000 would be used towards future joint venture activities.
Allotrope is a company that is commercializing
a new technology called ARMS under exclusive license agreements. ARMS stands for “Advanced Reactive Munitions and Structures.”
This new technology is ideally suited for unmanned aerial vehicles (“UAV”) or drone warfare and the security
needs and combat missions of the future for armies around the globe. Security needs of the future include counter-terrorism, drug
enforcement, counter piracy, and counter-insurgency in addition to potential threats posed by countries of states. These conflicts
are often in densely populated urban environments where avoiding collateral damage is essential, or conversely in very remote environments
where deploying large scale forces is impractical. UAVs and drones will find increasing use in both types of conditions.
UAVs and drones are currently an annual
$7B market growing at 5%+ compound annual growth rate (“CAGR”). Manufacturers are seeking to include
new weapon systems as part of their offerings, not just selling the aircraft only. ARMS is an ideal technology for this application
because it is very lightweight – up to 50% lighter than conventional weapons – and it packs a bigger punch because
the metal that makes up ARMS releases energy on impact – up to 50% higher energy output per pound. This means the weapons
can be made much lighter while still having the power required. Conversely, the weapons could be miniaturized for precision strike
in urban environments without collateral damage. We seek to enter into an agreement with Allotrope for the licensing of their technology
and to working with both foreign and domestic companies to commercialize the ARMS technology for UAV/drone use and to generate
revenues through material sales, licensing, and partnerships with manufacturers globally.
In addition, discussions are underway,
in both London and Switzerland, to establish offices at those locations.
Upon completion of financing, we intend
to initialize the use of our Science Advisory Board to begin identifying specific opportunities in the following technology spaces.
These other technologies are under consideration, but no definite agreement exists at this time.
| · | A joint development and manufacturing
agreement that would potentially give Knowledge Machine rights to a super-flexible conductor for high speed internet data cables
that would extend the ability of copper-based cables to go to higher data transfer rates without the use of fiber optics |
| · | The same material described above which
could be used for high end athletic orthotics and compression wear that will allow selective and multi-directional support of joints
during exercise to either avoid injuries from occurring in the first place or allow athletes to recover faster from injuries that
have already occurred |
| · | A 2.5D printing technology – i.e.
2D printing plus a slight 3D relief – that will be used for creation of fine art pieces. (Currently there is no art printing
technique that can emulate the organic manner in which oil paintings, murals, frescos, etc. are created by human artists.) |
| · | A super-energetic munitions technology
for US Government customers |
| · | A border incursion detection technology
for use in several nations once all required export licenses are obtained, if any are required |
Marketing and Sales
Marketing
Strategy vs. Tactics
Marketing and sales strategy and tactics
will be driven by the specific technologies and markets in question. For example, we have secured exclusive marketing and sales
rights to a high speed internet technology that will accelerate the speed of downloads and internet access more generally for
both desktop computers but more importantly for the wide range of mobile devices, both Android and Apple products. The exclusivity
is for the Indian subcontinent, which is a rapidly growing market. Sales and marketing in this arena will be conducted through
App Stores, both for Apple and Android devices. Similarly for the other technologies that we are helping to commercialize, the
specific marketing and sales tactic will be governed by the relevant market.
Marketing
Plan/Study
We intend to conduct formal marketing studies
for the specific target technology areas we are seeking to help commercialize. For example, in collaboration with Allotrope, we
are working with TNO in the Netherlands, a recognized defense research establishment, to conduct a market survey for the specific
applicability of the ARMS technology to U.S. and NATO forces, and specifically what form factors and product manifestations will
be best suited for initial customer needs.
India Marketing
Management believes that after the landslide
election in India which brought Narendra Modi to power, there is a significant pro-growth, pro-business climate which is sweeping
in a new wave of Indian startups in fields as diverse as DNA therapies, computer science, energy, etc. We are in the process of
creating Knowledge Machine Pvt. Ltd. to be located in Mumbai, India, a wholly owned Indian subsidiary which will seek outstanding
opportunities in India that also have strong market potential in Europe and North America. Harshal Shah, our India-based Science
Board Member and Asian Market Advisor, will play a significant role in this office. We hope this will provide our shareholders
and investors with significant upside potential India and across Asia.
Major
Customers
We anticipate having a mix of consumer
oriented products such as the Score mobile device App and highly-engineered specific use products such as ARMS. Therefore we expect
a mix of customers ranging from many individual consumers to large industrial companies such as those involved in defense manufacturing.
Major
Contracts
As we are in the startup phase, there are
no existing sales contracts at this time.
Competition
Competition for our products and services
is again divided according to the industry segment for the specific technologies that we are seeking to help commercialize. Potential
companies which could offer competing products and services are further discussed in the section below, but first the descriptions
of the industries to be addressed by us at this stage are provided below. The specific industry segments will now be discussed
on a product by product basis.
Score Technologies
The general marketspace for Score products
can be divided into two parts. First there is a consumer–oriented aspect that will be sold through App Stores for both Android
and Apple devices. Secondly, there is an internet service provider (ISP) aspect where the Score software will be marketed to ISPs
who seek to offer their clients faster downloads, especially on mobile devices. In the ISP space in India for which we have obtained
the exclusive marketing rights, the following companies are offering products and services in this space: BSNL, MTNL, Airtel Broadband,
Hathway Cable Broadband, Tata Broadband, Reliance Broadband, You Broadband, Sify Broadband, Asianet Dateline Broadband, and HFCL
Infotel Connect. These companies are competitors in the sense that they are already in the marketplace and seek to improve their
products and services through currently available channels such as additional hardware infrastructure. These companies are potential
customers of the Score App, as it could offer them a competitive advantage over the others in this field. On the other hand it
is expected that these companies will also strive to improve and increase their own download speeds through software and hardware
innovations.
Deep Web
Internet search is dominated by large companies
such as Google, Microsoft and Yahoo. However the anticipated marketspace for the OmniScience™ search tool will be to professionals
in the research and development as well as intellectual property creation and litigation industries.
ARMS
In the U.S., there are well-established
munitions manufacturers such as ATK, Aerojet, General Dynamics–OTS, and Raytheon. In Europe, firms such as NAMMO in Norway,
Rheinmetall in Germany, BAE systems in the UK, and TDA Arements SAS in France are all possible customers for the ARMS technology.
However, a significant fraction of these firms are engaged in their own research and development to develop munitions and materials
with similar performance characteristics as ARMS.
Industry
Information
For Score, the relevant target customers
are those using the mobile broadband market in India. According to one recent industry report1, the GSMA, which represents
the interests of mobile operators worldwide, has announced that India will become the second largest mobile broadband market globally
within the next four years with 367 million mobile broadband connections by 2016. This could make India a larger market than the
U.S., which will account for 337 million mobile broadband connections by 2016; but it will still be second to China, which is estimated
to reached 639 million connections in the same period.
1 http://www.themobileindian.com/news/5977_India-to-be-second-largest-mobile-broadband-market
Since 3G licenses were first awarded to
mobile operators in India in September 2010, mobile broadband connectivity has grown steadily. There are now more than 10 million
HSPA+">HSPA (3G GSM technology) connections across the country, and this number is expected to grow exponentially, by 900%,
to more than 100 million connections in 2014. This could make India the largest HSPA market worldwide within the next two years,
surpassing China, Japan and the U.S.
For ARMS, the relevant industry details
are in two market segments: precision guided munitions or so-called smart weapons, and UAVs. For precision guided munitions, the
worldwide market is $3.6 billion and could reach $5.3 billion by 20182. India and the Middle East countries are leading
arms importers and account for a lot of the growth in this area, as does China. The U.S. UAV market alone for military applications
is expected to reach over $18 billion by 2018 and has a growth rate of 12% CAGR3. The reason why the UAV market is
important to ARMS is that ARMS would enable a new class of custom munitions specifically suited to UAVs to be designed and built.
Management believes UAV manufacturers are seeking to expand into these areas and offer more complete capabilities as opposed to
just the UAV platform itself.
Competitive
Strategy
We will compete in these various marketspaces
on the basis of value added and overall value proposition in addition to price. For example, in the internet speed enhancing App
(Score), BSNL is the largest provider by far with the others lagging behind. There will be significant value in working with the
competitors to BSNL to offer them a speed enhancing App that will better serve their customers and thereby enhance their competitive
position with respect to BSNL.
Similarly, ARMS technology represents a
new capability and especially in the UAV space it offers the opportunity to create new series of products and offerings. As a result,
it is not a commodity but is at the high end of precision guided munitions capabilities.
In each marketspace that we intend to address,
we propose to similarly seek to offer products and services based on value and not competing strictly on price. Inevitably, however,
such a value-based offering cannot continue indefinitely without continued technological innovation, as competing offerings would
likely similarly try to position themselves based on their own value propositions. Therefore, to create sustainable advantage in
any given marketspace, partnerships will be essential to leverage the capabilities of other companies in other each individual
marketspace. This could take the form of joint development agreements, joint marketing and sales agreements, or even new joint
venture companies.
Intellectual Property
One of the main objectives of our company
is to identify promising and potentially breakthrough technology in different marketspaces and to obtain access to the enabling
IP, either through licensing, marketing and sales agreements, joint development agreements, joint ventures, or through jointly
assigned IP filings. Our business strategy and execution is therefore extremely dependent on IP and seeking to maximize the return
on IP.
Method
of Protection
We intend to file patents, either jointly
with other entities or on our own as required, in addition to filing trademarks, copyrights, and other IP protections as required
and as beneficial to our business.
2 http://www.defensenews.com/article/20140727/DEFREG04/307270018/Mideast-US-Lead-Sharp-Rise-Munitions-Market
3 http://www.marketresearchmedia.com/?p=509
License
Agreements
Currently we have an option to exclusively
license the Score technology for the India marketspace. This option will expire on February 15, 2015, if it does not convert to
a full license agreement before that time. The non-refundable option cost was $25,000, but this option cost will apply towards
the final license cost when converted to a full license agreement. An additional $50,000 has been paid to Score as a refundable
advance on the final license agreement; this would be refundable in the event that a marketable application cannot be developed
within the license option timeframe.
Research and Development
Our business strategy of IP licensing and
maximizing return on IP necessarily involves research and development. However, in order to minimize costs internally, we will
seek to conduct this research through other partners. For example in both the Score and ARMS technologies, significant previous
research and development funding has already been invested in these technologies in order to bring them to their current state
of development. We will similarly leverage funds from joint venture partners in order to maximize the return on research and development
investments and minimize internal expenditures. For example, if we enter into a joint research and development agreement with additional
revenue sharing provisions, such an agreement would leverage whatever investments we make of money and manpower with those of our
partner and define a revenue split based on each firms individual contributions to the overall product or service thus created.
Government Regulation
The
current products and services that are anticipated to be developed by us will not be subject to governmental regulations, with
the exception of the ARMS technology. ARMS is subject to the International Traffic in Arms Regulations of the U.S. Government (“ITAR”).
ITAR is a set of U.S. government regulations that controls the export and import of defense-related articles and services on the
U.S. Munitions List. These regulations implement the provisions of the Arms Export Control Act, and are described in Title 22 (Foreign
Relations), Chapter I (Department of State), Subchapter M of the Code of Federal Regulations. The Department of State’s Directorate
of Defense Trade Controls interprets and enforces ITAR. Its goal is to safeguard U.S. national security and further U.S. foreign
policy objectives. The related Export Administration Regulations (Code
of Federal Regulations Title 15 chapter VII, subchapter C) are enforced and interpreted by the Bureau of Industry and Security
in the Commerce Department. The Department of Defense is also involved
in the review and approval process. Physical enforcement of import and export laws at border crossings is performed by Customs
and Border Protection, an agency of the Department of Homeland Security.
Employees
At October 22, 2014,
following closing of the Reorganization Agreement and other transactions, we had no employees. We are currently accomplishing our
business objectives with contractors, up to and including the President and CEO who is currently acting in a contractor capacity.
After obtaining additional funding we intend to add personnel and full time employees as determined by management and as per the
needs of specific revenue, sales, and marketing objectives.
ITEM 1A. RISK FACTORS.
An investment in our
Company involves significant risks, including the risks described below. You should consult with your own financial and legal advisors
and carefully consider the material risks described below, together with all of the other information in this annual report on
Form 10-K. If any of the following risks actually occur, our business, financial condition and results of operations could suffer,
and the trading price of our common stock could decline.
Risks Related to Our
Company and Its Business
We have a limited
operating history, are not currently profitable, do not expect to become profitable in the near future and may never become profitable.
We are a development
stage technology company with a limited operating history. We are not profitable and have incurred losses since inception. We have
not generated any net revenue since inception, expect to incur substantial losses for the foreseeable future, and may never become
profitable. We also expect to incur significant operating and capital expenditures and anticipate that our expenses and losses
will increase substantially in the foreseeable future as we:
|
· |
target
and negotiate licensing and marketing agreements with target technologies; |
|
· |
implement
internal systems and infrastructure; |
|
· |
seek
to develop licensed technologies; |
|
· |
hire
management and other personnel; and |
|
· |
move
licensed technology towards commercialization. |
We also expect to experience
negative cash flow for the foreseeable future. As a result, we will need to generate significant revenues in order to achieve and
maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. If our licensed or
marketed technologies do not achieve market acceptance, we may never become profitable. Our failure to achieve or maintain profitability,
or substantial delays in achieving profitability, could negatively impact the value of our common stock and our ability to raise
additional financing. A substantial decline in the future value of our common stock would also affect the price at which we could
sell shares to secure future funding, which could dilute the ownership interest of current stockholders.
Even if we achieve profitability
in the future, we may not be able to sustain profitability in subsequent periods. Accordingly, it is difficult to evaluate our
business prospects. Moreover, our prospects must be considered in light of the risks and uncertainties encountered by an early-stage
company in competitive markets, such as the technology market, where market acceptance of our products is uncertain. There can
be no assurance that our efforts will ultimately be successful or result in revenues or profits.
Because of our
limited operating history, we cannot ensure the long-term successful operation of our business or the execution of our business
plan.
Although Knowledge Machine,
our wholly owned subsidiary, entered into licensing and marketing agreements for various technologies prior to the closing of the
Reorganization Agreement, we have a limited operating history upon which to evaluate our proposed business and prospects. Our proposed
business operations will be subject to numerous risks, uncertainties, expenses and difficulties associated with early stage enterprises.
Such risks include, but are not limited to, the following:
|
· |
the
absence of a lengthy operating history; |
|
· |
insufficient
capital to fully realize our operating plan; |
|
· |
expected
continual losses for the foreseeable future; |
|
· |
operating
in multiple currencies; |
|
· |
social
and political unrest; |
|
· |
our
ability to anticipate and adapt to a developing market(s); |
|
· |
acceptance
of our licensed and marketed technologies by consumers; |
|
· |
limited
marketing experience; |
|
· |
a
competitive environment characterized by well-established and well-capitalized competitors; |
|
· |
the
ability to identify, attract and retain qualified personnel; and |
|
· |
reliance
on key personnel. |
Because we are subject
to these risks, evaluating our business may be difficult, our business strategy may be unsuccessful and we may be unable to address
such risks in a cost-effective manner, if at all. If we are unable to successfully address these risks our business will be harmed.
We have not yet
commercialized any products or technologies, and we may never become profitable.
We have not yet commercialized
any of our licensed or marketed technologies, and we may never be able to do so. We do not know when or if we will complete any
of our product development efforts or successfully commercialize any of our licensed or marketed products. Even if we are successful
in developing licensed products that reach commercialization, we will not be successful unless these products gain market acceptance.
The degree of market acceptance of these products will depend on a number of factors, including:
| · | the
competitive environment; |
| · | our ability to enter into strategic agreements
with technology companies with strong marketing and sales capabilities; and |
| · | the
adequacy and success of distribution, sales and marketing efforts. |
Even if we successfully
develop one or more products that incorporate our licensed technologies, we may not become profitable.
We expect that
we will need to raise additional capital to meet our business requirements in the future, and such capital raising may be costly
or difficult to obtain and may dilute current stockholders’ ownership interests. An inability to raise the necessary capital
or to do so on acceptable terms would threaten the success of our business.
The Company is addressing
its liquidity issues by implementing initiatives to raise additional funds as well as other measures that will cover its anticipated
budget needs. Because of the uncertainties in our business, including the uncertainties discussed in this “Risk Factors”
section, we cannot assure that without additional financing, we will be able to maintain our operations as currently planned. Our
future capital requirements will depend on many factors, including the profitability of our current portfolio of technologies,
the number and development requirements of other technology candidates that we pursue, and the costs of operations. Because of
the numerous risks and uncertainties associated with the development and commercialization of our current portfolio of technologies
and technology candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated
with our anticipated operations. It is highly likely that we will need to raise additional funds through public or private debt
or equity financings to meet various objectives including, but not limited to:
| · | the progress of the development and marketing
of our current technology portfolio; |
| · | the number of new technologies we pursue; |
| · | the costs involved in filing and prosecuting
patent applications and enforcing or defending patent claims; |
| · | whether or not we establish our own sales,
marketing and/or manufacturing capabilities; |
| · | our ability to establish, enforce and
maintain selected strategic alliances and activities required for product development and commercialization; |
| · | our revenues, if any, from successful
development and commercialization of any technology candidates; |
| · | hiring qualified management and key employees; |
| · | responding to competitive pressures; and |
| · | maintaining compliance with applicable
laws. |
To carry out our business
plan and implement our strategy, we anticipate that we will need to obtain additional financing from time to time and may choose
to raise additional funds through strategic collaborations, public or private equity or debt financing, a bank line of credit,
asset sales or other arrangements. We cannot be sure that any additional funding, if needed, would be available on terms favorable
to us or at all. Furthermore, any additional capital raised through the sale of equity or equity-linked securities may dilute our
current stockholders’ ownership in us and could also result in a decrease in the market price of our common stock. The terms
of those securities issued by us in future capital transactions may be more favorable to new investors and may include the issuance
of warrants or other derivative securities, which may have a further dilutive effect. Furthermore, any debt financing, if available,
may subject us to restrictive covenants and significant interest costs. If we obtain funding through a strategic collaboration,
we may be required to relinquish our rights to certain of our technologies, products or marketing territories. In addition, certain
investors, including institutional investors, may be unwilling to invest in our securities since our common stock is quoted on
the OTCBB, and is not traded on a national securities exchange. Our inability to raise capital when needed would harm our business,
financial condition and results of operations, could cause our stock price to decline, and we may not be able to continue operating
if we do not generate sufficient revenues from operations.
We may incur substantial
costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance
fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection
with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.
If we fail to obtain
necessary funds for our operations, we will be unable to maintain and improve our licensed technology, and we will be unable to
develop and commercialize our products and technologies.
Our present and future
capital requirements depend on many factors, including:
| · | the level of research and development
investment required to develop our product incorporating our licensed technologies, and maintain and improve our licensed technology
position; |
| · | the costs of identifying new technology
candidates; |
| · | our success in establishing and effecting
out-licensing agreements with strategic partners, the terms of these agreements and the success of these potential future licensees
and partners in selling our products; |
| · | the costs of investigating patents that
might block us from developing potential technology candidates; |
| · | the costs of recruiting and retaining
qualified personnel; |
| · | the number of technology candidates we
pursue; |
| · | the costs of filing, prosecuting, defending
and enforcing patent claims and other intellectual property rights; |
| · | our need or decision to acquire or license
complementary technologies or new platform or technology candidate targets; and |
| · | the costs of financing unanticipated working
capital requirements and responding to competitive pressures. |
If we are unable to obtain
the funds necessary for our operations, we will be unable to maintain and improve and market our licensed technologies, and we
will be unable to develop and commercialize our products and technologies, which would materially and adversely affect our business,
liquidity and results of operations.
If we are unable
to attract and retain key personnel, it could adversely affect our ability to develop and market our products.
While we intend to attempt
to attract and retain key personnel to the best of our ability, some of our competitors are likely to have greater resources and
more experience than we do, making it difficult for us to compete successfully for key personnel. If we are ultimately unable to
attract and retain key personnel, we likely would not be able to develop and market our products and licensed technologies. If
we are unable to retain key personnel or replace them, our business, financial condition and results of operations, would be materially
adversely affected.
If we acquire or
license additional technology candidates, we may incur a number of costs and may experience other risks that could harm our business
and results of operations.
We may license additional
technology candidates. Any technology candidate we license from others will likely require additional development efforts prior
to commercial sale. All technology candidates are prone to risks of failure inherent in technology development, including the possibility
that the technology candidate or product developed based on licensed technology will not commercially accepted. In addition, we
cannot assure you that any technology candidate that we develop based on licensed technology will be manufactured or produced economically,
successfully commercialized or widely accepted in the marketplace. Moreover, integrating any newly acquired technology candidates
could be expensive and time-consuming. If we cannot effectively manage these aspects of our business strategy, our business may
not succeed.
We depend on key
members of our management and key consultants and will need to add and retain additional leading experts. Failure to retain our
management and consulting team and add additional leading experts could have a material adverse effect on our business, financial
condition and results of operations.
We are highly dependent
on our executive officers and other key management and technical personnel, including our Science Advisory Board. Our failure to
retain our Chairman, Vivek Dave, Ph.D. or any other key management and technical personnel, could have a material adverse effect
on our future operations. Our success is also dependent on our ability to attract, retain and motivate highly trained technical,
and management personnel, among others, to continue the development and commercialization of our current portfolio and future licensed
technologies.
Our future success highly
depends on our ability to attract, retain and motivate personnel, including contractors, required for the development, maintenance
and expansion of our activities. There can be no assurance that we will be able to retain our existing personnel or attract additional
qualified employees or consultants. The loss of key personnel or the inability to hire and retain additional qualified personnel
in the future could have a material adverse effect on our business, financial condition and results of operations.
Under current U.S.
law, we may not be able to enforce employees’ covenants not to compete and therefore may be unable to prevent our competitors
from benefiting from the expertise of some of our former employees.
Although we intend to
enter into non-competition agreements with our key employees, in most cases within the framework of their employment agreements,
we currently do not have employment agreements with any employees, except Mr. Dave with whom we have a consulting agreement. The
consulting agreement with Mr. Dave’s company does not contain non-competition provisions. Future agreements will prohibit
our key employees, if they cease working for us, from competing directly with us or working for our competitors for a limited period.
Under applicable U.S. law, we may be unable to enforce these agreements. If we cannot enforce our non-competition agreements with
our employees, then we may be unable to prevent our competitors from benefiting from the expertise of our former employees, which
could materially adversely affect our business, results of operations and ability to capitalize on our proprietary information.
We face significant
competition and continuous technological change, and developments by competitors may render our licensed technologies obsolete
or non-competitive. If we cannot successfully compete with new or existing products, our marketing and sales will suffer
and we may not ever be profitable.
We will compete against
fully integrated technology companies and smaller companies that are collaborating with larger technology companies, academic institutions,
government agencies and other public and private research organizations. In addition, many of these competitors, either alone or
together with their collaborative partners, operate larger research and development programs than we do, and have substantially
greater financial resources than we do.
If our competitors develop
and commercialize technologies faster than we do, or develop and commercialize technologies that are superior to our technology
candidates, our commercial opportunities will be reduced or eliminated. The extent to which any of our technology candidates achieve
market acceptance will depend on competitive factors, many of which are beyond our control. Competition in the technology industry
is intense and has been accentuated by the rapid pace of development. Our competitors include large integrated technology companies,
universities, and public and private research institutions. Almost all of these entities have substantially greater research and
development capabilities and financial, scientific, manufacturing, marketing and sales resources than we do. These organizations
also compete with us to:
|
· |
attract
parties for acquisitions, joint ventures or other collaborations; |
|
· |
license
proprietary technology that is competitive with the technology we are developing; |
|
· |
attract
funding; and |
|
· |
attract
and hire talented and other qualified personnel. |
Our competitors may succeed
in developing and commercializing products earlier than we do. Our competitors may also develop products or technologies that are
superior to those we are developing, and render our technology candidates or technologies obsolete or non-competitive. If we cannot
successfully compete with new or existing products and technologies, our marketing and sales will suffer and we may not ever be
profitable.
We may incur substantial
liabilities and may be required to limit commercialization of our licensed technologies in response to product liability lawsuits,
which may result in substantial losses.
Any of our product candidates
could cause adverse events, including injury. These adverse events may not be observed during product development, but may nonetheless
occur in the future. If any of these adverse events occur, they may render our technology candidates ineffective or harmful, and
our sales would suffer, materially adversely affecting our business, financial condition and results of operations.
In addition, potential
adverse events caused by our technology candidates could lead to product liability lawsuits. If product liability lawsuits are
successfully brought against us, we may incur substantial liabilities and may be required to limit the marketing and commercialization
of our technology candidates. Our business exposes us to potential product liability risks, which are inherent in the testing,
manufacturing, marketing and sale of licensed technologies and our products. We may not be able to avoid product liability claims.
We currently do not carry product liability insurance for our licensed technologies and products and may never do so. If, at any
time, we are unable to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product
liability claims, we may be unable to develop, market or commercialize our technology candidates. A successful product liability
claim brought against us in excess of our insurance coverage, if any, may cause us to incur substantial liabilities, and, as a
result, our business, liquidity and results of operations would be materially adversely affected. In addition, the existence of
a product liability claim could affect the market price of our common stock.
We may encounter
difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect on our business,
results of operations and financial condition.
We may not be able to
successfully grow and expand. Successful implementation of our business plan will require management of growth, including potentially
rapid and substantial growth, which will result in an increase in the level of responsibility for management personnel and place
a strain on our human and capital resources. To manage growth effectively, we will be required to continue to implement and improve
our operating and financial systems and controls to expand, train and manage our employee base. Our ability to manage our operations
and growth effectively requires us to continue to expend funds to enhance our operational, financial and management controls, reporting
systems and procedures and to attract and retain sufficient numbers of talented personnel. If we are unable to scale up and implement
improvements to our control systems in an efficient or timely manner, or if we encounter deficiencies in existing systems and controls,
then we will not be able to make available the products required to successfully commercialize our licensed technologies. Failure
to attract and retain sufficient numbers of talented personnel will further strain our human resources and could impede our growth
or result in ineffective growth. Moreover, the management, systems and controls currently in place or to be implemented may not
be adequate for such growth, and the steps taken to hire personnel and to improve such systems and controls might not be sufficient.
If we are unable to manage our growth effectively, it will have a material adverse effect on our business, results of operations
and financial condition.
If we are unable
to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately insured
loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely affected
if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.
We may not be able to
obtain insurance policies on terms affordable to us that would adequately insure our business and property against damage, loss
or claims by third parties. To the extent our business or property suffers any damages, losses or claims by third parties, which
are not covered or adequately covered by insurance, our financial condition may be materially adversely affected.
We may be unable to obtain
and maintain sufficient insurance as a public company to cover liability claims made against our officers and directors. If we
are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and directors
to manage the Company.
If we fail to maintain
an effective system of internal controls, we may not be able to accurately report our financial results or detect fraud. Consequently,
investors could lose confidence in our financial reporting and this may decrease the trading price of our stock.
We must maintain effective
internal controls to provide reliable financial reports and detect fraud. Our failure to properly maintain an effective system
of internal controls could harm our operating results and cause investors to lose confidence in our reported financial information.
In addition, such failure may cause us to suffer violations of the U.S. federal securities laws to the extent we are unable to
maintain effective internal controls. Any such loss of confidence or violations would have a negative effect on the trading price
of our stock.
Recent disruptions
in the financial markets and economic conditions could affect our ability to raise capital and could disrupt or delay the performance
of our third-party contractors and suppliers.
In past years, the U.S.
and global economies have taken a dramatic downturn as the result of the deterioration in the credit markets and related financial
crisis as well as a variety of other factors including, among other things, extreme volatility in securities prices, severely diminished
liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. The U.S. and certain
foreign governments have recently taken unprecedented actions in an attempt to address and rectify these extreme market and economic
conditions by providing liquidity and stability to the financial markets. If the actions taken by these governments are not successful,
the continued economic decline may cause a significant impact on our ability to raise capital, if needed, on a timely basis and
on acceptable terms or at all. In addition, we rely and intend to rely on third-parties, including our clinical research organizations,
third-party manufacturers and second source suppliers, and certain other important vendors and consultants. As a result of the
current volatile and unpredictable global economic situation, there may be a disruption or delay in the performance of our third-party
contractors and suppliers. If such third-parties are unable to satisfy their contractual commitments to us, our business could
be severely adversely affected.
Our current management
team has little or no experience in managing and operating a publicly traded U.S. company. Any failure to comply or adequately
comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially
adversely affect our business, results of operations and financial condition.
Our current management
team has little or no experience managing and operating a publicly traded U.S. company. Failure to comply or adequately comply
with any laws, rules, or regulations applicable to our business may result in fines or regulatory actions, which may materially
adversely affect our business, results of operation, or financial conditions and could result in delays in achieving the development
of an active and liquid trading market for our common stock.
As an “emerging
growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
As an “emerging
growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements.
We are an emerging growth company until the earliest of: (i) the last day of the fiscal year during which we had total annual
gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first
sale of our common stock pursuant to an effective registration statement, (iii) the date on which we have, during the previous
three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed a “large accelerated
issuer” as defined in Regulation S-K of the Securities Act. For so long as we remain an emerging growth company, we will
not be required to:
| · | have an auditor report on our internal
control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; |
| · | comply with any requirement that may be
adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s
report providing additional information about the audit and the financial statements (auditor discussion and analysis); |
| · | submit certain executive compensation
matters to shareholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring
a non-binding shareholder vote to approve compensation of certain executive officers) and the “say on golden parachute”
provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in
connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010; and |
| · | include detailed compensation discussion
and analysis in our filings under the Exchange Act, and instead may provide a reduced level of disclosure concerning executive
compensation. |
Although we intend to
rely on the exemptions provided in the JOBS Act, the exact implications of the JOBS Act for us are still subject to interpretations
and guidance by the SEC and other regulatory agencies. In addition, as our business grows, we may no longer satisfy the conditions
of an emerging growth company. We are currently evaluating and monitoring developments with respect to these new rules and we cannot
assure you that we will be able to take advantage of all of the benefits from the JOBS Act.
In addition, as an “emerging
growth company,” we may elect under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable
to public companies until such pronouncements are made applicable to private companies. Therefore, our financial statements may
not be comparable to those of companies that comply with standards that are otherwise applicable to public companies.
Risks Relating to
Our Intellectual Property
If we fail to adequately
protect or enforce or secure rights to the patents which were licensed to us or any patents we may own in the future, the value
of our intellectual property rights would diminish and our business and competitive position would suffer.
Our success, competitive
position, and future revenues, if any, depend in part on our ability to obtain and successfully leverage intellectual property
covering our products incorporating our licensed technologies and technology candidates, know-how, methods, processes, and other
technologies, to protect our trade secrets, to prevent others from using our intellectual property and to operate without infringing
the intellectual property rights of third parties.
The risks and uncertainties
that we face with respect to our intellectual property rights include, but are not limited to, the following:
| · | the degree and range of protection any
patents will afford us against competitors; |
| · | if and when patents will issue; |
| · | whether or not others will obtain patents
claiming aspects similar to those covered by our own or licensed patents and patent applications; |
| · | we may be subject to interference proceedings; |
| · | we may be subject to opposition proceedings
in foreign countries; |
| · | any patents that are issued may not provide
meaningful protection; |
| · | we may not be able to develop additional
proprietary technologies that are patentable; |
| · | other companies may challenge patents
licensed or issued to us or our customers; |
| · | other companies may independently develop
similar or alternative technologies, or duplicate our technologies; |
| · | other companies may design around technologies
we have licensed or developed; and |
| · | enforcement of patents is complex, uncertain
and expensive; and |
| · | whether we will need to initiate litigation
or administrative proceedings that may be costly whether we win or lose. |
If patent rights covering
our products incorporating our licensed technology and methods are not sufficiently broad, they may not provide us with any protection
against competitors with similar products and technologies. Furthermore, if the United States Patent and Trademark Office, or the
USPTO, or foreign patent offices issue patents to us or our licensors, others may challenge the patents or design around the patents,
or the patent office or the courts may invalidate the patents. Thus, any patents we own or license from or to third parties may
not provide any protection against our competitors.
We cannot be certain
that patents will be issued as a result of any future applications, and we cannot be certain that any of our issued patents, licensed
from various licensors (or any other third-party in the future), will give us adequate protection from competing products. For
example, issued patents, including the patents licensed to us, may be circumvented or challenged, declared invalid or unenforceable,
or narrowed in scope.
In addition, since publication
of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the
first to make our inventions or to file patent applications covering those inventions.
It is also possible that
others may obtain issued patents that could prevent us from commercializing our licensed products or require us to obtain licenses
requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that
we have licensed to us, our rights depend on maintaining our obligations to the licensor under the applicable license agreement,
and we may be unable to do so.
In addition to patents
and patent applications, we depend upon trade secrets and proprietary know-how to protect our licensed technology. We require our
employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential
information to any other parties. We require our employees and consultants to disclose and assign to us their ideas, developments,
discoveries and inventions. These agreements may not, however, provide adequate protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use or disclosure.
If licensors of our licensed
technologies determine not to protect the intellectual property rights that we license from them we may be unable defend such intellectual
property rights on our own or we may have to undertake costly litigation to defend the intellectual property rights of the licensors
ourselves. There can be no assurances that we will continue to have proprietary rights to any of the intellectual property that
we license from licensors, or otherwise have the right to use through similar strategic relationships. Any loss or limitations
on use with respect to our right to use such licensed intellectual property could have a material adverse effect on our business,
results of operations and financial condition.
Costly litigation
may be necessary to protect our intellectual property rights and we may be subject to claims alleging the violation of the intellectual
property rights of others.
We may face significant
expense and liability as a result of litigation or other proceedings relating to patents and other intellectual property rights
of others. In the event that another party has also filed a patent application or been issued a patent relating to an invention
or technology claimed by us in future applications, we may be required to participate in an interference proceeding declared by
the USPTO to determine priority of invention, which could result in substantial uncertainties and costs for us, even if the eventual
outcome were favorable to us. We, or our licensors, also could be required to participate in interference proceedings involving
issued patents and pending applications of another entity. An adverse outcome in an interference proceeding could require us to
cease using the technology or to license rights from prevailing third parties.
The cost to us of any
patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved in our favor, could
be substantial and could divert management’s resources and attention. Our ability to enforce our patent protection could
be limited by our financial resources, and may be subject to lengthy delays. If we are unable to effectively enforce our proprietary
rights, or if we are found to infringe the rights of others, we may be in breach of our various license agreements.
A third party may claim
that we are using inventions claimed by their patents and may go to court to stop us from engaging in our normal operations and
activities, such as research, development and the sale of any future products. Such lawsuits are expensive and would consume time
and other resources. There is a risk that the court will decide that we are infringing the third party’s patents and will
order us to stop the activities claimed by the patents, redesign our products or processes to avoid infringement or obtain licenses
(which may not be available on commercially reasonable terms or at all). In addition, there is a risk that a court will order us
to pay the other party damages for having infringed their patents.
Moreover, there is no
guarantee that any prevailing patent owner would offer us a license so that we could continue to engage in activities claimed by
the patent, or that such a license, if made available to us, could be acquired on commercially acceptable terms. In addition, third
parties may, in the future, assert other intellectual property infringement claims against us with respect to our product candidates,
technologies or other matters. Any claims of infringement asserted against us, whether or not successful, may have a material adverse
effect on us.
We rely on confidentiality
agreements that could be breached and may be difficult to enforce, which could result in third parties using our intellectual property
to compete against us.
Although we believe that
we take reasonable steps to protect our intellectual property, including the use of agreements relating to the non-disclosure of
confidential information to third parties, as well as agreements that purport to require the disclosure and assignment to us of
the rights to the ideas, developments, discoveries and inventions of our employees and consultants while we employ them, the agreements
can be difficult and costly to enforce. Although we seek to obtain these types of agreements from our contractors, consultants,
advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual
property in connection with any of our projects, disputes may arise as to the intellectual property rights associated with our
products. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of our rights
can be costly and unpredictable. We also rely on trade secrets and proprietary know-how that we seek to protect in part by confidentiality
agreements with our employees, contractors, consultants, advisors or others. Despite the protective measures we employ, we still
face the risk that:
|
· |
these
agreements may be breached; |
|
· |
these
agreements may not provide adequate remedies for the applicable type of breach; |
|
· |
our
trade secrets or proprietary know-how will otherwise become known; or |
|
· |
our
competitors will independently develop similar technology or proprietary information. |
International patent
protection is particularly uncertain, and if we are involved in opposition proceedings in foreign countries, we may have to expend
substantial sums and management resources.
Patent law outside the
United States is may be different than in the United States. Further, the laws of some foreign countries may not protect our intellectual
property rights to the same extent as the laws of the United States, if at all. A failure to obtain sufficient intellectual property
protection in any foreign country could materially and adversely affect our business, results of operations and future prospects.
Moreover, we may participate in opposition proceedings to determine the validity of our foreign patents or our competitors’
foreign patents, which could result in substantial costs and divert management’s resources and attention.
Risks Related to Our
Industry
We are subject
to government regulations and we may experience delays or may be unsuccessful in obtaining required regulatory approvals within
or outside the United States to market our proposed technology candidates, and even if we obtain approval, the approved indications
may impair our ability to successfully market the product or make commercial distribution not feasible.
Various aspects of our
operations are subject to federal, state or local laws, rules and regulations, any of which may change from time to time. Costs
arising out of any regulatory developments could be time-consuming and expensive and could divert management resources and attention
and, consequently, could adversely affect our business operations and financial performance.
Delays in regulatory
approval, limitations in regulatory approval and withdrawals of regulatory approval may have a material adverse effect on the Company.
If we experience significant delays in testing or receiving approvals, our product development costs, or our ability to license
technology candidates, will increase. Any product approvals that we receive in the future could also include significant restrictions
on the use or marketing of our licensed technologies. Product approvals, if granted, can be withdrawn for failure to comply with
regulatory requirements or upon the occurrence of adverse events following commercial introduction of the products. Failure to
comply with applicable regulatory requirements may result in criminal prosecution, civil penalties, recall or seizure of products,
total or partial suspension of production or injunction, as well as other regulatory action against our technology candidates or
us. If approval is withdrawn for a product, or if a product were seized or recalled, we would be unable to sell or license that
product and our revenues would suffer. In addition, outside the United States, our ability to market any of our potential licensed
technologies is contingent upon receiving market application authorizations from the appropriate regulatory authorities.
Risks Relating to
Ownership of Our Common Stock
We have not paid,
and do not intend to pay, dividends on our common stock and therefore, unless our common stock appreciates in value, our investors
may not benefit from holding our common stock.
We have not paid any
cash dividends on our common stock since inception. We do not anticipate paying any cash dividends our common stock in the foreseeable
future. As a result, investors in our common stock will not be able to benefit from owning our common stock unless the market price
of our common stock becomes greater than the price paid for the stock by investors.
The public trading
market for our common stock is volatile and may result in higher spreads in stock prices, which may limit the ability of our investors
to sell their shares at a profit, if at all.
Our common stock trades
in the over-the-counter market and is quoted on OTC Pink Marketplace. The over-the-counter market for securities has historically
experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations may adversely affect
the market price of our common stock and result in substantial losses to our investors. In addition, the spreads on stock traded
through the over-the-counter market are generally unregulated and higher than on stock exchanges, which means that the difference
between the price at which shares could be purchased by investors in the over-the-counter market compared to the price at which
they could be subsequently sold would be greater than on these exchanges. Significant spreads between the bid and asked prices
of the stock could continue during any period in which a sufficient volume of trading is unavailable or if the stock is quoted
by an insignificant number of market makers. Historically, our trading volume has been insufficient to significantly reduce this
spread and we have had a limited number of market makers sufficient to affect this spread. These higher spreads could adversely
affect investors who purchase the shares at the higher price at which the shares are sold, but subsequently sell the shares at
the lower bid prices quoted by the brokers. Unless the bid price for the stock exceeds the price paid for the shares by the investor,
plus brokerage commissions or charges, the investor could lose money on the sale. For higher spreads such as those on over-the-counter
stocks, this is likely a much greater percentage of the price of the stock than for exchange listed stocks. There is no assurance
that at the time an investor in our common stock wishes to sell the shares, the bid price will have sufficiently increased to create
a profit on the sale.
We do not know
whether a market for our common stock will be sustained or what the market price of our common stock will be and as a result it
may be difficult for investors to sell their shares of our common stock.
Although our common stock
is eligible for quotation on the OTC Pink, an active trading market for our shares has not commenced and may not be sustainable.
It may be difficult for investors to sell their shares without depressing the market price for the shares or at all. As a result
of these and other factors, investors may not be able to sell their shares at or above the offering price or at all. Further, an
inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to
enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration. If an
active market for our common stock does not develop or is not sustained, it may be difficult to sell your common stock.
Our Board can,
without stockholder approval, cause preferred stock to be issued on terms that adversely affect common stockholders or which could
be used to resist a potential take-over of the Company.
Under our Articles of
Incorporation, our Board is authorized to issue up to 5,000,000 shares of preferred stock, none of which are issued and outstanding.
Also, our Board, without stockholder approval, may determine the price, rights, preferences, privileges and restrictions, including
voting rights, of those shares. If the Board causes shares of preferred stock to be issued, the rights of the holders of our common
stock could be adversely affected. The Board’s ability to determine the terms of preferred stock and to cause its issuance,
while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of our outstanding voting stock. Preferred shares issued by
the Board could include voting rights, or even super voting rights, which could shift the ability to control the Company to the
holders of the preferred stock. Preferred shares could also have conversion rights into shares of common stock at a discount to
the market price of the common stock which could negatively affect the market for our common stock. In addition, preferred shares
would have preference in the event of liquidation of the corporation, which means that the holders of preferred shares would be
entitled to receive the net assets of the corporation distributed in liquidation before the common stock holders receive any distribution
of the liquidated assets. We have no current plans to issue any shares of preferred stock.
The market price
of our common stock may fluctuate significantly, which could result in substantial losses by our investors.
The market price of our
common stock may fluctuate significantly in response to numerous factors, some of which are beyond our control, such as:
| · | announcements of technological innovations,
new products or product enhancements by us or others; |
| · | announcements by us of significant strategic
partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments; |
| · | expiration or terminations of licenses,
research contracts or other collaboration agreements; |
| · | public concern as to the safety of products
we, our licensors or others develop; |
| · | success of research and development projects; |
| · | developments concerning intellectual property
rights or regulatory approvals; |
| · | variations in our and our competitors’
results of operations; |
| · | changes in earnings estimates or recommendations
by securities analysts, if our common stock is covered by analysts; |
| · | changes in government regulations or patent
decisions; |
| · | developments by our licensors; |
| · | developments in the technology industry; |
| · | the results of product liability or intellectual
property lawsuits; |
| · | future issuances of common stock or other
securities; |
| · | the addition or departure of key personnel; |
| · | announcements by us or our competitors
of acquisitions, investments or strategic alliances; |
| · | general market conditions, including the
volatility of market prices for shares of technology companies generally, and other factors, including factors unrelated to our
operating performance; and |
| · | the other factors described in this “Risk
Factors” section. |
These factors and any
corresponding price fluctuations may materially and adversely affect the market price of our common stock and result in substantial
losses by our investors.
Further, the stock market
in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations in the
past. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could cause a decline
in the value of our common stock. Price volatility of our common stock might be worse if the trading volume of our common stock
is low. In the past, following periods of market volatility, stockholders have often instituted securities class action litigation.
If we were involved in securities litigation, it could have a substantial cost and divert resources and attention of management
from our business, even if we are successful. Future sales of our common stocks could also reduce the market price of such stock.
Moreover, the liquidity
of our common stock is limited, not only in terms of the number of shares that can be bought and sold at a given price, but by
delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of us, if any. These
factors may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread
between the bid and ask prices for our common stock. In addition, without a large float, our common stock is less liquid than the
stock of companies with broader public ownership and, as a result, the trading prices of our common stock may be more volatile.
In the absence of an active public trading market, an investor may be unable to liquidate its investment in our common stock. Trading
of a relatively small volume of our common stock may have a greater impact on the trading price of our stock than would be the
case if our public float were larger. We cannot predict the prices at which our common stock will trade in the future.
Some or all of the “restricted”
shares of our common stock issued in connection with the Transaction or held by other of our stockholders may be offered from time
to time in the open market pursuant to an effective registration statement or Rule 144 promulgated under Regulation D of the Securities
Act, and these sales may have a depressive effect on the market for our common stock.
Raising additional
capital by issuing securities may cause dilution to existing stockholders.
We may need to raise
substantial future capital to continue to complete development and commercialize our products incorporating licensed technologies
and technology candidates and to conduct the research and development and regulatory activities necessary to bring our technology
candidates to market.
If we raise additional
funds through licensing arrangements with third parties, we may have to relinquish valuable rights to our technology candidates,
or grant licenses on terms that are not favorable to us. If we raise additional funds by issuing equity or convertible debt securities,
we will reduce the percentage ownership of our then-existing stockholders, and these securities may have rights, preferences or
privileges senior to those of our existing stockholders.
Because our common
stock may be a “penny stock,” it may be more difficult for investors to sell shares of our common stock, and the market
price of our common stock may be adversely affected.
Our common stock may
be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed on a national
securities exchange or it has not met certain net tangible asset or average revenue requirements. Broker-dealers who sell penny
stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document
provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker
must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation,
make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s
written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their accounts with such
broker-dealer a monthly statement containing price and market information relating to the penny stock. If a penny stock is sold
to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and get its money back.
If applicable, the penny
stock rules may make it difficult for investors to sell their shares of our common stock. Because of the rules and restrictions
applicable to a penny stock, there is less trading in penny stocks and the market price of our common stock may be adversely affected.
Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not always be able to resell
their shares of our common stock publicly at times and prices that they feel are appropriate.
ITEM 1B. UNRESOLVED
STAFF COMMENTS.
Not applicable.
ITEM 2. PROPERTIES.
The Company’s principal
corporate office is located at the residence of our Chief Executive Officer located at 14 Hayward Brook Drive, Concord, NH 03301.
The office space is furnished at no cost to the Company. Management intends to seek permanent office space as needed in the future.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor
its subsidiary, Knowledge Machine, is a party to, nor is any of their property subject to, any legal proceedings which require
disclosure pursuant to this item.
ITEM 4. MINE SAFETY
DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our Common Stock is quoted
on the OTC Pink Marketplace under the symbol “SDDL.” The Company’s common stock was approved for quotation on
June 18, 2014. Trading in the Company’s common stock has not commenced.
Holders
Following the closing
of the Reorganization Agreement and the other various transactions, there were approximately 72 stockholders. This number does
not include an indeterminate number of stockholders whose shares are held by brokers in street name. The holders of our common
stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of our
common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption
or sinking fund provisions applicable to our common stock.
Dividends
We have not paid, nor
declared, any cash dividends since our inception in 1999 and do not intend to declare or pay any such dividends in the foreseeable
future. Our ability to pay cash dividends is subject to limitations imposed by state law.
Securities Authorized
for Issuance Under Equity Compensation Plans
As of the year ended
July 31, 2014, we had no compensation plans (including individual compensation arrangements) under which our Common Stock was authorized
for issuance.
Unregistered Sales
of Securities
In connection with the
closing of the Reorganization Agreement described in Item 1 above, we issued 37,625,000 shares of our common stock on a pro rata
basis to the shareholders of Knowledge Machine in return of all of the outstanding shares of Knowledge Machine. These shares were
issued without registration pursuant to an exemption from registration in accordance with Section 4(a)(2) of the Securities Act
and Rule 506(b) promulgated thereunder. No selling commissions were paid in connection with the sale of these shares to the shareholders
of Knowledge Machine.
ITEM 6. SELECTED
FINANCIAL DATA.
As a “smaller reporting
company”, we have elected not to provide the disclosure required by this item.
ITEM 7. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Overview
Our
company was incorporated in the State of Nevada on December 27, 2012, to engage in the development and operation of a business
engaged in the distribution of high end cutlery sets produced in China. We conducted this business through October 22, 2014. On
October 22, 2014, we acquired an operating subsidiary, Knowledge Machine, Inc., a Nevada corporation, (“Knowledge Machine”)
and subsequently sold off our current business. Knowledge Machine is a development stage technology company focused on targeting
new technologies, acquiring licensing rights to those technologies, and marketing our licensed technologies. Knowledge Machine
is our only subsidiary.
On October 22, 2014,
we entered into a contract with and completed the acquisition of Knowledge Machine in a stock-for-stock exchange in which we issued
37,625,000 shares of our common stock on a pro rata basis to the shareholders of Knowledge Machine in return of all of the outstanding
shares of Knowledge Machine (the “Reorganization Agreement”). Knowledge Machine also entered into a Stock
Purchase Agreement (the “SPA”) with Igor Kaspruk, the sole officer, director and principal shareholder
of the Company at the time, to acquired 2,464,716 shares of restricted stock held by him for $35,800. Following the closing of
the Reorganization Agreement and the SPA, we sold the assets relating to the prior business of the Company to Mr. Kaspruk in return
of 1,535,284 shares owned by him pursuant to an Asset Purchase Agreement between the Company and Mr. Kaspruk (the “APA”).
In addition, Knowledge Machine loaned $14,200 to the Company to repay outstanding prior cash advances made by Mr. Kaspruk to the
Company.
At the closing of the
Reorganization Agreement, Mr. Kaspruk appointed Vivek R. Dave and Taylor Caswell to serve as directors of the Company and subsequently
resigned as an officer and director of the Company. Thereafter, in connection with the closing of the SPA and the APA, the 4,000,000
restricted shares of common stock purchased by Knowledge Machine and the Company from Mr. Kaspruk in the above transactions were
cancelled and returned the authorized but unissued common stock of the Company.
As a result of the above
transactions a change of control of the Company occurred from Mr. Kaspruk to Messrs. Dave and Caswell who assumed management control
of the Company.
In connection with the
closing of the Reorganization Agreement, the board of directors approved a one-for-ten forward stock split of the pre-closing outstanding
shares and a change of the Company’s name to “Knowledge Machine International, Inc.” The forward stock split
and name change were approved by written consent of Mr. Kaspruk as a majority shareholder immediately prior to the closing of the
Reorganization Agreement. The name change and forward stock split are being processed through FINRA with an expected effective
date of November 10, 2014. We also filed articles of amendment with the State of Nevada to reflect the forward stock split and
name change to be effective November 10, 2014.
Upon completion of the
above transactions, giving effect to the forward split of the pre-closing shares and cancellation of Mr. Kaspruk’s shares,
we have 47,625,000 shares of our common stock outstanding. Of these shares Messrs. Dave and Caswell will own 6,500,000 shares or
approximately 13.7% of our Company’s outstanding stock. Former shareholders of Knowledge Machine, including Messrs. Dave
and Caswell, will own 37,625,000 shares of the Company, representing approximately 80% of the outstanding shares. The securities
issued in the closing of the Reorganization Agreement were not and will not be registered under the Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered or sold in the United States absent registration
or an applicable exemption from registration requirements.
In connection with the
closing of the above transactions, we ceased our prior principal business operations (which were sold and transferred to Mr. Kaspruk
pursuant to the APA). Upon completion of these transactions, we acquired Knowledge Machine (which is now our wholly-owned subsidiary)
and became a technology company focused on targeting new technologies, acquiring licensing rights to those technologies, and marketing
our licensed technologies. Knowledge Machine was incorporated in the State of Nevada on December 12, 2013, and commenced its operations
in 2013. All references to business of the Company after the closing of the Reorganization Agreement refer to Songbird Development
Inc. and Knowledge Machine, Inc., collectively.
Plan of Operations
Since its founding, Knowledge
Machine has been involved in several activities both on an organizational front as well as the business development front. Organizationally,
Knowledge Machine has created a Science Advisory Board over the past six months that combines international business experience
with high level science and technology expertise. Additionally, Knowledge Machine has been in close contact with regional development
authorities in various states to see if there are potential teaming opportunities that take advantage of regional development funding
or incentives. On the business development front, in addition to the SCORE and ARMS projects, Knowledge Machine together with its
science advisory board has reviewed dozens of potential technologies for future licensing or joint venture activities upon future
funding. Examples of these technologies include, but are not limited to:
| · | A new brain-wave based MMI – Man
Machine Interface – that could be used for a wide range of applications; |
| · | A weather prediction model and system
that significantly outperforms current models in the critical time period from 14 days to a year in advance; |
| · | New superenergetic materials for various
defense applications; |
| · | A 2.5D printing process, i.e. 2-D plus
relief, that has applications to fine art printing; |
| · | A spectrometric diagnostic method for
analyzing blood samples for evidence of traumatic brain injury, or TBI; and |
| · | A new super-elastic materials technology. |
Upon successful completion
of subsequent funding, we intend to pursue avenues which are the most promising based on recurring revenue potential. We estimates
that it will require approximately $1,500,000 in additional funding to finance its operations during the next 12 months and intends
to seek this additional financing through sales of equity securities, although it currently has no commitments or arrangements
for the additional financing needed.
Upon delivery of the
code from Score, we intend to implement the fast internet download technology for which we have licensing options, known as Score,
in India over the coming 12 months through the establishment of an India office as well as joint venture relationships with Indian
companies. Additional funds raised through the sale of equity are needed to establish the joint venture and to begin marketing
efforts. The initial mechanism of sales and distribution of the technology will be through the Apple and the Android App stores
as we anticipate there will be both versions of this software available. It is expected that initial sales will commence in the
second calendar quarter of 2015, provided that the sales office can be successfully established by first quarter, which again is
contingent upon successful funding.
Through our Asian Market
Advisor Harshal Shah, we are preparing a response to a solicited request for enhanced border security technology. This technology
will first be assessed for export control compliance before and specific offers are tendered to our Indian partners.
We are working with Allotrope
Inc. to commercialize BAM and ARMS primarily to US Government customers and to NATO forces with appropriate export licenses. In
July of 2014 Knowledge Machine and Allotrope met with TNO in the Netherlands to discuss the technology in an open, non-export-controlled
forum. The next steps are that TNO are anticipated to deliver before the end of this calendar year a series of white papers specifically
outlining market opportunities for these technologies within Europe and NATO as well as specific contacts at early adopter customers.
Knowledge Machine expects
to establish a European registered office in first calendar quarter 2015 in order to follow up with these early adopter customers
and to secure initial test and evaluation contracts. This would be the first step in evaluating the suitability of the ARMS and
BAM technologies for specific weapons systems, and, if successful, Knowledge Machine and Allotrope would be compensated on a time
and material contract basis. Following these initial test and evaluation contracts, material supply agreements would be negotiated
with various early adopter customers for supply of the related technologies. It is anticipated that such material supply agreements
would be in place by fourth calendar quarter of 2015, provided that: i) Knowledge Machine is able to raise the required equity
funds, ii) the test and evaluation contracts are successful, and iii) the early adopter customers still have a validated need for
the ARMS and BAM technology which has not been displaced by any other technology.
Starting in June of 2014,
Knowledge Machine negotiated a statement of work for a joint technology development agreement with Deep Web Technologies to develop
and commercialize the OmniScienceTM technology. This search technology should allow linking of IP across organizational
and even national boundaries in a manner that would be either very difficult or impractical using today’s search techniques.
The technology could be used for internal use by Knowledge Machine as well as licensing to other organizations such as research
institutions, universities or corporations who wish to enhance the efficiency of their IP portfolio by locating highly complementary
IP either within their own organization or across organizational boundaries. The initial development is expected to be completed
in third calendar quarter of 2015, again subject to the successful funding by Knowledge Machine.
In addition to the above
two technologies for which contractual agreements currently exist, Knowledge Machine will conduct business development activities
on the following technology areas:.
| · | Super-Flexible Conductors for High
Speed Data Cables. Knowledge Machine is in discussions with the licensees of an MIT-developed technology that could increase
the capability of copper–based data cables to extend to data rates as high as 100 GB / second. Knowledge Machine has an interest
in the establishment of a pilot plant for the manufacture of such materials, and this is expected to lead to material supply agreements
to manufacture the wire under contract to the owners of the MIT technology for use by identified early adopter customers. |
| · | Super-Flexible and Energy Absorbing
Wires for Orthotics. Knowledge Machine is in discussions with this same group to explore the development, marketing and sales
of the same material for use in high end orthtics or high end compression athletic clothing where these super-flexible elements
could be woven into existing fabrics in order to provide selected reinforcement for joints as well as other parts of the body.
The advantage of this material over existing materials is that is can apply higher and more controlled forces thereby preventing
injuries by avoiding hyperextension of joints or limbs, or speeding up the recovery from such injuries by preventing re-injury.
It is expected that an agreement could be reached by second calendar quarter of 2015, provided that we are able to successfully
raise additional funds. |
| · | Super-Energetic Materials. This
is a sensitive program for US Government customers and additional technical details cannot be provided for security reasons. From
a programmatic point of view, Knowledge Machine will be in a position to test initial small scale prototypes by third calendar
quarter of 2015, provided that additional funds are raised to fund this project. Starting in fourth quarter of this calendar year
and continuing to third calendar quarter of 2015, Knowledge Machine and its joint venture partner, Allotrope, anticipate meeting
regularly with US Government sponsors to review progress and to obtain additional government funding for a larger scale demonstration
project. This is expected to lead to a test and evaluation contract by third calendar quarter of 2015, again subject to successful
project launch and execution which in turn depends on the availability of additional funding. |
Results of Operations--Year
Ended July 31, 2014 Compared to the Year Ended July 31, 2013
Gross Revenue.
Gross revenue for the year ended July 31, 2014, was $116,620, with no corresponding revenue generated in the partial year ended
July 31, 2013. From the date of inception (December 27, 2012) until July 31, 2013, the Company was in the startup phase of its
operations and had not yet commenced principal operations.
General and Administrative
Expenses. Selling, general and administrative expenses for the year ended July 31, 2014 totaled $53,448, an increase of
$49,887 or approximately 1,400% compared to selling, general and administrative expenses of $3,561 for the partial year ended July
31, 2013. The increase in the total selling, general and administrative was primarily due to the commencement of principal business
operations in the year ended July 31, 2014.
Net Loss.
For the reasons stated above, our net loss for the year ended July 31, 2014 was ($22,373) or ($0.005) per share, an increase of
$18,812, compared to a net loss of ($3,561), or ($0.0009) per share, during the year ended July 31, 2013.
Liquidity and Capital
Resources
As of July 31, 2014, we had cash of $9,966.
The Company had current liabilities of $14,200 consisting of loans payable to our sole officer and director. We had a net working
capital deficit of $4,234.
The accompanying financial statements of
the Company have been prepared contemplating a continuation of the Company as a going concern. The Company has reported a cumulative
net loss of ($25,934) since inception and had an accumulated deficit of ($25,934) at July 31, 2014.
Off-Balance Sheet
Arrangements
We have no off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a “smaller reporting
company”, we have elected not to provide the disclosure required by this item.
ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA.
The required financial statements
are included following the signature page of this Form 10-K.
ITEM 9. CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
On October 22, 2014,
the Company informed John Scrudato, CPA (“Scruvato”) that it was terminating his services as the Company’s
independent registered public accounting firm effective upon the filing of this annual report on Form 10-K. On October 22, 2014,
the board approved the engagement of Pritchett Siler & Hardy, PC (“Pritchett”) as its independent
registered public accounting firm effective upon the filing of this annual report on Form 10-K. The decision to terminate the engagement
of Scrudato and to engage Pritchett as the independent registered public accounting firm was approved by the Company’s board
of directors; the Company has no audit committee. Scrudato was the independent registered public accounting firm for the Company
from inception until the filing of this annual report on Form 10-K. Scrudato’s report on the Company’s financial statements
for the period from December 27, 2012 (inception) through July 31, 2014 (a) did not contain an adverse opinion or disclaimer of
opinion, (b) was not modified as to uncertainty, audit scope, or accounting principles, and (c) for the period from December 27,
2012 (inception) to July 31, 2014 and through the date of filing of this annual report on Form 10-K disclosing the resignation,
there were no disagreements on any matters of accounting principles or practices, financial statement disclosure, or auditing scope
or procedures, which disagreements, if not resolved to the satisfaction of Scrudato, would have caused him to make reference to
the subject matter of the disagreements in connection with its report. None of the reportable events set forth in Item 304(a)(1)(iv)
of Regulation S-K occurred during the period in which Scrudato served as the Company’s independent registered public accounting
firm. However, the report of Scrudato dated October 15, 2014 on our financial statements for the years ended July 31, 2014 and
2013, contained an explanatory paragraph which noted that there was substantial doubt as to the Company’s ability to continue
as a going concern.
Prior to date on which
this annual report on Form 10-K was filed, the date that Pritchett was retained as the independent registered public accounting
firm of the Company: (1) the Company did not consult Pritchett regarding either the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial
statements; (2) neither a written report nor oral advice was provided to the Company by Pritchett that they concluded was an important
factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; and (3) the
Company did not consult Pritchett regarding any matter that was either the subject of a “disagreement” (as defined
in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or any of the reportable events set forth in Item 304(a)(1)(v)
of Regulation S-K.
ITEM 9A. CONTROLS
AND PROCEDURES.
Evaluation of Disclosure
Controls and Procedures
Our management, with
the participation of our prior principal executive and financial officer, evaluated the effectiveness of our disclosure controls
and procedures (as defined in Rule 15d-15(e) of the Securities Exchange Act of 1934, as amended, the Exchange Act) as of the end
of the period covered by this report. Based on that evaluation, our Chief Executive Officer and principal financial officer concluded
that our disclosure controls and procedures as of the end of the period covered by this report (based on the evaluation of these
controls and procedures required by Rule 15d-15(b) of the Exchange Act) were effective in ensuring that information required to
be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported
within the time periods specified in the Commission’s rules and forms, and (ii) is accumulated and communicated to the Company’s
management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate
to allow timely decisions regarding required disclosure. We believe that a control system, no matter how well designed and operated,
cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Management’s
Annual Report on Internal Control over Financial Reporting
This
annual report does not include a report of management's assessment regarding internal control over financial reporting or an attestation
report of the company's registered public accounting firm due to a transition period established by rules of the Securities and
Exchange Commission for newly public companies.
Changes in Internal
Control Over Financial Reporting
There was no change in
our internal control over financial reporting (as defined in Rule 15d-15(f) of the Exchange Act) that occurred during the quarter
ended July 31, 2014, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The following table sets
forth information concerning our executive officers and directors, each of whom was appointed in the Closing of the Transaction
effective October 22, 2014:
|
Name |
Age |
Title |
|
Vivek R. Dave |
46 |
Director, Chairman, President, and CEO |
|
Taylor Caswell |
45 |
Director |
The Board believes that
each director named below is highly qualified and has the skills and experience required for effective service on the Board. The
directors’ individual biographies below contain information about their experience, qualifications and skills that led the
Board to appoint them.
Dr. Vivek R. Dave, Ph.D. Dr. Dave
earned his BS California Institute of Technology with honor and his MS and PHD from MIT. Additionally, he has extensive previous
experience in the aerospace, defense, and additive manufacturing/3D printing industries. He has held positions including Senior
Engineer at Pratt and Whitney, Group Leader at Los Alamos National Lab, and Chief Scientist at Sigma Labs (SGLB). He also serves
as a technical consultant for Sigma Labs Inc., a NM-based company he had helped to found in 2010. He has over 50 publications and
10 patents or patents pending. He is a recognized expert in advanced aerospace and defense technology as well as materials and
materials processing.
Taylor Caswell. Mr.
Caswell’s career spans twenty years of private and government sector experience in renewable energy development, affordable
housing, community, and economic development, project finance, and sustainability solutions – all with integrated regulatory,
policy, and advocacy strategies. Since January 2009, Mr. Caswell has been the owner of Caswell Industries. Most recently, Mr. Caswell
has worked in the cleantech world, launching two startups to develop utility-scale ground mounted solar generation project as well
as provide project development consulting services to a wide array of customers in both the fossil and renewable energy sectors,
efficiency retrofit financing, multifamily market and affordable housing development. His public service career includes his role
as a White House appointee to the U.S. Department of Housing and Urban Development and as senior Congressional staff in Washington,
D.C. Among his many awards and associations, he was named to the New Hampshire “40 Under 40” list of state leaders,
was elected Chairman of the U.S. Interagency Regional Council on Homelessness, and has served as Chair of the NH Energy and Climate
Collaborative, as a board member of The Nature Conservancy, and remains as Senior Advisor to the CleanTech Council.
The term of our directors’
appointment is until the next annual meeting of shareholders or until their successors are duly elected and qualified. At this
time, there are no plans to appoint our directors to any committees.
Legal Proceedings
During the past ten years
there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material
to the evaluation of the ability and integrity of any of our directors or executive officers.
We are not aware of any
legal proceedings in which any director, officer or affiliate of our Company, any owner of record or beneficially of more than
five percent of any class of our voting securities, or any associate of any such director, officer, or affiliate of our Company,
or security holder is a party adverse to us or our subsidiaries or has a material interest adverse to us or our subsidiaries.
Family Relationships
There are no family relationships
between any director, executive officer, or person nominated or chosen by the Company to become a director or executive officer.
ITEM 11. EXECUTIVE
COMPENSATION
Executive Compensation
Igor Kaspruk served as
our sole executive officer and director from inception through October 22, 2014. Neither Mr. Kaspruk nor any other person received
compensation from us during the years ended July 31, 2014 or 2013, which would be reportable pursuant to this item.
Equity Awards
Neither Mr. Kaspruk
nor any other person held any unexercised options, stock that had not vested, or equity incentive plan awards at July 31, 2014.
Director Compensation
No compensation was paid
to or earned by any director during the year ended July 31, 2014
ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
The following table
sets forth certain information furnished by current management and others, concerning the beneficial ownership of our common stock
as of completion of the Transaction effective October 28, 2014, of (i) each person who is known to us to be the beneficial owner
of more than five percent of our common stock; (ii) all directors and named executive officers; and (iii) our directors and executive
officers as a group:
Name and Address of
Beneficial Owner |
Amount and Nature of
Beneficial Ownership(1) |
Percent of Class(1) |
|
|
|
Vivek R. Dave
14 Hayward Brook Drive
Concord, NH 03301 |
5,500,000 |
11.5% |
Taylor Caswell
72 Long Hill Road
Hollis, NH 03049 |
1,000,000 |
2.1% |
|
|
|
Executive Officers and
Directors as a Group
(2 Persons) |
6,500,000 |
13.7% |
|
|
|
Igor Kaspruk
108
Dnipropetrovska Doroha
Apt.
110
Odesa,
Ukraine 65000 |
0 |
- |
|
|
|
Valerie Vekkos
3344 Hill St.
San Diego, CA 92106
|
3,000,000(2) |
6.3% |
Harshal Shah
1091 North Main St.
Brockton, MA 02301 |
4,000,000(3) |
8.4% |
| (1) | This table is based upon information supplied by officers, directors and principal stockholders
and is believed to be accurate. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders
named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Beneficial
ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock subject to options, warrants, or other conversion privileges
currently exercisable or convertible, or exercisable or convertible within 60 days of the date of this table, are deemed outstanding
for computing the percentage of the person holding such option, warrant, or other convertible instrument but are not deemed outstanding
for computing the percentage of any other person. Where more than one person has a beneficial ownership interest in the same shares,
the sharing of beneficial ownership of these shares is designated in the footnotes to this table. Effective as of October 22, 2014,
we had 47,625,000 shares outstanding. |
| (2) | Shares held in the Valerie V. Vekkos Trust of which, Valerie Vekkos is the trustee and has voting
and dispositive control of the shares. |
| (3) | These shares have been issued and Mr. Shah retains voting rights to the shares, although 1,333,333
of the shares are vested, 1,333,333 shares will vest April 22, 2015, and the remaining 1,333,334 shares will vest April 22, 2016.
All vesting is contingent upon continued membership on the Science Advisory Board on the vesting date. In the event Mr. Shah resigns
or is removed from the Science Advisory Board, the unvested shares would lapse and be cancelled. |
ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.
Certain Relationships
and Related Transactions
On April 23, 2014, the
board of directors of Knowledge Machine approved the grant of 5,500,000 restricted shares to Mr. Dave for services with 1,833,333
shares vesting immediately and the remaining. 3,666,667 shares vesting at later dates. On July 9, 2014, the board of directors
of Knowledge Machine amended the Science Advisory Board Agreement with Mr. Dave and all unvested shares for Mr. Dave became fully
vested.
On March 11, 2014, Knowledge
Machine entered into a consulting agreement effective January 1, 2014 with Northern New Hampshire Technical Associates LLC, an
entity controlled by Mr. Dave (“NHTA”). Under the consulting agreement, NHTA provides consulting services
for us regarding Mr. Dave’s service as Chairman of the Science Advisory Board and other consulting services requested by
our board of directors. The term of the consulting agreement is for twelve months from the effective date and is automatically
extended by one additional year unless we give written notice to NHTA at least 30 days prior to January 1, 2015 or, after January
1, 2015, one month prior to the expiration of the consulting agreement, either party’s desire to terminate the consulting
agreement or to modify its terms. We have agreed to pay NHTA $2,500 per month under the consulting agreement including reimbursement
for all travel, entertainment and other reasonable business expenses incurred by NHTA incident to services rendered to us. The
consulting agreement also includes an indemnification provision applicable to both NHTA and Mr. Dave. Effective September 2014,
this monthly reimbursement was increased to $6,000 in light of the fact that Dr. Dave has assumed additional responsibilities as
President and CEO.
Director Independence
Our securities are not
listed on a national securities exchange or in an inter-dealer quotation system which has requirements that directors be independent.
Therefore, we have adopted the independence standards of the American Stock Exchange, now known as the NYSE MKT LLC, to determine
the independence of our directors and those directors serving on our committees. These standards provide that a person will be
considered an independent director if he or she is not an officer of the company and is, in the view of the company’s board
of directors, free of any relationship that would interfere with the exercise of independent judgment. Our board of directors has
determined that Mr. Caswell meets this standard, and therefore, would be considered to be independent.
ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES.
Audit Fee
The aggregate fees billed
for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of our annual
financial statement and review of financial statements included in our 10-Q reports and services normally provided by the accountant
in connection with statutory and regulatory filings or engagements were $4,000 for fiscal year ended July 31, 2014, and $2,500
for fiscal year ended July 31, 2013.
Audit-Related Fees
The aggregate fees billed
in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related
to the performance of the audit or review of our financial statements that are not reported above were $0 for fiscal year ended
July 31, 2014 and $0 for fiscal year ended July 31, 2013.
Tax Fees
The aggregate fees billed
in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice,
and tax planning were $0 for fiscal year ended July 31, 2014, and $0 for fiscal year ended July 31, 2013.
All Other Fees
The aggregate fees billed
in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported
above were $0 for fiscal year ended July 31, 2014, and $0 for fiscal year ended July 31, 2013.
Audit Committee
We do not have an audit
committee currently serving and as a result our board of directors performs the duties of an audit committee. Our board of directors
will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit
services. We do not rely on pre-approval policies and procedures.
PART IV
ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES.
(a) Financial Statements Index
AUDITED
FINANCIAL STATEMENTS OF Songbird Development Inc.
Report
of Independent Registered Public Accounting firms
Balance
Sheets, July 31, 2014 and 2013
Statements
of Operations, for the years ended July 31, 2014 and 2013 and from December 27, 2012 (the “Inception of the Development
Stage”) through July 31, 2014
Statements
of Changes in Stockholders’ Equity from the Inception Development Stage through July 31, 2014
Statements
of Cash Flows, for the years ended July 31, 2014, and from the Inception of the Development Stage through July 31, 2014
Notes
to Financial Statements
AUDITED
FINANCIAL STATEMENTS OF Knowledge Machine, Inc.
Report
of Independent Registered Public Accounting Firm
Balance
Sheet as of June 30, 2014
Statement of Operations for the Period from December 12, 2013 (Inception) June 30, 2014
Statement
of Stockholders’ Equity (Deficit) for the Period from December 12, 2013 (Inception) June 30, 2014
Statement of Cash Flows for the Period from December 12, 2013 (Inception) June 30, 2014
Notes
to Financial Statements
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:
Unaudited Pro Forma Condensed
Consolidated Balance Sheet
Unaudited Pro
Forma Condensed Consolidated Statements of Operations
Notes to Unaudited Pro Forma
Condensed Consolidated Financial Statements
(b) Exhibits
Exhibit Number |
Exhibit Description |
Form |
File No. |
Exhibit |
Filing Date |
Filed Here-
with |
2.1 |
Agreement and Plan of Reorganization dated October 22, 2104 |
|
|
|
|
X |
2.2 |
Asset Purchase Agreement dated October 22, 2014 |
|
|
|
|
X |
3.1 |
Articles of Incorporation |
|
|
|
|
X |
3.2 |
Bylaws |
S-1 |
333-191175 |
3.2 |
9/16/13 |
|
10.1 |
General Release by Igor Kaspruk dated October 22, 2014 |
|
333-191175 |
|
|
|
10.2 |
Stock Purchase Agreement dated October 22, 2014 |
|
|
|
|
X |
10.3 |
Supply Agreement Dated June 30, 2013 |
S-1 |
333-191175 |
10.1 |
9/16/13 |
|
10.4 |
Supply Agreement Dated June 30, 2013 |
S-1 |
333-191175 |
10.2 |
9/16/13 |
|
10.5 |
Lease Agreement |
S-1/A |
333-191175 |
10.4 |
1/24/14 |
|
10.6 |
Consulting Agreement effective January 1, 2014, with Northern New Hampshire Technical Associates LLC* |
|
|
|
|
X |
10.7 |
Score Technologies Option Agreement dated July 2, 2014 |
|
|
|
|
X |
16.1 |
Letter from John Scrudato, CPA to the Securities and Exchange Commission dated October 28, 2014. |
|
|
|
|
X |
21.1 |
Subsidiaries |
|
|
|
|
X |
31.1 |
Rule 15d-14(a) Certification by Principal Executive Officer |
|
|
|
|
X |
31.2 |
Rule 15d-14(a) Certification by Principal Financial Officer |
|
|
|
|
X |
32.1 |
Section 1350 Certification of Principal Executive Officer |
|
|
|
|
X |
32.2 |
Section 1350 Certification of Principal Financial Officer |
|
|
|
|
X |
101.INS |
XBRL Instance Document |
|
|
|
|
X |
101.SCH |
XBRL Taxonomy Extension Schema Document |
|
|
|
|
X |
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
X |
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
X |
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
X |
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
X |
*Management contract,
or compensatory plan or arrangement, required to be filed as an exhibit.
SIGNATURE PAGE FOLLOWS
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
Songbird Development Inc. |
|
|
|
|
|
|
Date: October 28, 2014 |
By: |
/s/ Vivek R. Dave |
|
|
Vivek R. Dave, Ph.D., Chief Executive Officer |
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
NAME |
TITLE |
DATE |
|
|
|
|
|
|
/s/ Vivek R.
Dave |
Chairman, Chief
Executive Officer |
October 28,
2014 |
Vivek R.
Dave, Ph.D. |
and President
(Principal executive, financial,
and accounting officer) |
|
|
|
|
/s/ Taylor Caswell |
Director |
October 28,
2014 |
Taylor Caswell |
|
|
John Scrudato CPA
CERTIFIED PUBLIC ACCOUNTING FIRM |
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Songbird Development, Inc.
We have audited the accompanying consolidated
balance sheets of Songbird Development, Inc. as of July 31, 2014 and 2013 and the related consolidated statements of operations,
changes in stockholders’ deficit and cash flows for the period December 27, 2012(Inception) to July 31, 2013, and the year
ended July 31, 2014 and the period December 27, 2012(Inception) through July 31, 2014. These financial statements are the responsibility
of the Company management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Songbird Development, Inc. at
July 31, 2014 and 2013, and the results of their operations and their cash flows for the period December 27, 2012(Inception) to
July 31, 2013, and the year ended July 31, 2014 and the period December 27, 2012(Inception) through July 31, 2014 in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming that Songbird Development, Inc. will continue as a going concern. As more fully described in Note 4, at
July 31, 2014 the Company had a working capital deficit of $4,234 and had accumulated losses at July 31, 2014 of $25,934. These
conditions raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in
regards to these matters are also described in Note 4. The consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities
that may result from the outcome of this uncertainty.
/s/
John Scrudato CPA
Califon, New Jersey
October 15, 2014
7 Valley View Drive Califon,
New Jersey 07830
Registered
Public Company Oversight Board |
SONGBIRD DEVELOPMENT INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
| |
July 31, 2014 | | |
July 31, 2013 | |
ASSETS | |
CURRENT ASSETS | |
| | | |
| | |
Cash | |
$ | 9,966 | | |
$ | 489 | |
| |
| | | |
| | |
FIXED ASSETS | |
| | | |
| | |
Buildings and Land | |
| 14,000 | | |
| – | |
Vehicles | |
| 8,300 | | |
| – | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 32,266 | | |
$ | 489 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
LIABILITIES | |
| | | |
| | |
Current Liabilities: | |
| | | |
| | |
Loan Payable - Related Party | |
$ | 14,200 | | |
$ | 50 | |
| |
| | | |
| | |
STOCKHOLDERS' EQUITY | |
| | | |
| | |
Preferred stock: authorized 5,000,000; $0.001
par value; 0 shares issued and outstanding at July 31, 2014 and 2013 |
|
|
– |
|
|
|
– |
|
Common stock: authorized 70,000,000; $0.001
par value; 5,000,000 and 4,000,000 shares issued and outstanding at July 31, 2014 and July 31, 2013 |
|
$ |
5,000 |
|
|
$ |
4,000 |
|
Additional paid in capital | |
| 39,000 | | |
| – | |
Deficit accumulated during the development stage | |
| (25,934 | ) | |
| (3,561 | ) |
| |
| | | |
| | |
Total Stockholders' Equity | |
$ | 18,066 | | |
$ | 439 | |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | |
$ | 32,266 | | |
$ | 489 | |
The accompanying notes are an integral part of these financial statements
SONGBIRD DEVELOPMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
| |
| | |
For the | | |
From Inception | |
| |
For the
Year Ended | | |
Period
December 27, 2012 | | |
(December 27, 2012)
to | |
| |
July 31, 2014 | | |
to July 31, 2013 | | |
July 31, 2014 | |
Income: | |
| | | |
| | | |
| | |
Revenue | |
$ | 116,620 | | |
$ | – | | |
$ | 116,620 | |
Cost of Goods Sold: | |
| | | |
| | | |
| | |
Cutlery Set Purchases | |
| 75,675 | | |
| | | |
| 75,675 | |
Sales Commission Paid | |
| 9,870 | | |
| | | |
| 9,870 | |
Gross Profit | |
| 31,075 | | |
| | | |
| 31,075 | |
| |
| | | |
| | | |
| | |
Operating Expenses: | |
| | | |
| | | |
| | |
General and administrative | |
| 32,315 | | |
| 61 | | |
| 32,375 | |
Professional Fees | |
| 21,134 | | |
| 3,500 | | |
| 24,634 | |
Total Expenses | |
| 53,448 | | |
| 3,561 | | |
| 57,009 | |
| |
| | | |
| | | |
| | |
Net loss for the period | |
$ | (22,373 | ) | |
$ | (3,561 | ) | |
$ | (25,934 | ) |
| |
| | | |
| | | |
| | |
Net loss per share: | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.01 | ) | |
$ | 0.00 | | |
| | |
| |
| | | |
| | | |
| | |
Weighted average number of shares outstanding: | |
| | | |
| | | |
| | |
Basic and diluted | |
| 4,293,151 | | |
| 4,000,000 | | |
| | |
The accompanying notes are an integral part of these financial statements
SONGBIRD DEVELOPMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
From Inception December 27, 2012 to July 31, 2013
| |
Preferred Stock | | |
Common Stock | | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| | |
Total | |
| |
Number of | | |
| | |
Number of | | |
| | |
Additional | | |
Accumulated | | |
Shareholders’ | |
| |
Shares | | |
Par Value | | |
Shares | | |
Par Value | | |
Paid in Capital | | |
Deficit | | |
Equity | |
Balance, December 27, 2012 (Inception) | |
| – | | |
$ | – | | |
| – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Shares issued: for cash on July 10, 2013 | |
| – | | |
| – | | |
| 4,000,000 | | |
| 4,000 | | |
| – | | |
| – | | |
| 4,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (3,561 | ) | |
| (3,561 | ) |
Balance, July 31, 2013 | |
| – | | |
| – | | |
| 4,000,000 | | |
| 4,000 | | |
| – | | |
| (3,561 | ) | |
$ | 439 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common Shares issued: for cash in April 2014 | |
| – | | |
| – | | |
| 1,000,000 | | |
| 1,000 | | |
| 39,000 | | |
| – | | |
| 40,000 | |
Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (22,373 | ) | |
| (22,373 | ) |
Balance, July 31, 2014 | |
| – | | |
$ | – | | |
| 5,000,000 | | |
$ | 5,000 | | |
$ | 39,000 | | |
$ | (25,934 | ) | |
$ | 18,066 | |
The accompanying notes are an integral part of these financial statements
SONGBIRD DEVELOPMENT INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
| |
| | |
| | |
| |
| |
For the
Year Ended | | |
For the
Period
December 27, 2012 | | |
From inception
(December 27, 2012)
to | |
| |
July 31, 2014 | | |
to July 31, 2013 | | |
July 31, 2014 | |
Operating activities: | |
| | | |
| | | |
| | |
Net loss | |
$ | (22,373 | ) | |
$ | (3,561 | ) | |
$ | (25,934 | ) |
Adjustment to reconcile net loss to net cash provided by
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities: | |
| | | |
| | | |
| | |
Building and Land | |
| (14,000 | ) | |
| | | |
| (14,000 | ) |
Vehicles | |
| (8,300 | ) | |
| | | |
| (8,300 | ) |
Net cash provided by operating activities | |
| (44,673 | ) | |
| (3,561 | ) | |
| (48,234 | ) |
| |
| | | |
| | | |
| | |
Financing activities: | |
| | | |
| | | |
| | |
Proceeds from issuance of common stock | |
| 40,000 | | |
| 4,000 | | |
| 44,000 | |
Due to related party | |
| 14,150 | | |
| 50 | | |
| 14,200 | |
Net cash provided by financing activities | |
| 54,150 | | |
| 4,050 | | |
| 58,200 | |
Net increase in cash | |
| 9,477 | | |
| 489 | | |
| 9,966 | |
Cash, beginning of period | |
| 489 | | |
| – | | |
| – | |
Cash, end of period | |
$ | 9,966 | | |
$ | 489 | | |
$ | 9,966 | |
| |
| | | |
| | | |
| | |
Supplemental disclosure of cash flow information: | |
| | | |
| | | |
| | |
Cash paid during the period | |
| | | |
| | | |
| | |
Taxes | |
$ | – | | |
$ | – | | |
| – | |
Interest | |
$ | – | | |
$ | – | | |
| – | |
The accompanying notes are an integral part of these financial statements
SONGBIRD DEVELOPMENT INC.
(A Development Stage Company)
Notes to Financial Statements
July 31, 2014
NOTE 1. ORGANIZATION AND DESCRIPTION OF
BUSINESS
Songbird Development Inc. (the Company) was
incorporated under the laws of the State of Nevada on December 27, 2012. The Company was formed to engage in the development and
operation of a business engaged in the distribution of high end cutlery sets produced in China. The Company is in the development
stage. Because we were not able to raise sufficient capital to execute our business plan, we are now engaged in discussions with
third parties regarding alternative directions for the Company that could enhance shareholder value. As of the date of these
financial statements, we have not entered into any definitive agreement to change our direction.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Accounting
The Company’s financial statements are
prepared using the accrual method of accounting. The Company has elected a July 31, year-end.
Basic Earnings (loss) Per Share
ASC No. 260, “Earnings Per Share”,
specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held
common stock. The Company has adopted the provisions of ASC No. 260.
Basic net earnings (loss) per share amounts
is computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss)
per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.
Cash Equivalents
The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash equivalents.
Use of Estimates and Assumptions
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
In accordance with ASC No. 250 all adjustments are normal and recurring.
SONGBIRD DEVELOPMENT INC.
(A Development Stage Company)
Notes to Financial Statements
July 31, 2014
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (Continued)
Income Taxes
Income taxes are provided in accordance with
ASC No. 740, Accounting for Income Taxes. A deferred tax asset or liability is recorded for all temporary differences between financial
and tax reporting and net operating loss carry-forwards. Deferred tax expense (benefit) results from the net change during the
year of deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will
not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date
of enactment.
Property, Plant and Equipment
The Company accounts for its long-lived assets
in accordance with Accounting Standards Codification (“ASC”) Topic 360. Property, plant and equipment are recorded
at cost less accumulated depreciation. Expenditures for major additions and improvements are capitalized. As property and equipment
are sold or retired, the applicable cost and accumulated depreciation are removed from the accounts and any resulting gain or loss
thereon is recognized as operating expenses.
Depreciation is calculated after the asset
is placed in service using the straight-line method over the estimated useful lives or, in the case of leasehold improvements,
the term of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:
Buildings |
40 years |
Equipment |
5-15 years |
The Company reviews property, plant
and equipment and all amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. Recoverability is based on estimated undiscounted cash flows. Measurement
of the impairment loss, if any, is based on the difference between the carrying value and fair value.
Impairment of Long-Lived Assets
The Company accounts for its long-lived
assets in accordance with Accounting Standards Codification (“ASC”) Topic 360-10-05, “Accounting for the
Impairment or Disposal of Long-Lived Assets.” ASC Topic 360-10-05 requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that the historical cost carrying value of an asset may no
longer be appropriate. The Company annually assesses recoverability of the carrying value of an asset by estimating the
future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are
less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s
carrying value and fair value or disposable value. The Company determined that none of its long-term assets at July 31, 2014
or the period December 27, 2012(inception) through July 31, 2014 were impaired.
SONGBIRD DEVELOPMENT INC.
(A Development Stage Company)
Notes to Financial Statements
July 31, 2014
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue
The Company records revenue on the accrual
basis when all goods and services have been performed and delivered, the amounts are readily determinable, and collection is reasonably
assured. The Company has generated $116,620 in revenue since its inception.
Advertising
The Company expenses its advertising when incurred.
During the year ended July 31, 2014 the Company purchased $29,260 in cutlery sets to be utilized as promotional gifts and free
samples to current and potential clients as a way to boost sales.
NOTE 3. RECENT ACCOUNTING PRONOUNCEMENTS
The Company has evaluated all the recent accounting
pronouncements through the date the financial statements were issued and filed with the Securities and Exchange Commission and
believe that none of them will have a material effect on the Company’s financial statements.
NOTE 4. GOING CONCERN
The accompanying financial statements are presented
on a going concern basis. The Company had ongoing operations during the period from December 27, 2012 (date of inception) to July
31, 2014 with a net loss of $25,934. There is no guarantee that the Company will continue to generate revenues. This condition
raises substantial doubt about the Company’s ability to continue as a going concern. The Company is currently in the development
stage, management believes that the Company’s current cash of $9,966 and anticipated revenues is sufficient to cover the
expenses they will incur during the next twelve months.
SONGBIRD DEVELOPMENT INC.
(A Development Stage Company)
Notes to Financial Statements
July 31, 2014
NOTE 5. RELATED PARTY TRANSACTIONS
The sole officer and director of the Company
may, in the future, become involved in other business opportunities as they become available, he may face a conflict in selecting
between the Company and those other business opportunities. The Company has not formulated a policy for the resolution of such
conflicts.
As of July 31, 2014, $14,200 is owed to the
Company’s Officer & Director, Igor Kaspruk, from funds he loaned the Company. The loan is non-interest bearing with no
specific repayment terms.
NOTE 6. STOCK TRANSACTIONS
On July 10, 2013, we offered and sold to
Igor Kaspruk, our President, Secretary, Treasurer and Director, a total of 4,000,000 shares of common stock for a purchase price
of $0.001 per share, for aggregate proceeds of $4,000.
During the year ended July 31, 2014 the Company
sold 1,000,000 shares of common stock to 35 independent shareholders. The shares were sold at a price of $0.04 each for total proceeds
of $40,000. The Offering was closed on February 21, 2014 and the certificates were delivered on April 15, 2014.
As of July 31, 2014 the Company had 5,000,000
shares of common stock issued and outstanding.
NOTE 7. STOCKHOLDERS’ EQUITY
The stockholders’ equity section of the
Company contains the following classes of capital stock as of July 31, 2014:
Preferred stock, $0.001 par value: 5,000,000
shares authorized zero issued and outstanding as of July 31, 2014.
Common stock, $0.001 par value: 70,000,000
shares authorized; 5,000,000 shares issued and outstanding.
NOTE 8. SUBSEQUENT EVENTS
On October 22, 2014, the Company entered
into a contract with and completed the acquisition of Knowledge Machine, Inc., a Nevada corporation, in a stock-for-stock
exchange in which the Company issued 37,625,000 shares of its common stock on a pro rata basis to the shareholders of
Knowledge Machine in return of all of the outstanding shares of Knowledge Machine (the “Reorganization
Agreement”). Knowledge Machine also entered into a Stock Purchase Agreement (the “SPA”) with the sole
officer, director and principal shareholder of the Company at the time, to acquired 2,464,716 shares of restricted stock held
by him for $35,800. Following the closing of the Reorganization Agreement and the SPA, the Company sold the assets
relating to the prior business of the Company to the former principal executive office in return of 1,535,284 shares owned by
him pursuant to an Asset Purchase Agreement (the “APA”). In addition, Knowledge Machine advanced
$14,200 to the Company to repay outstanding prior cash advances made by a former officer to the Company.
At the closing of the Reorganization Agreement,
new management was appointed. Thereafter, in connection with the closing of the SPA and the APA, the 4,000,000 restricted
shares of common stock purchased by Knowledge Machine and the Company from the former principal shareholder in the above transactions
were cancelled and returned the authorized but unissued common stock of the Company.
In connection with the closing of the Reorganization Agreement, the board of directors approved a one-for-ten
forward stock split of the pre-closing outstanding shares and a change of the Company’s name to “Knowledge Machine
International, Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Board of Directors
Knowledge Machine, Inc.
San Diego, California
We have audited the accompanying balance sheet
of Knowledge Machine, Inc., [a development stage company] as of June 30, 2014 and the related statements of operations, stockholders’
equity and cash flows for the period from inception on December 12, 2013 through June 30, 2014. Knowledge Machine, Inc.’s
management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over
financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Knowledge Machine, Inc. as of June 30, 2014 and the
results of its operations and its cash flows for the period from inception on December 12, 2013 through June 30, 2014, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have
been prepared assuming Knowledge Machine, Inc. will continue as a going concern. As discussed in Note 3 to the consolidated financial
statements, Knowledge Machine, Inc. has incurred losses since inception and has not yet achieved profitable operations. These factors
raise substantial doubt about the ability of the Company to continue as a going concern. Management’s plans in regards to
these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
/s/ PRITCHETT, SILER & HARDY, P.C.
Salt Lake City, Utah
August 8, 2014
Knowledge Machine, Inc.
Balance Sheet
June 30, 2014
ASSETS | |
| |
Current Assets | |
| |
Cash | |
$ | 461,285 | |
Total Current Assets | |
| 461,285 | |
| |
| | |
| |
| | |
Other Assets | |
| | |
Cash in Escrow | |
| 50,000 | |
| |
| | |
Total Other Assets | |
| 50,000 | |
| |
| | |
TOTAL ASSETS | |
$ | 511,285 | |
| |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | |
Current Liabilities | |
| | |
Accounts Payable | |
$ | 20,179 | |
Accrued Interest Payable | |
| 600 | |
Due to Allotrope | |
| 100,000 | |
Notes Payable - Convertible | |
| 650,000 | |
Total Current Liabilities | |
| 770,779 | |
| |
| | |
TOTAL LIABILITIES | |
| 770,779 | |
| |
| | |
Stockholders' Equity(Deficit) | |
| | |
Preferred Stock, $0.001 par; 1,000,000 shares authorized;
None issued and outstanding |
|
|
– |
|
Common Stock, $0.001 par; 200,000,000 shares authorized;
34,000,000 issued and 26,331,999 outstanding |
|
|
34,000 |
|
Additional Paid-In Capital | |
| – | |
Less Deferred Compensation
7,668,001 common shares |
|
|
(7,668 |
) |
Retained Earnings (Deficit) | |
| (285,826 | ) |
Total Stockholders' Equity (Deficit) | |
| (259,494 | ) |
| |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT) | |
$ | 511,285 | |
The accompanying notes are an integral part of these financial statements
Knowledge Machine, Inc.
Statement of Operations
Period December 12, 2013 (Date of Inception) to June 30, 2014
REVENUE | |
$ | – | |
| |
| | |
EXPENSES | |
| | |
General & Administration | |
| 131,704 | |
Impairment Loss | |
| 150,000 | |
Non-cash Stock Compensation | |
| 3,832 | |
Total Expenses | |
| 285,536 | |
| |
| | |
OTHER INCOME (EXPENSE) | |
| | |
Interest Expense | |
| (600 | ) |
Interest Income | |
| 310 | |
Total Other Income (Expense) | |
| (290 | ) |
| |
| | |
INCOME (LOSS) BEFORE INCOME TAXES | |
| (285,826 | ) |
| |
| | |
Current Income Tax Expense | |
| – | |
| |
| | |
Deferred Income Tax Expense | |
| – | |
| |
| | |
Net Income (Loss) | |
$ | (285,826 | ) |
| |
| | |
Loss per Common Share - Basic and Diluted | |
$ | (0.02 | ) |
| |
| | |
Weighted Average Number of Shares
Outstanding - Basic and Diluted |
|
|
13,058,540 |
|
The accompanying notes are an integral part of these financial statements
Knowledge Machine, Inc.
Statement of Cash Flows
Period December 12, 2013 (Date of Inception) to June 30, 2014
OPERATING ACTIVITIES | |
| | |
Net Income (Loss) | |
$ | (285,826 | ) |
Adjustments to reconcile Net Income (Loss) to Net Cash (used) provided by operations: | |
| | |
Noncash Expenses: | |
| | |
Stock Compensation | |
| 3,832 | |
Impairment Loss | |
| 150,000 | |
Change in assets and liabilities: | |
| | |
(Increase) in Cash in Escrow | |
| (50,000 | ) |
Increase in Accounts Payable | |
| 20,179 | |
Increase in Accrued Interest | |
| 600 | |
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES | |
| (161,215 | ) |
| |
| | |
INVESTING ACTIVITIES | |
| | |
Purchase of Cost Method Investment in Allotrope | |
| (50,000 | ) |
NET CASH (USED) BY INVESTING ACTIVITIES | |
| (50,000 | ) |
| |
| | |
FINANCING ACTIVITIES | |
| | |
Proceeds from Notes Payable | |
| 650,000 | |
Proceeds from Sale of Stock | |
| 22,500 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | |
| 672,500 | |
| |
| | |
| |
| | |
NET CASH INCREASE (DECREASE) FOR PERIOD | |
| 461,285 | |
| |
| | |
CASH AT BEGINNING OF PERIOD | |
| – | |
| |
| | |
CASH AT END OF PERIOD | |
$ | 461,285 | |
| |
| | |
Supplemental Disclosure for Cash Flow Information | |
| | |
Cash paid during the period for: | |
| | |
Interest | |
$ | – | |
Income Taxes | |
$ | – | |
| |
| | |
Supplemental Schedule of Noncash Investing and Financing Activities: | |
| | |
| |
| | |
For the period December 12, 2013 to June 30, 201411,500,000 shares issued for board services at $0.001 per share. Of
these, 3,831,999 vested during the period and 7,668,001 are unvested. |
|
|
|
|
The Company's Cost Method Investment in Allotrope of $150,000 is partially
offset by a related liability of $100,000. |
|
|
|
|
The accompanying
notes are an integral part of these financial statements
Knowledge Machine, Inc.
Statement of Stockholders' Equity (Deficit)
Period December 12, 2013 (Date of Inception) to June 30, 2014
| |
Common Stock Shares | | |
Common Stock Amount | | |
Additional Paid in Capital | | |
Deferred Compensation | | |
Retained Earnings (Deficit) | | |
Totals | |
Balance December 12, 2013 | |
| – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | | |
$ | – | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for cash | |
| 22,500,000 | | |
| 22,500 | | |
| – | | |
| – | | |
| – | | |
| 22,500 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for services | |
| 11,500,000 | | |
| 11,500 | | |
| – | | |
| (7,668 | ) | |
| – | | |
| 3,832 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss for the period ended June 30, 2014 | |
| – | | |
| – | | |
| – | | |
| – | | |
| (285,826 | ) | |
| (285,826 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance June 30, 2014 | |
| 34,000,000 | | |
$ | 34,000 | | |
$ | – | | |
$ | (7,668 | ) | |
$ | (285,826 | ) | |
$ | (259,494 | ) |
The accompanying
notes are an integral part of these financial statements
KNOWLEDGE MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2014
NOTE 1 – Summary of Significant Accounting Policies
Nature of Business – Knowledge Machine, Inc. is a Nevada
corporation (the “Company”), incorporated December 12, 2013.
The Company is a technology company focused on targeting new technologies,
acquiring licensing rights to those technologies, and marketing its licensed technology. The Company seeks to create a portfolio
of transformative and breakthrough technologies. The Company has been organized to fundamentally change the paradigm of technology
transfer and tech startups involving licensing of IP, and in so doing, transform the very nature by which technology companies
are conceived, launched, and are made successful. The Company intends to accomplish this by introducing tools and processes that
remove various biases, blind spots, and cultural pathologies and make commercialization of technology a more systematic and process-driven
approach. The Company intends to acquire IP and marketing and sales rights to innovative and breakthrough technologies, and then
through partnerships develop companies which will provide the Company with multiple sources of recurring revenue and increasing
valuation. Additionally, the Company’s Science Advisory Board will help to mitigate technical, market, and financial risks
and help make its activities significantly more successful. The Company’s activities are expected to grow rapidly upon completion
of future financing.
Basis of Presentation – The accompanying financial
statements have been prepared by the Company in accordance with Article 8 of U.S. Securities and Exchange Commission Regulation
S-X. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at June 30, 2014 and for the period then ended have been made.
Property and Equipment – Property and equipment are
stated at cost. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized
upon being placed in service. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets. The estimated life has been determined to be three
years unless a unique circumstance exists, which is then fully documented as an exception to the policy.
Fair Value of Financial Instruments - The Company accounts
for fair value measurements in accordance with accounting standard ASC 820-10-50, “Fair Value Measurements.” This
guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances
disclosure requirements for fair value measures. The three levels are defined as follows:
Level 1 inputs to the
valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 inputs to the
valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable
for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3 inputs to valuation
methodology are unobservable and significant to the fair measurement.
The Company’s financial instruments consist of cash, payables,
and notes payable. The carrying amount of cash and payables approximates fair value because of the short-term nature of these items.
The carrying amount of notes payable approximates fair value as the individual borrowings bear interest at market interest rates
and are also short-term in nature.
Income Taxes – The Company accounts for income
taxes in accordance with ASC Topic No. 740, “Accounting for Income Taxes.”
The Company adopted the provisions of ASC Topic No. 740, “Accounting
for Income Taxes,” at the date of inception on December 12, 2013. As a result of the implementation of ASC Topic No. 740,
the Company recognized no increase in the liability for unrecognized tax benefits.
The Company has no tax positions at June 30, 2014 for which the
ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company recognizes interest accrued related to unrecognized
tax benefits in interest expense and penalties in operating expenses. During the period ended June 30, 2014, the Company recognized
no interest and penalties. The Company had no accruals for interest and penalties at June 30, 2014. All tax years starting with
2013 are open for examination.
Stock Based Compensation – The
Company recognizes compensation costs to employees under ASC Topic No. 718, “Compensation – Stock Compensation.”
Under ASC Topic No. 718, companies are required to measure the compensation costs of share-based compensation arrangements based
on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required
to provide services. Share based compensation arrangements include stock options, restricted share plans, performance based awards,
share appreciation rights and employee share purchase plans. As such, compensation cost is measured on the date of grant at their
fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to other than employees are recorded on
the basis of the fair value of the instruments, as required by ASC Topic No. 505, “Equity Based Payments to Non-Employees.”
In general, the measurement date is when either (a) a performance commitment, as defined, is reached or (b) the earlier of (i)
the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized
over a period based on the facts and circumstances of each particular grant as defined in the FASB Accounting Standards Codification.
Loss Per Share – The computation of loss per share
is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings
Per Share.”
Accounts Receivable and Allowance for Doubtful Accounts –
Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful accounts. We determine the
allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations
applied to an aging of accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts
receivable previously written off are recorded as income when received. The allowance for doubtful accounts at June 30, 2014 was
$0.
Long-Lived and Intangible Assets – Long-lived assets
and certain identifiable definite life intangibles to be held and used by the Company are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company continuously evaluates
the recoverability of its long-lived assets based on estimated future cash flows and the estimated liquidation value of such long-lived
assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived
assets. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference
between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal
and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable
value.
Recently Enacted Accounting Standards – The FASB established
the Accounting Standards Codification (“Codification” or “ASC”) as the source of authoritative accounting
principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance
with generally accepted accounting principles in the United States (“GAAP”). Rules and interpretive releases of the
Securities and Exchange Commission (“SEC”) issued under authority of federal securities laws are also sources of GAAP
for SEC registrants.
Recent Accounting Standards Updates (“ASU”) through
ASU No. 2014-13 contain technical corrections to existing guidance or affect guidance to specialized industries. These updates
have no current applicability to the Company or their effect on the financial statements would not have been significant. The Company
has early adopted the provisions of ASU No. 2014-10 “Development Stage Entities” which generally removes the requirements
for added disclosures about development stage activities.
Cash Equivalents - The Company considers all highly liquid
investments with a maturity of three months or less at date of purchase to be cash equivalents.
Concentration of Credit Risk – The Company maintains
its cash in bank deposit accounts, which, at times, may exceed federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
Organization Expenditures – Organizational expenditures
are expensed as incurred for Securities Exchange Commission (SEC) filings, but capitalized and amortized for income tax purposes.
Cost Method Investments – These are investments in
equity securities having no readily determinable fair value (i.e. the shares are not publicly traded), and where the equity method
(i.e. 20% or greater ownership) or consolidation method (i.e. greater than 50% ownership or if the Company has significant influence
over the operating and financial policies of the investee company) do not apply.
These long-term investments are carried at cost until disposed of
or until written down due to impairment. Impairment is tested annually at the individual security level (or more often if an event
or changes in circumstances has occurred that may have a significant adverse effect on the fair value of the investment). An investment
is deemed impaired when its fair value is less than its book carrying value. During the period ended June 30, 2014, an impairment
loss of $150,000 was recorded.
Accounting Estimates - The preparation of financial statements
in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions
that affect certain reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date
of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimated by management.
Revenue Recognition – The Company’s revenue is
derived primarily from providing services under contractual agreements. The Company recognizes revenue in accordance with ASC Topic
No. 605 based on the following criteria: Persuasive evidence of an arrangement exists, services have been rendered, the price is
fixed or determinable, and collectability is reasonably assured.
NOTE 2 – Going Concern
The Company was only recently formed and has not yet achieved profitable
operations. The ability of the Company to continue as a going concern is dependent on expanding income opportunities. Management
anticipates that future contracts will allow the Company to achieve profitable operations. There is no assurance that the Company
will be successful in raising additional capital or in achieving profitable operations. The financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
NOTE 3 – Cost Method Investments
Allotrope Sciences Corporation
In June 2014, the Company entered into a Stock Purchase Agreement
with Allotrope Sciences Corporation, a Delaware corporation, to purchase 12% of the total number of shares of Allotrope’s
common stock for $150,000. Three payments of $50,000 each were due within 10, 30 and 90 business days of the signing of the agreement
on June 23, 2014. The first payment of $50,000 was made prior to June 30, 2014 and the two remaining payments totaling $100,000
are included as a liability on the Company’s balance sheet at June 30, 2014. The Company is subsequently in default on the
second payment of the agreement. The investment in Allotrope is carried on the cost method. An impairment loss of $150,000 has
been recorded at June 30, 2014 because the Company was unable to determine a fair market value of the investment.
NOTE 4 – Convertible Notes Payable
Notes payable consisted of the following at June 30, 2014: | |
| | |
| |
| | |
Note payable to Marietta Dermatology PSP FBO Myles Jerdan, with an annual interest rate of 0.28%, unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently converted to common stock. | |
$ | 125,000 | |
| |
| | |
Note payable to Ruben Azrak and Victor Azrak, with an annual interest rate of 0.30%, unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently $75,000 was repaid and $75,000 was subsequently converted to common stock. | |
| 150,000 | |
| |
| | |
Note payable to Jonathan Rahn, with an annual interest rate of 0.30%, unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently converted to common stock. | |
| 50,000 | |
| |
| | |
Note payable to Shawn Henry German, with an annual interest rate of 0.28%, unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently converted to common stock. | |
| 50,000 | |
| |
| | |
Note payable to Sam Esses, with an annual interest rate of 0.30%, unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently converted to common stock. | |
| 75,000 | |
| |
| | |
Note payable to Seymore Rubin and Mark Rubin,with an annual interest rate of 0.30%,unsecured with interest accruing monthly and the principle balance due July 31, 2014, subsequently converted to common stock. | |
| 200,000 | |
| |
| | |
Total | |
| 650,000 | |
| |
| | |
Less current notes payable | |
| (650,000 | ) |
| |
| | |
Long-term notes payable | |
$ | 0 | |
NOTE 5 – Income Taxes
The Company accounts for income taxes in accordance with ASC Topic
No. 740. This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit
or expense of temporary reporting differences between book and tax accounting methods and any available operating loss or tax credit
carryforwards.
The Company has available at June 30, 2014, unused operating loss
carryforwards of approximately $285,826, which may be applied against future taxable income and which expire in various years through
2034. However, if certain substantial changes in the Company’s ownership should occur, there could be an annual limitation
on the amount of net operating loss carryforward which can be utilized. The amount of and ultimate realization of the benefits
from the operating loss carryforwards for income tax purposes is dependent, in part, upon the tax laws in effect, the future earnings
of the Company and other future events, the effects of which cannot be determined. Because of the uncertainty surrounding the realization
of the loss carryforwards, the Company has established a valuation allowance equal to the tax effect of the loss carryfowards of
approximately $18,965 at June 30, 2014 and, therefore, no deferred tax asset has been recognized for the loss carryforwards. The
change in the valuation allowance is approximately $18,965 for the period ended June 30, 2014.
Deferred tax assets are comprised of the following:
| |
2014 | |
Deferred tax assets: | |
| | |
NOL carryover | |
$ | 285,826 | |
Organization Expense | |
| (9,391 | ) |
Impairment Expense | |
| (150,000 | ) |
Valuation allowance | |
| (126,435 | ) |
Net deferred tax asset | |
$ | – | |
NOTE 6 – Stockholders’ Equity
Common Stock
The Company has authorized 200,000,000 shares of common stock, $.001
par value.
In February, March and April 2014, the Company issued 22,500,000
shares to officers and investors for cash of $22,500, or $0.001 per share.
On April 22, 2014, the Company issued 11,500,000 shares of the Company’s
common stock to the Company’s Science Advisory Board members as noncash compensation for services to be rendered valued at
$11,500 or $0.001 per share. Of these shares, 3,831,999 (valued at $3,832) vested during the period ended June 30, 2014 and 7,668,001
(valued at $7,668) remain unvested and are reflected as deferred compensation as of June 30, 2014.
Deferred Compensation
During the period ended June 30, 2014, 11,500,000 shares of common
stock were issued to the Company’s Science Advisory Board members at $0.001 per share. The unvested portion of the shares
at June 30, 2014 (7,668,001 unvested shares) increased deferred compensation by $7,668.
As of June 30, 2014, the balance of unvested compensation cost expected
to be recognized is $7,668 and is recorded as a reduction of stockholders’ equity. The unvested compensation is expected
to be recognized over the weighted average period of approximately 2 years (through April 22, 2016).
Preferred Stock
The Company is authorized to issue 1,000,000 shares of preferred
stock, $0.001 par value. There were none issued and outstanding at June 30, 2014.
Proposed Acquisition
The Company is newly formed and is negotiating a potential acquisition
of a public company as a means for future access to public capital markets to expand operations. Any such acquisition would likely
be structured as a reorganization of the Company in a manner similar to a reverse purchase, wherein the shareholders of the Company
would become the controlling shareholders of the public company. The Company would thus take over the public reporting obligations
of the public company. Accordingly, the Company has placed $50,000 in an escrow as it seeks an acquisition. No assurance can be
given that the Company will be successful in finding and completing an acquisition.
NOTE 7 – Loss Per Share
The following data show the amounts used in computing loss per share
and the effect on income and the weighted average number of shares of dilutive potential common stock for the period ended June
30, 2014:
Loss from continuing operations available to common stockholders (numerator) | |
$ | (285,826 | ) |
| |
| | |
Weighted average number of common shares outstanding used in loss per share during the Period (denominator) | |
| 13,058,540 | |
Dilutive loss per share was not presented as the Company had no
common equivalent shares for all periods presented that would affect the computation of diluted loss per share or its effect is
anti-dilutive.
NOTE 8 – Subsequent Events
The Company has evaluated subsequent events from the balance sheet
date through the date the financial statements were issued and determined there are no items to disclose, except as noted below.
On July 8, 2014, the Company entered into an agreement with Score
Technologies, Inc. for the purchase of 100,000 shares of stock in consideration of $50,000. The Company also has options to enter
into two license agreements for $25,000 each. The stock purchase agreement was subsequently cancelled and rescinded retroactively
as though it never happened. The $50,000 payment is being held as a deposit towards partial payment on any license agreements entered
into between the Company and Score.
On July 9, 2014, the Company amended their Science Advisory Board
Agreement with the President of the Company and all unvested shares for the President (3,666,667 shares valued at $0.001, or $3,667)
became fully vested.
In July 2014, the Company repaid $75,000 of notes payable. The remaining
promissory notes in the aggregate principal amount of $575,000 were converted to common stock at a rate of five shares of stock
per $1.00. A total of 2,875,000 shares of common stock were issued as part of the conversions. All interest due on the notes was
paid upon conversion.
SONGBIRD DEVELOPMENT, INC.
AND KNOWLEDGE MACHINE, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
The following unaudited proforma condensed
combined balance sheet aggregates the balance sheet of Songbird Development, Inc., a Nevada corporation (the “Company”)
as of July 31, 2014 and the balance sheet of Knowledge Machine, Inc., a Nevada corporation (“KMI”) as of June 30, 2014
accounting for the transaction as a reorganization of KMI in a manner similar to a reverse purchase with the issuance of common
stock of the Company for all the issued and outstanding shares of KMI and using the assumptions described in the following notes,
giving effect to the transaction, as if the transaction had occurred as of the end of the period. The transaction was not completed
as of July 31, 2014.
The following unaudited proforma condensed
combined statement of operations combines the results of operations of the Company for the year ended July 31, 2014 and the results
of operations of KMI for the period from inception on December 12, 2013 through June 30, 2014 as if the transaction had occurred
at the beginning of the periods.
The pro forma condensed combined financial
statements should be read in conjunction with the separate financial statements and related notes thereto of the Company and KMI.
These proforma financial statements are not necessarily indicative of the combined financial position, had the acquisition occurred
at the end of the periods indicated above, or the combined results of operations which might have existed for the periods indicated
or the results of operations as they may be in the future.
SONGBIRD DEVELOPMENT, INC.
AND KNOWLEDGE MACHINE, INC.
PROFORMA CONDENSED COMBINED BALANCE SHEET
July 31, 2014
ASSETS
[Unaudited]
| |
| Songbird | | |
| Knowledge | | |
|
| | | |
| | |
| |
| Development, Inc. | | |
| Machine, Inc. | | |
|
| Proforma | | |
| | |
| |
| July 31, 2014 | | |
| June 30, 2014 | | |
|
| Increase | | |
| Proforma | |
| |
| [Company] | | |
| [KMI] | | |
|
| (Decrease) | | |
| Combined | |
| |
| | | |
| | | |
|
| | | |
| | |
ASSETS: | |
Cash | |
$ | 9,966 | | |
$ | 461,285 | | |
$ |
| – | | |
$ | 469,751 | |
| |
| | | |
| | | |
|
[F] | (1,500 | ) | |
| | |
Cash in Escrow | |
| – | | |
| 50,000 | | |
|
[E] | (50,000 | ) | |
| – | |
Buildings and Land | |
| 14,000 | | |
| – | | |
|
[C] | (14,000 | ) | |
| – | |
Vehicles | |
| 8,300 | | |
| – | | |
|
[C] | (8,300 | ) | |
| – | |
Investment in subsidiary | |
| – | | |
| – | | |
|
[A] | 37,625 | | |
| – | |
| |
| – | | |
| – | | |
|
[B] | (37,625 | ) | |
| – | |
| |
$ | 32,266 | | |
$ | 511,285 | | |
$ |
| (38,000 | ) | |
$ | 469,751 | |
| |
| | | |
| | | |
|
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | |
| |
| | | |
| | | |
|
| | | |
| | |
LIABILITIES: | |
| | | |
| | | |
|
| | | |
| | |
Accounts payable | |
$ | – | | |
$ | 20,179 | | |
$ |
| – | | |
$ | 20,179 | |
Accrued interest payable | |
| – | | |
| 600 | | |
|
| – | | |
| 600 | |
Due to Allotrope | |
| – | | |
| 100,000 | | |
|
| – | | |
| 100,000 | |
Loan payable – related party | |
| 14,200 | | |
| – | | |
|
[E] | (14,200 | ) | |
| – | |
Notes payable - convertible | |
| – | | |
| 650,000 | | |
|
| – | | |
| 650,000 | |
Total Liabilities | |
| 14,200 | | |
| 770,779 | | |
|
| (14,200 | ) | |
| 770,779 | |
| |
| | | |
| | | |
|
| | | |
| | |
STOCKHOLDERS’ (DEFICIT): | |
| | | |
| | | |
|
| | | |
| | |
| |
| | | |
| | | |
|
[A] | 37,625 | | |
| | |
| |
| | | |
| | | |
|
[B] | (34,000 | ) | |
| | |
| |
| | | |
| | | |
|
[C] | (4,000 | ) | |
| | |
Common stock | |
| 5,000 | | |
| 34,000 | | |
|
[D] | 9,000 | | |
| 47,625 | |
| |
| | | |
| | | |
|
| | | |
| | |
| |
| | | |
| | | |
|
[B] | (29,559 | ) | |
| | |
| |
| | | |
| | | |
|
[C] | (18,300 | ) | |
| | |
Additional paid in capital | |
| 39,000 | | |
| – | | |
|
[D] | (9,000 | ) | |
| (55,159 | ) |
Less deferred compensation | |
| – | | |
| (7,668 | ) | |
|
[E] | (35,800 | ) | |
| (7,668 | ) |
Accumulated Deficit | |
| (25,934 | ) | |
| (285,826 | ) | |
|
[B] | 25,934 | | |
| (285,826 | ) |
| |
| | | |
| | | |
|
[F] | (1,500 | ) | |
| | |
| |
| | | |
| | | |
|
| | | |
| | |
Total Stockholders’ (Deficit) | |
| 18,066 | | |
| (259,494 | ) | |
|
| (23,800 | ) | |
| (301,028 | ) |
| |
| | | |
| | | |
|
| | | |
| | |
| |
$ | 32,266 | | |
$ | 511,285 | | |
$ |
| (38,000 | ) | |
$ | 469,751 | |
See Notes To Unaudited Proforma Condensed Financial
Statements.
SONGBIRD DEVELOPMENT, INC.
AND KNOWLEDGE MACHINE, INC.
PROFORMA CONDENSED COMBINED STATEMENT OF
OPERATIONS
[Unaudited]
| |
| | |
Knowledge | | |
| | |
| |
| |
Songbird | | |
Machine, Inc. | | |
| | |
| |
| |
Development, Inc. | | |
From inception | | |
| | |
| |
| |
For the Year | | |
on Dec 12, 2013 | | |
| | |
| |
| |
Ended | | |
Through | | |
Proforma | | |
| |
| |
July 31, 2014 | | |
June 30, 2014 | | |
Increase | | |
Proforma | |
| |
[Company] | | |
[KMI] | | |
(Decrease) | | |
Combined | |
| |
| | | |
| | | |
| | | |
| | |
REVENUE | |
$ | 116,620 | | |
$ | – | | |
$ | – | | |
$ | 116,620 | |
| |
| | | |
| | | |
| | | |
| | |
COST OF GOODS SOLD: | |
| | | |
| | | |
| | | |
| | |
Cutlery set purchases | |
| 75,675 | | |
| – | | |
| – | | |
| 75,675 | |
Sales commissions paid | |
| 9,870 | | |
| – | | |
| – | | |
| 9,870 | |
Gross Profit | |
| 31,075 | | |
| – | | |
| – | | |
| 31,075 | |
| |
| | | |
| | | |
| | | |
| | |
EXPENSES: | |
| | | |
| | | |
| | | |
| | |
General and administrative | |
| 32,315 | | |
| 131,704 | | |
| – | | |
| 164,019 | |
Professional fees | |
| 21,134 | | |
| – | | |
| – | | |
| 21,134 | |
Impairment loss | |
| – | | |
| 150,000 | | |
| – | | |
| 150,000 | |
Non-cash stock compensation | |
| – | | |
| 3,832 | | |
| – | | |
| 3,832 | |
| |
| | | |
| | | |
| | | |
| | |
Total Expenses | |
| 53,449 | | |
| 285,536 | | |
| – | | |
| 338,985 | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM OPERATIONS | |
| (22,374 | ) | |
| (285,536 | ) | |
| – | | |
| (307,910 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| – | | |
| (600 | ) | |
| – | | |
| (600 | ) |
Interest income | |
| – | | |
| 310 | | |
| – | | |
| 310 | |
| |
| | | |
| | | |
| | | |
| | |
Total Other Income (Expense) | |
| – | | |
| (290 | ) | |
| – | | |
| (290 | ) |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM OPERATIONS | |
| | | |
| | | |
| | | |
| | |
BEFORE PROVISION FOR TAXES | |
| (22,374 | ) | |
| (285,826 | ) | |
| – | | |
| (308,200 | ) |
| |
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
INCOME (LOSS) FROM | |
| | | |
| | | |
| | | |
| | |
CONTINUING OPERATIONS | |
| (22,374 | ) | |
| (285,826 | ) | |
| – | | |
| (308,200 | ) |
| |
| | | |
| | | |
| | | |
| | |
DISCONTINUED OPERATIONS | |
| – | | |
| – | | |
| – | | |
| – | |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME (LOSS) | |
$ | (22,374 | ) | |
$ | (285,826 | ) | |
$ | – | | |
$ | (308,200 | ) |
| |
| | | |
| | | |
| | | |
| | |
BASIC NET (LOSS) PER COMMON SHARE (Note 4) | |
| | | |
| | | |
| | | |
$ | (.006 | ) |
See Notes To Unaudited Proforma Condensed Financial
Statements.
SONGBIRD DEVELOPMENT, INC.
AND KNOWLEDGE MACHINE, INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
[Unaudited]
NOTE 1 – SONGBIRD DEVELOPMENT, INC.
Songbird Development, Inc. (the “Company”)
was organized under the laws of the State of Nevada on December 27, 2012. The Company was formed to engage in the development and
operation of a business engaged in the distribution of high end cutlery sets produced in China. The Company is in the development
stage. The Company was not able to raise sufficient capital to execute their business plan and is now engaged in discussions with
third parties regarding alternative directions for the Company that could enhance shareholder value.
NOTE 2 – KNOWLEDGE MACHINE, INC.
Knowledge Machine, Inc. (“KMI”)
was organized under the laws of the State of Nevada on December 12, 2013. The Company is a technology company focused on targeting
new technologies, acquiring licensing rights to those technologies, and marketing our licensed technology. The Company seeks to
create a portfolio of transformative and breakthrough technologies. The Company has been organized to fundamentally change the
paradigm of technology transfer and tech startups involving licensing of IP, and in so doing, transform the very nature by which
technology companies are conceived, launched, and are made successful. The Company intends to accomplish this by introducing tools
and processes that remove various biases, blind spots, and cultural pathologies and make commercialization of technology a more
systematic and process-driven approach. The Company intends to acquire IP and marketing and sales rights to innovative and breakthrough
technologies, and then through partnerships develop companies which will provide the Company with multiple sources of recurring
revenue and increasing valuation. Additionally, the Company’s Science Advisory Board will help to mitigate technical, market,
and financial risks and help make its activities significantly more successful. The Company’s portfolio is expected to grow
rapidly upon completion of future financing.
NOTE 3 - PROFORMA ADJUSTMENTS
On October 22, 2014, KMI was acquired
by the Company pursuant to an Agreement and Plan of Reorganization. The agreement called for the Company to issue 37,625,000 shares
of common stock to the shareholders of KMI for a controlling ownership interest of the Company in a transaction wherein KMI would
became a wholly-owned subsidiary of the Company.
The ownership interests of the former
owners of KMI in the combined enterprise will be greater than that of the ongoing shareholders of the Company and, accordingly,
the management of KMI will assume operating control of the combined enterprise. Consequently, the acquisition is accounted for
as the recapitalization of KMI, wherein KMI purchased the assets of the Company and accounted for the transaction as a reverse
purchase for accounting purposes.
Proforma adjustments on the attached
financial statements include the following:
| [A] | To record the issuance of 37,625,000 shares of common stock pursuant to the Agreement and Plan
of Reorganization. |
| [B] | To eliminate the common stock accounts of KMI and the prior retained earnings of the Company. |
| [C] | To record the cancellation of 4,000,000 shares of common stock from a shareholder of Songbird Development
and the elimination of capital assets. |
| [D] | To record the forward split of 1,000,000 shares of common stock from shareholders of Songbird Development
into 10,000,000 shares. |
| [E] | To record repayment of the related party loan payable of $14,200 and $35,800 to purchase
stock for cancellation. |
| [F] | To record payment of the expenses of closing of $1,500. |
NOTE 4 - PROFORMA (LOSS) PER SHARE
The proforma (loss) per share is
computed based on the number of shares outstanding, after adjustment for shares issued in the acquisition, as though all shares
issued in the acquisition had been outstanding from the beginning of the periods presented.
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and
Plan of Reorganization (the “Agreement”), entered into this 22nd day of October 2014, is by and among
Knowledge Machine, Inc., a Nevada corporation (the “Target”), Songbird Development Inc., a Nevada corporation
(the “Purchaser”), and the shareholders of the Target whose names and signatures are set forth upon the signature
page of this Agreement (the “Shareholders”). Certain capitalized terms used in this Agreement not otherwise
defined in the body of the Agreement are defined in ARTICLE XI of this Agreement.
RECITALS:
WHEREAS, the Target
has entered into an agreement to purchase common shares of the Purchaser (the “Stock Purchase Transaction”);
WHEREAS, the Purchaser
wishes to acquire, and the Shareholders are willing to sell, all of the outstanding stock of the Target upon the terms and subject
to the conditions of this Agreement (the “Transaction”), and in accordance with Nevada Revised Statutes (the
“NRS”);
WHEREAS, the parties hereto intend to qualify
such transaction as a tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended;
NOW, THEREFORE, based
upon the stated premises, which are incorporated herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived herefrom, and other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Purchaser, the Target, and the Shareholders approve and adopt this
Agreement and plan of reorganization and mutually covenant and agree with each other as follows:
ARTICLE
I.
STOCK-FOR-STOCK EXCHANGE TRANSACTION
1.1
Transfer of Target Shares. On the Closing Date the Shareholders shall transfer to the Purchaser certificates for
the number of shares of the common stock of the Target (the “Target Shares”) which in the aggregate shall represent
substantially all, but not less than 80%, of the issued and outstanding shares of the common stock of the Target.
1.2
Issuance of Purchaser Shares. In exchange for the transfer of the common stock of the Target pursuant to Subsection
1.1 hereof, the Purchaser shall on the Closing Date, and contemporaneously with such transfer of the common stock of the Target
to it by the Shareholders, issue and deliver to the Shareholders on a one-for-one basis an equal number of shares of common stock
of the Purchaser (the “Purchaser Shares”). The maximum number of post forward split Purchaser Shares to be issued
to Shareholders is 37,625,000.
ARTICLE
II.
CLOSING
2.1
Closing Date. Except as otherwise provided below, the closing of the Transaction (the “Closing”)
will take place at the offices of Ronald N. Vance, Attorney at Law, 1656 Reunion Avenue, Suite 250, South Jordan, Utah, immediately
following the closing of the Stock Purchase Transaction, or as soon as practicable after the satisfaction or waiver of the conditions
set forth in ARTICLE VII and ARTICLE VIII of this Agreement, or such other date, time and place as each of the parties hereto may
otherwise agree in writing (the “Closing Date”). If a party hereto is not in attendance at the Closing, Closing
may be held by conference call and delivery of the closing documents may be accomplished by Federal Express or as otherwise as
determined by the parties hereto.
2.2
Execution of Transaction Documents. On the Closing Date, the parties hereto shall consummate the Transaction by filing
the Articles of Exchange, together with any required certificates, with the Nevada Secretary of State, in such form as required
by, and executed in accordance with the relevant provisions of the NRS. The Transaction will be effective as of the filing of the
Articles of Exchange (the “Effective Time”).
ARTICLE
III.
SHAREHOLDER REPRESENTATIONS
Each Shareholder, severally
and not jointly, represents and warrants to the Purchaser that all of the statements contained in this ARTICLE III are true as
of the date of this Agreement (or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.
3.1
Ownership of Stock.
(a)
The Shareholder is the record and beneficial owner and holder of the number of fully paid and nonassessable Target Shares
set forth on the transfer records of the Target and will continue to own these Target Shares until the delivery thereof to the
Purchaser on the Closing Date and all such Target Shares are or will be on the Closing Date owned free and clear of all liens,
encumbrances, charges, and assessments of every nature and subject to no restrictions with respect to transferability. The Shareholder
currently has, and will have at Closing, full power and authority to dispose, assign, and transfer his, her, or its Target Shares
in accordance with the terms hereof.
(b)
Except for this Agreement, there are no outstanding options, contracts, calls, commitments, agreements or demands of any
character relating to the Target Shares listed in the transfer records of the Target.
3.2
Restricted Securities. The Shareholder understands that the Purchaser Shares have not been registered pursuant to
the Securities Act, or any state securities act, and thus are “restricted securities” as defined in Rule 144 promulgated
by the SEC. Therefore, under current interpretations and applicable rules, he, she, or it will be required to retain the Purchaser
Shares for a specified period from the date of Closing and at the expiration of such period his, her, or its sales may be confined
to brokerage transactions of limited amounts requiring certain notification filings with the SEC and such disposition may be available
only if the Purchaser is current in its filings with the SEC under the Exchange Act, or other public disclosure requirements. Accordingly,
the Shareholder hereby acknowledges that he, she, or it is prepared to hold the Purchaser Shares for an indefinite period.
3.3
Investment Purpose. The Shareholder acknowledges that the Purchaser Shares are being purchased for his, her, or its
own account, for investment, and not with the present view towards the distribution, assignment, or resale to others or fractionalization
in whole or in part. The Shareholder further acknowledges that no other person has or will have a direct or indirect beneficial
or pecuniary interest in the Purchaser Shares received by the Shareholder.
3.4
Limitations on Resale; Restrictive Legend. The Shareholder acknowledges that he, she, or it will not sell, assign,
hypothecate, or otherwise transfer any rights to, or any interest in, the Purchaser Shares except (i) pursuant to an effective
registration statement under the Securities Act, or (ii) in any other transaction which, in the opinion of counsel acceptable to
the Purchaser, is exempt from registration under the Securities Act, or the rules and regulations of the SEC thereunder. The Shareholder
also acknowledges that an appropriate legend will be placed upon each of the certificates representing the Purchaser Shares stating
that they have not been registered under the Securities Act and setting forth or referring to the restrictions on transferability
and sale thereof.
3.5
Information. The Shareholder has been furnished (i) with all SEC Reports; (ii) all requested materials relating to
the business, finances, and operations of the Purchaser; (iii) with information deemed material to making an informed investment
decision; and (iv) with additional requested information necessary to verify the accuracy of any documents furnished to the undersigned
by the Purchaser. Such person has been afforded the opportunity to ask questions of the Purchaser and its management and to receive
answers concerning the terms and conditions of this transaction.
3.6
Knowledge and Experience in Business and Financial Matters. The Shareholder, either individually or together with
his purchaser representative, has such knowledge and experience in business and financial matters that he, she or it is capable
of evaluating the risks of the prospective investment, and that the financial capacity of such party is of such proportion that
the total cost of such person’s commitment in the Purchaser Shares would not be material when compared with his total financial
capacity.
3.7
No Advertisements. The Shareholder did not enter into this Agreement as a result of or subsequent to any advertisement,
article, notice, or other communication published in any newspaper, magazine, or similar media or broadcast on television or radio,
or presented at any seminar or meeting.
3.8
Investment Communications. All communications concerning this Agreement and the issuance of the Purchaser Shares
made to the Shareholder by either the Purchaser or the Target, or on its behalf by its duly authorized representative(s), have
been made only in the state in which the Shareholder has listed as his mailing address.
3.9
Accuracy of All Statements Made by the Shareholders. No representation or warranty by the Shareholder in this Agreement,
nor any statement, certificate, schedule, or exhibit hereto furnished or to be furnished by or on behalf of the Shareholder pursuant
to this Agreement, nor any document or certificate delivered to the Purchaser by the Shareholder pursuant to this Agreement or
in connection with actions contemplated hereby, contains any untrue statement of material fact or omits a material fact necessary
to make the statements contained therein not misleading.
ARTICLE
IV.
REPRESENTATIONS AND WARRANTIES OF THE TARGET
The Target represents
and warrants to the Purchaser that all of the statements contained in this ARTICLE IV are true as of the date of this Agreement
(or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.
4.1
Due Incorporation. The Target is a corporation duly organized, validly existing, and in good standing under the laws
of the State of Nevada, with all requisite power and authority to own, lease and operate its properties and to carry on its business
as it is now being owned, leased, operated, and conducted. The Target does not have any wholly or partially owned subsidiaries
and does not own any economic, voting or management interests in any other Person.
4.2
Due Authorization. The Target has full power and authority to enter into this Agreement, the Articles of Exchange,
and to consummate the transactions contemplated hereby and thereby. The execution, delivery, and performance by the Target of this
Agreement have been duly and validly approved and authorized by the board of directors of the Target, and no other actions or proceedings
on the part of the Target are necessary to authorize this Agreement, the Articles of Exchange, and the transactions contemplated
hereby and thereby. The Target has duly and validly executed and delivered this Agreement. This Agreement constitutes the legal,
valid, and binding obligation of the Target, enforceable in accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to time in effect
which affect creditors’ rights generally and by general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
4.3
Full Disclosure. No representation or warranty by the Target contained in this Agreement contains any untrue statement
of material fact or omits to state a material fact necessary, in light of the circumstances under which it was made, to make any
of the representations and warranties therein not misleading.
ARTICLE
V.
REPRESENTATIONS OF THE PURCHASER
The Purchaser represents
and warrants to Target and to each Shareholder that all of the statements contained in this ARTICLE V are true as of the date of
this Agreement (or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.
5.1
Due Incorporation; Foreign Qualification. The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, with all requisite power and authority to own, lease, and operate its properties
and to carry on its businesses as they are now being owned, leased, operated, and conducted. The Purchaser (a) has no wholly or
partially owned subsidiaries and (b) owns no economic, voting or management interest in any other Person.
5.2
Due Authorization. The Purchaser has full power and authority to enter into, as applicable, this Agreement and the
Articles of Exchange, and has full power and authority to consummate the transactions contemplated hereby and thereby. The execution,
delivery, and performance by the Purchaser of this Agreement have been duly and validly approved and authorized by its board of
directors; and no other actions or proceedings on the part of the Purchaser are necessary to authorize this Agreement or the transactions
contemplated hereby. The Purchaser has duly and validly executed and delivered this Agreement. This Agreement constitutes the legal,
valid, and binding obligation of the Purchaser, enforceable in accordance with its terms as to the Purchaser, except as such enforceability
may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization or other laws from time to
time in effect which affect creditors’ rights generally, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3
Non-Contravention.
(a)
Except for the filing of the Articles of Exchange with the appropriate authorities pursuant to the NRS and filings required
by applicable federal and state securities laws, no Permit or filing or registration with, any Governmental Authority, or any other
Person not a party to this Agreement, is necessary in connection with the execution, delivery and performance by the Purchaser
of this Agreement or the Articles of Exchange, or the consummation of the transactions contemplated hereby or thereby, or for the
lawful continued operation of the respective businesses currently conducted by the Purchaser following the Effective Time. There
are no Contracts to which the Purchaser is a party that require a novation or consent to this transaction or change of control,
as the case may be, prior to the Effective Time.
(b)
Except as would not result in a Purchaser Material Adverse Effect, the execution, delivery, and performance by each of the
Purchaser of this Agreement and the Articles of Exchange do not and will not (i) violate any Law; (ii) violate or conflict with,
result in a breach or termination of, or constitute a default (or a circumstance which, with or without notice or lapse of time
or both, would constitute a default) under any Contract; (iii) give any third party any additional right (including a termination
right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes not yet due and payable)
upon any of the assets or properties of the Purchaser under any Contract to which the Purchaser is a party or by which the Purchaser
or any of its assets or properties are bound; (iv) permit the acceleration of the maturity of any indebtedness of the Purchaser
or indebtedness secured by the Purchaser’s assets or properties; (v) violate or conflict with any provision of the Articles
of Incorporation or Bylaws of the Purchaser; or (vi) result in the activation of any anti-dilution rights or a reset or repricing
of any debt or security instrument of any creditor or equity holder of the Purchaser except as provided for in this Agreement.
5.4
Capitalization.
(a)
The authorized capital stock of the Purchaser consists of an aggregate of 70,000,000 shares of common stock, and 5,000,000
shares of preferred stock, each with a par value $0.001 per share. On the date hereof there are issued and outstanding an aggregate
of 5,000,000 shares of common stock and no shares of preferred stock. All such issued and outstanding shares of capital stock are
validly issued, fully paid and non-assessable, and issuance thereof was not subject to preemptive rights or made in compliance
therewith. Upon the issuance of the Purchaser Shares to participating Shareholders as contemplated herein, such shares, when issued,
will be validly issued, fully paid and non-assessable, and will not be subject to preemptive rights.
(b)
The Purchaser represents as follows: (i) no shares of the Purchaser’s capital stock are subject to preemptive rights
or any other similar rights or any Liens suffered or permitted by the Purchaser; (ii) there are no outstanding debt securities;
(iii) there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments
of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Purchaser,
or Contracts by which the Purchaser is or may become bound to issue additional shares of capital stock of the Purchaser or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Purchaser; (iv) there are no Contracts under which the Purchaser is obligated
to register the sale of any of its securities under the Securities Act; (v) there are no outstanding securities of the Purchaser
which contain any redemption or similar provisions, and there are no Contracts by which the Purchaser is or may become bound to
redeem a security of the Purchaser; (vi) there are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the shares as described in this Agreement; (vii) the Purchaser does not have any stock
appreciation rights, plans or agreements or any similar plan or agreement; and (viii) there is no dispute as to the class of any
shares of the Purchaser’s capital stock.
5.5
SEC Reports; Financial Statements. The Purchaser has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act since the effective date of its S-1 registration statement
on February 13, 2014 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein,
being collectively referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective
dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable,
and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The financial statements of the Purchaser included in the SEC Reports, and the audited financial
statements for the year ended July 31, 2014, (the “Purchaser Financial Statements”) comply in all material respects
with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time
of issuance and filing. Such financial statements have been prepared in accordance with GAAP (except (i) as may be otherwise indicated
in the Purchaser Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent
they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial
position of the Purchaser as of and for the dates thereof and the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
5.6
Liabilities. There are no material liabilities of the Purchaser, whether accrued, absolute, contingent or otherwise,
which arose or relate to any transaction of the Purchaser, its agents or servants occurring prior to the period covered by the
Purchaser Financial Statements which are not disclosed by or reflected in the Purchaser Financial Statements. To the Knowledge
of the Purchaser, there are no circumstances, conditions, happenings, events or arrangements, contractual or otherwise, which may
hereafter give rise to liabilities, except in the normal course of business of the Purchaser.
5.7
Material Changes; Undisclosed Events, Liabilities or Developments. Since the period covered by the Purchaser Financial
Statements, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected, individually or in the aggregate, to result in or cause a Purchaser Material Adverse
Effect, (ii) the Purchaser has not incurred any liabilities (contingent or otherwise) other than trade payables and accrued expenses
incurred in the ordinary course of business consistent with past practice, (iii) the Purchaser has not altered its method of accounting,
(iv) the Purchaser has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Purchaser has not issued any
equity securities to any officer, director or Affiliate. Except for the transactions contemplated by this Agreement, no event,
liability, fact, circumstance, occurrence or development has occurred or exists or is reasonably expected to occur or exist with
respect to the Purchaser that would result in or cause a Purchaser Material Adverse Effect. The Purchaser has not taken any steps,
and does not currently expect to take any steps, to seek protection pursuant to any bankruptcy or similar law nor does the Purchaser
have any Knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy or similar proceedings against
it or the Principal Shareholder.
5.8
Contracts. The SEC Reports contain as exhibits each material Contract of the Purchaser. With respect to each such
agreement: (i) the agreement is legal, valid, binding, enforceable, and in full force and effect; (ii) the agreement will continue
to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the Transaction;
(iii) no party is in breach of default, and no event has occurred which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or acceleration, under the agreement; and (iv) no party has repudiated any provision
of the agreement.
5.9
Tax Matters. All federal, state, foreign, county, and local income, withholding, profits, franchise, occupation,
property, sales, use, gross receipts and other taxes (including any interest or penalties relating thereto) and assessments which
are due and payable have been duly reported, fully paid and discharged as reported by the Purchaser, and there are no unpaid taxes
which are, or could become a Lien on the properties and assets of the Purchaser, except as provided for in the Purchaser Financial
Statements, or have been incurred in the normal course of business of the Purchaser since that date. All tax returns of any kind
required to be filed have been filed and the taxes paid, including tax returns for the year ended July 31, 2014. There are no disputes
as to taxes of any nature payable by the Purchaser.
5.10
Litigation. There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the Knowledge of the Purchaser, threatened against the Purchaser or any of its officers
or directors, in their capacities as such, control persons, or any properties or businesses of the Purchaser or any of its officers
or directors; and, to the Knowledge of the Purchaser, there are no facts or circumstances which may reasonably be likely to give
rise to any of the foregoing. The Purchaser is not subject to any order, judgment, decree, injunction, stipulation or consent order
of or with any court or other Governmental Authority; and the Purchaser has not entered into any agreement to settle or compromise
any proceeding pending or threatened in writing which has involved any obligation for which the Purchaser has any continuing obligation.
There are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge of the Purchaser, threatened by
or against the Purchaser with respect to this Agreement or in connection with the transactions contemplated hereby, and the Purchaser
has no reason to believe there is a valid basis for any such claim, action, suit, proceeding or investigation.
5.11
Employees. Since its inception the Purchaser has not employed any individual on either a part-time or full-time basis.
5.12
Compliance with Laws. The Purchaser is not subject to or in default under any order of any court, Governmental Authority
or other agency or arbitration board or tribunal to which it is or was subject; and the Purchaser is not in violation of any Laws
(including, but not limited to, those relating to environmental, safety, building, product safety or health standards or labor
or employment matters), except for such violations as would not, individually or in the aggregate, have a Purchaser Material Adverse
Effect. The businesses of the Purchaser have been conducted in material compliance with all Applicable Laws, except to the extent
failure, individually or in the aggregate, would not have a Purchaser Material Adverse Effect.
5.13
Board Approval. The board of directors of the Purchaser, at meetings duly called and held or pursuant to written
consents fully executed prior to execution of this Agreement, duly and unanimously adopted resolutions: (a) approving and declaring
advisable this Agreement and the transactions contemplated hereby (such approvals having been made in accordance with the NRS);
(b) determining that the terms of the Agreement are fair to and in the best interests of the Purchaser and its shareholders; and
(c) adopting this Agreement, which resolutions have not been modified, supplemented or rescinded and remain in full force and effect.
5.14
Takeover Restrictions. No Takeover Statute is applicable to the Transaction, except for such statutes or regulations
as to which all necessary action has been taken by the Purchaser and its Board of Directors to permit the consummation of the stock-for-stock
exchange in accordance with the terms hereof, nor does the Purchaser have any shareholder rights or similar “poison pill”
plans.
5.15
Full Disclosure. No representation or warranty by the Purchaser contained in this Agreement contains any untrue statement
of material fact or omits to state a material fact necessary, in light of the circumstances under which it was made, to make any
of the representations and warranties therein not misleading.
ARTICLE
VI.
COVENANTS
6.1
Implementing Agreement. Subject to the terms and conditions hereof, each party hereto shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action required of it to consummate and make effective the transactions
contemplated by this Agreement.
6.2
Certain Notices. From and after the date of this Agreement until the Effective Time, each party hereto shall promptly
notify the other party hereto of: (a) the occurrence, or non-occurrence, of any event that would be likely to cause any condition
to the obligations of any party to effect the Transaction and the other transactions contemplated by this Agreement not to be satisfied;
or (b) the failure of the Target or the Purchaser, as the case may be, to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it pursuant to this Agreement which would reasonably be expected to result in any condition
to the obligations of any party to effect the Transaction and the other transactions contemplated by this Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant to this Section 6.2 shall not cure any breach of any
representation or warranty requiring disclosure of such matter prior to the date of this Agreement or otherwise limit or affect
the remedies available hereunder to the party receiving such notice.
6.3
Consents and Approvals.
(a)
The Target shall use commercially reasonable efforts to obtain all consents, approvals, certificates, and other documents
required in connection with the performance by it of this Agreement and the consummation of the transactions contemplated hereby.
The Target shall make all filings, applications, statements, and reports to all Governmental Authorities and other Persons that
are required to be made prior to the Closing Date by or on behalf of the Target pursuant to Applicable Law or one of the Target’s
material Contracts in connection with this Agreement and the transactions contemplated hereby.
(b)
The Purchaser shall use commercially reasonable efforts to obtain all consents, approvals, certificates, and other documents
required in connection with the performance by it of this Agreement and the consummation of the transactions contemplated hereby.
The Purchaser shall make all filings, applications, statements, and reports to all Governmental Authorities and other Persons that
are required to be made prior to the Closing Date by or on behalf of the Purchaser pursuant to Applicable Law or otherwise in connection
with this Agreement and the transactions contemplated hereby.
6.4
Supplemental Information. From time to time prior to the Closing, the Target, on the one hand, and the Purchaser,
on the other hand, shall promptly disclose in writing to the other any matter hereafter arising which, if existing, occurring or
known at the date of this Agreement would have been required to be disclosed to the other parties hereto or which would render
inaccurate any of the representations, warranties or statements set forth in ARTICLE IV and ARTICLE V, respectively, hereof.
ARTICLE
VII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PURCHASER
The obligations of
the Purchaser under this Agreement are subject to the satisfaction (or waiver by the Purchaser) of the following conditions precedent
on or before the Closing Date:
7.1
Representations and Warranties. Without supplementation after the date of this Agreement, the representations and
warranties of the Target contained in this Agreement must be, with respect to those representations and warranties qualified by
any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other representations
and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect as if made as
of the Closing Date.
7.2
Compliance with Agreements and Covenants. The Target must have performed and complied in all material respects with
all of its covenants, obligations, and agreements contained in this Agreement to be performed and complied with by it on or prior
to the Closing Date.
7.3
Officer’s and Shareholder’s Certificate. The Target must have furnished the Purchaser with a certificate
(dated as of the Closing Date and in form and substance reasonably satisfactory to the Purchaser), executed by an executive officer
of the Target, certifying to the fulfillment of the conditions specified in subsections 7.1 and 7.2 hereof.
7.4
Consents and Approvals. The Target shall have sent written evidence satisfactory to the Purchaser that all consents
and approvals required for the consummation of the transactions contemplated hereby have been obtained, and all required filings
have been made.
7.5
Execution of Agreement by Shareholders. Shareholders owning at least 80% of the Target Shares shall have executed
this Agreement.
7.6
No Material Adverse Change. At the Closing Date, there must be no material adverse change in the assets, liabilities,
prospects, financial condition or business of Target. Between the date of this Agreement and the Closing Date, there must not have
occurred an event that would reasonably be expected to constitute a Target Material Adverse Effect.
7.7
Actions or Proceedings. There can be no action or proceeding instituted or threatened by any Governmental Authority
or other Person which: (a) is likely to have a Target Material Adverse Effect; or (b) could enjoin, restrain or prohibit, or could
result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE
VIII.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE TARGET
The obligations of
the Target under this Agreement are subject to the satisfaction (or waiver by the Target) of the following conditions precedent
on or before the Closing Date:
8.1
Representations and Warranties. Without supplementation after the date of this Agreement, the representations and
warranties of the Purchaser contained in this Agreement must be, with respect to those representations and warranties qualified
by any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other representations
and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect as if made as
of the Closing Date.
8.2
Compliance with Agreements and Covenants. The Purchaser must have performed and complied in all material respects
with all of its covenants, obligations, and agreements contained in this Agreement to be performed and complied with by it on or
prior to the Closing Date.
8.3
Officer’s and Shareholder’s Certificate. The Purchaser must have furnished the Target with a certificate
(dated as of the Closing Date and in form and substance reasonably satisfactory to the Target), executed by an executive officer
of the Purchaser, certifying to the fulfillment of the conditions specified in subsections 8.1 and 8.2 hereof.
8.4
Actions or Proceedings. No action or proceeding by any Governmental Authority or other Person has been instituted
or threatened which: (a) is likely to have a Purchaser Material Adverse Effect; or (b) could enjoin, restrain or prohibit, or could
result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE
IX.
DELIVERIES AT CLOSING
9.1
The Target Closing Deliveries. At the Closing, or prior thereto, in addition to any other documents or agreements
required under this Agreement, the Target shall deliver to the Purchaser the following:
(a)
Resolutions of the board of directors and holders of the Target approving and authorizing the execution, delivery and performance
of this Agreement the consummation of the transactions contemplated hereby;
(b)
The officer’s certificate required pursuant to subsection 7.3 hereof;
(c)
The executed Articles of Exchange; and
(d)
All other instruments and documents that the Purchaser or its counsel, in the reasonable exercise of their reasonable discretion,
deems necessary: (i) to fulfill any obligation required to be fulfilled by the Target on the Closing Date; and (ii) to evidence
satisfaction of any conditions to Closing.
9.2
The Purchaser Closing Deliveries. At the Closing, or prior thereto, in addition to any other documents or agreements
required under this Agreement, the Purchaser must deliver to the Target the following:
(a)
Resolutions of the board of directors of the Purchaser approving and authorizing the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby;
(b)
The officer’s certificate required pursuant to subsection 8.3 hereof;
(c)
The executed Articles of Exchange; and
(d)
All other instruments and documents that the Target or its counsel, in the reasonable exercise of their reasonable discretion,
deems necessary: (i) to fulfill any obligation required to be fulfilled by the Purchaser on the Closing Date; and (ii) to evidence
satisfaction of any conditions to Closing.
9.3
Officers’ Certificates. In the event this Agreement and the Closing are contemporaneous, the officers’
certificates required pursuant to Sections 7.3 and 8.3 will not be required.
ARTICLE
X.
TERMINATION
10.1
Agreement Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated
and the Transaction contemplated hereby may be abandoned at any time prior to the Closing Date, only as follows:
(a)
by mutual written agreement of the Purchaser and the Target;
(b)
by the Purchaser (if the Purchaser is not then in material breach of its obligations under this Agreement) if: (i) a material
default or breach by the Target with respect to the due and timely performance of any of its covenants and agreements contained
herein and such default is not cured within ten (10) days; (ii) the Target makes an amendment or supplement to any Schedule hereto
and such amendment or supplement reflects a Target Material Adverse Effect after the date of this Agreement; or (iii) a Target
Material Adverse Effect occurs after the date of this Agreement;
(c)
by the Target (if the Target is not then in material breach of its obligations under this Agreement) if: (i) a material
default or breach shall be made by the Purchaser with respect to the due and timely performance of any of its covenants and agreements
contained herein and such default is not cured within thirty days; (ii) the Purchaser makes an amendment or supplement to any schedule
hereto and such amendment or supplement reflects a Purchaser Material Adverse Effect after the date of this Agreement; or (iii)
a Purchaser Material Adverse Effect occurs after the date of this Agreement; or
(d)
by either the Purchaser or the Target if the Closing has not occurred by October 31, 2014.
10.2
Effect of Termination. In the event of termination of this Agreement authorized pursuant to Section 10.1 hereof,
written notice thereof shall be given to the other parties and all obligations of the parties will terminate and, except as otherwise
provided in this Section, no party will have any right against any other party hereto for any loss, damage, expense (including
out-of-pocket expenses) or liability, including, without limitation, reasonable attorneys’ fees and disbursements arising
out of the preparation and execution of this Agreement, fulfilling in whole in part its obligations under this Agreement or otherwise
incurred by a party in any action or proceeding between such party and the other party hereto or between such party and a third
party, which is determined to have been sustained, suffered or incurred by a party and to have arisen from or in connection with
an event or state of facts which is subject to claim under this Agreement.
ARTICLE
XI.
MISCELLANEOUS
11.1
Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below:
“Applicable
Law” means all Laws, to the extent applicable to any Person.
“Contract”
shall mean any contract, lease, arrangement, commitment or understanding, sales order, purchase order, agreement, indenture, mortgage,
note, bond, instrument or license, whether written or verbal, which is intended or purports to be a binding and enforceable agreement.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“GAAP”
means United States generally accepted accounting principles applied on a consistent basis during the periods involved.
“Governmental
Authority” means: (a) the government of the United States: (b) the government of any foreign country; (c) the
government of any state or political subdivision of the government of the United States or the government of any foreign country;
or (d) any entity, body or authority exercising executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
“Knowledge”
means, as it relates to the Purchaser, the actual knowledge of Igor Kaspruk, in each case upon reasonable inquiry; and as it relates
to the Target, the actual knowledge of Vivek R. Dave or Valerie Vekkos, in each case upon reasonable inquiry.
“Law”
means any law, statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority.
“Lien”
means any mortgage, lien, charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any third
party, easement, encroachment or encumbrance upon any of the assets or properties of any Person.
The terms “material”
and “materially” when used in this Agreement refer, with respect to a given Person, to a level of significance
that would have affected any decision of a reasonable person in that Person’s position regarding whether to enter into this
Agreement or would affect any decision of a reasonable person in that Person’s position regarding whether to consummate the
transactions contemplated by this Agreement.
“Permit”
means a permit, license, registration, certificate of occupancy, approval or other authorization issued by any Governmental Authority.
“Person”
means any corporation, proprietorship, firm, partnership, limited partnership, trust, association, individual or other entity.
“Purchaser
Material Adverse Effect” means any change or effect that is, or is reasonably likely to be, materially adverse
to the business, assets and liabilities (taken together), financial condition or operations or results of operations of the Purchaser
and its subsidiaries, taken as a whole; provided, however, that none of the following will be deemed (either alone or in
combination) to constitute such a change or effect: (a)(i) any adverse change attributable to the announcement or pendency of the
transactions contemplated by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting the United
States economy or financial markets in general; (b) any act or threat of terrorism or war anywhere in the world, any armed hostilities
or terrorist activities anywhere in the world, any threat or escalation of armed hostilities or terrorist activities anywhere in
the world or any governmental or other response or reaction to any of the foregoing; or (c) any action by the Purchaser approved
or consented to in writing by the Target.
“SEC”
means the U.S. Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Takeover
Statute” means any “fair price,” “moratorium,” “control share acquisition”
or other similar anti-takeover statute of any Governmental Authority.
“Target Material
Adverse Effect” means any change or effect that is, or is reasonably likely to be, materially adverse to the business,
assets, and liabilities (taken together), financial condition or operations or results of operations of the Target and its subsidiaries,
taken as a whole; provided, however, that none of the following will be deemed (either alone or in combination) to constitute
such a change or effect: (a) (i) any adverse change attributable to the announcement or pendency of the transactions contemplated
by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting (A) the technology industry as
a whole; (B) the United States economy or financial markets in general; or (C) any foreign economy or financial markets in any
location where the Target has material operations or sales; (b) any act or threat of terrorism or war anywhere in the world, any
armed hostilities or terrorist activities anywhere in the world, any threat or escalation of armed hostilities or terrorist activities
anywhere in the world or any governmental or other response or reaction to any of the foregoing; or (c) any action by the Target
approved or consented to in writing by the Purchaser.
11.2
Other Definitions. In addition to the terms set forth in Section 11.1 and elsewhere in this Agreement, each of the
following terms is defined in the section set forth opposite such term:
Defined Term |
Location |
|
|
Agreement |
Preamble |
Closing |
§2.1 |
Closing Date |
§2.1 |
Code |
Recitals |
Purchaser |
Preamble |
Purchaser Financial Statements |
§5.5 |
Purchaser Shares |
§1.2 |
Effective Time |
§2.2 |
NRS |
Recitals |
SEC Reports |
§5.5 |
Stock Purchase Transaction |
Recitals |
Target |
Preamble |
Target Shares |
§1.1 |
Transaction |
Recitals |
11.3
Expenses. Except as otherwise expressly provided herein, each party hereto shall bear its own expenses with respect
to this Agreement and the transactions contemplated hereby.
11.4
Amendment. This Agreement may only be amended, modified or supplemented pursuant to a written agreement signed by
each of the parties hereto.
11.5
Non-Survival of Representation and Warranty Breach. No breach of any of the representations and warranties in this
Agreement by any party hereto, or of any representation or warranty contained in any instrument delivered pursuant to this Agreement
by any party hereto, shall survive the Effective Time. This Section 11.5 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
11.6
Press Release; Public Announcements. The parties shall not make any other public announcements in respect of this
Agreement or the transactions contemplated herein without prior consultation and written approval by the other party as to the
form and content thereof, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, any party may make
any disclosure which its counsel advises is required by Applicable Law or regulation, in which case the other party will be given
such reasonable advance notice as is practicable in the circumstances and the parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
11.7
Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder must
be in writing (including electronic format) and shall be effective (i) upon delivery in person (including by reputable express
courier service) at the address set forth below; (ii) upon delivery by facsimile (as verified by a printout showing satisfactory
transmission) at the facsimile number designated below (if sent on a business day during normal business hours where such notice
is to be received and if not, on the first business day following such delivery where such notice is to be received); (iii) by
electronic mail (as verified by a printout showing satisfactory transmission) at the electronic mail address set forth below (if
sent on a business day during normal business hours where such notice is to be received and if not, on the first business day following
such delivery where such notice is to be received); or (iv) upon three business days after mailing with the United States Postal
Service if mailed from and to a location within the continental United States by registered or certified mail, return receipt requested,
addressed to the address set forth below. Any party hereto may from time to time change its physical or electronic address or facsimile
number for notices by giving notice of such changed address or number to the other party hereto in accordance herewith.
|
If to the Target at: |
|
Knowledge Machine, Inc. |
|
|
|
3344 Hill Street |
|
|
|
San Diego, CA 92106 |
|
|
|
Attention: Valerie V. Vekkos |
|
|
|
Facsimile No.: 619 330-2200 |
|
|
|
Email Address: vvekkos@zephyrequities.com |
|
|
|
|
|
With a copy (which does not constitute notice) to: |
|
Ronald N. Vance |
|
|
|
The Law Office of Ronald N. Vance & Associates, P.C. |
|
|
|
1656 Reunion Avenue |
|
|
|
Suite 250 |
|
|
|
South Jordan, UT 84095 |
|
|
|
Facsimile No. (801) 446-8803 |
|
|
|
Email Address: ron@vancelaw.us |
|
|
|
|
|
If to the Purchaser at: |
|
Songbird Development Inc. |
|
|
|
108 Dnipropetrovska Doroha, Apt. 110 |
|
|
|
Odesa, Ukraine 65000 |
|
|
|
Attention: Igor Kaspruk, President |
|
|
|
Facsimile No.: |
|
|
|
Email Address: developmentsongbird@gmail.com |
|
|
|
|
|
With a copy (which does not constitute notice) to: |
|
Jody M. Walker, Esq. |
|
|
|
J. M. Walker & Associates |
|
|
|
7841 S. Garfield Way |
|
|
|
Centennial, CO 80122 |
|
|
|
Facsimile No.: (303) 482-2731 |
|
|
|
Email Address: jmwlkr85@gmail.com |
|
|
|
|
|
If to the Shareholder, to the address or fax number on the Signature Page. |
11.8
Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall
in no manner affect the right of such party at a later time to enforce the same. No waiver by a party of any condition or of any
breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and
no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty.
11.9
Interpretation. The headings preceding the text of Articles and Sections included in this Agreement are for convenience
only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine,
feminine or neuter gender herein shall not limit any provision of this Agreement. The use of the terms “including”
or “include” shall in all cases herein mean “including, without limitation” or “include, without
limitation,” respectively.
11.10
Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws
of the State of Nevada, without giving effect to the principles of conflicts of law thereof.
11.11
Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no assignment of any rights or obligations shall be made by any party
without the prior written consent of all the other parties hereto.
11.12
No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and, to the extent provided
herein, their respective directors, officers, employees, agents and representatives, and no provision of this Agreement shall be
deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right.
11.13
Further Assurances. Upon the reasonable request of the parties hereto, the other parties hereto shall, on and after
the Closing Date, execute and deliver such other documents, releases, assignments and other instruments as may be required to effectuate
completely the transactions contemplated by this Agreement.
11.14
Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality
or enforceability of the other provisions hereof shall remain in full force and shall not be affected thereby, and there shall
be deemed substituted for such invalid, illegal or unenforceable provision a valid, legal and enforceable provision as similar
as possible to the provision at issue.
11.15
Remedies Cumulative. The remedies provided in this Agreement shall be cumulative and shall not preclude the assertion
or exercise of any other rights or remedies available by law, in equity or otherwise.
11.16
Entire Understanding. This Agreement sets forth the entire agreement and understanding of the parties hereto and
supersede all prior agreements, arrangements and understandings between the parties.
11.17
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Facsimile transmissions of any signed original document, or transmission
of any signed facsimile document, shall constitute delivery of an executed original. At the request of any of the parties, the
parties shall confirm facsimile transmission signatures by signing and delivering an original document.
11.18
Exhibits. Each of the exhibits and schedules referenced in this Agreement is annexed hereto and is incorporated herein
by this reference and expressly made a part hereof.
[Signatures on following pages]
PURCHASER AND TARGET SIGNATURE PAGE
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed and delivered effective as of the date first above written.
|
Knowledge machine, inc. |
|
|
|
|
|
|
By: |
/s/ Vivek Dave |
|
|
|
Vivek Dave, President and CEO |
|
|
|
|
|
|
Songbird Development INc. |
|
|
|
|
|
|
By: |
/s/ Igor Kaspruk |
|
|
|
Igor Kaspruk, President |
|
SHAREHOLDER SIGNATURE PAGE
IN WITNESS WHEREOF,
the undersigned Shareholder has caused this Agreement to be executed and delivered on October 22, 2014.
/s/ Vivek Dave |
|
/s/ Taylor Caswell |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Dr. Charles Farrar |
|
/s/ Bill King |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Richard Mah |
|
/s/ Harshal Shah |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Dr. Dan Thoma |
|
/s/ Hymie Anteby |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Dr. Jan Arnett |
|
/s/ Theodore Aroney Trust |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Charles Azrak |
|
/s/ Ruben Azrak |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ David Cohen |
|
/s/ Howard Crosby |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Grace Esses |
|
/s/ Sam Fox |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/Allan Freedman |
|
/s/ Ira Goldfarb |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Greene Rovacable Trust, Dr. Robert TTEE |
|
/s/ Rick Ianieri |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Albert Iffergan |
|
/s/ Jack Kamin |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Robert Leman |
|
/s/ NormDog LLC |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Jonathan Rahn |
|
/s/ Michael Reis |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Jehuda Samara |
|
/s/Paul Sloan |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Valerie V. Vekkos Trust |
|
/s/Vitello Capital, LTD |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Gabe Zeitouni |
|
/s/Sam Esse |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Shawn Henry German |
|
/s/Marietta Dermathology Assoicate |
|
(Shareholder) |
|
(Shareholder) |
|
|
|
|
|
/s/ Mark & Seymore Rubin |
|
|
|
(Shareholder) |
|
|
|
Exhibit 2.2
ASSET
PURCHASE AGREEMENT
THIS ASSET PURCHASE
AGREEMENT (this “Agreement”) is made as of October 22, 2014, between Songbird Development Inc., a Nevada corporation
(the “Seller”) and Igor Kaspruk (the “Buyer”).
RECITALS
WHEREAS, the Seller
desires to sell to the Buyer and the Buyer desires to purchase from the Seller all of the Seller’s right, title, and interests
in and to certain real, personal, and intellectual property in exchange for certain consideration as set forth herein, and upon
the other terms and conditions set forth in this Agreement.
NOW, THEREFORE, in
consideration of the mutual agreements and covenants contained herein, the parties hereto agree as follows:
1. Assets
to Be Sold. Subject to and in accordance with the terms and conditions hereof, the Buyer hereby purchases from the Seller,
and the Seller hereby bargains, sells, assigns, transfers, and conveys to the Buyer all of the Seller’s rights, title, and
interest in and to Seller’s the assets set forth on Schedule 1 hereto (the “Assets”). The Assets
are sold “as is” without warranty, express or implied.
2. Liabilities
Transferred to Buyer. In connection with the purchase of the Assets, the Buyer assumes any and all liabilities, obligations
or indebtedness, whether due or to become due, absolute or contingent, known or unknown other than the obligations of the Seller.
3.
Purchase Price. The purchase price of the Assets is $22,300, payable by the Buyer with 1,535,284 shares of common
stock of Seller, which shares are hereby tendered to Seller for cancellation.
4. Deliveries of Seller. In connection herewith, the Seller must duly execute assignments of all Assets necessary to
vest in the Buyer good, valid, and marketable title to the Assets, or a bill of sale to evidence transfer of the Assets to the
Buyer, each as requested by the Buyer.
5. Indemnification.
a.
With respect to any Proceeding brought by someone other than the Seller or someone other than one or more Seller Indemnitees
against one or more Seller Indemnitees arising out of this Agreement or Buyer’s purchase or use of the Assets (each, a “Nonparty
Claim”), the Buyer shall indemnify those Seller Indemnitees against all Indemnifiable Losses arising out of that Proceeding,
except to the extent that Seller negligently or intentionally caused those Indemnifiable Losses.
b.
To be entitled to indemnification under section 6(a), a Seller Indemnitee subject to any Nonparty Claim must promptly
(and in any event no later than ten days after the Seller Indemnitee first knew of that Proceeding) notify the Buyer of that Nonparty
Claim and deliver to the Buyer a copy of all legal pleadings with respect to the Nonparty Claim. If the Seller Indemnitee fails
to timely notify the Buyer of a Nonparty Claim, the Buyer will be relieved of its indemnification obligations with respect to that
Nonparty Claim to the extent that the Buyer was prejudiced by that failure and the Buyer will not be required to reimburse the
Seller Indemnitee for any Litigation Expenses the Seller Indemnitee incurred during the period in which the Seller Indemnitee failed
to notify the Buyer.
c.
To assume the defense of a Nonparty Claim, the Buyer must notify the Seller Indemnitee that it is doing so. Promptly thereafter,
the Buyer shall retain to represent it in the Nonparty Claim independent legal counsel that is reasonably acceptable to the Seller
Indemnitee.
d.
A Seller Indemnitee is entitled to participate in the defense of a Nonparty Claim. A Seller Indemnitee may defend a Nonparty
Claim with counsel of its own choosing and without the Buyer participating if (i) the Buyer notifies the Seller Indemnitee
that it does not wish to defend the Nonparty Claim, (ii) by midnight at the end of the tenth day after the Seller Indemnitee
notifies the Buyer of the Nonparty Claim the Buyer fails to notify the Seller Indemnitee that it wishes to defend the Nonparty
Claim, or (iii) representation of the Buyer and the Seller Indemnitee by the same counsel would, in the opinion of that counsel,
constitute a conflict of interest.
e.
The Buyer shall pay any Litigation Expenses that a Seller Indemnitee incurs in connection with defense of the Nonparty Claim before
the Buyer assumes the defense of that Nonparty Claim, except with respect to any period during which the Seller Indemnitee
fails to timely notify the Buyer of that Nonparty Claim. The Buyer will not be liable for any Litigation Expenses that a Seller
Indemnitee incurs in connection with defense of a Nonparty Claim after the Buyer assumes the defense of that Nonparty Claim,
other than Litigation Expenses that the Seller Indemnitee incurs in employing counsel in accordance with section 6(d), which
Litigation Expenses the Buyer shall pay promptly as they are incurred.
f.
After the Buyer assumes the defense of a Nonparty Claim, the Buyer may contest, pay, or settle the Nonparty Claim at its
discretion without the consent of the Seller Indemnitee only if that settlement (i) does not entail any admission on the part
of the Seller Indemnitee that it violated any law or infringed the rights of any Person, (ii) has no effect on any other claim
against the Seller Indemnitee, (iii) provides as the claimant’s sole relief monetary damages that are paid in full by
the Buyer, and (iv) requires that the claimant release the Seller Indemnitee from all liability alleged in the Nonparty Claim.
g.
In this agreement, the following definitions apply:
“Seller
Indemnitee” means Seller, any affiliate of Seller, each Representative of any of the foregoing, and each of the heirs,
executors, successors, and assignees of any of the foregoing.
“Indemnifiable
Losses” means the aggregate of Losses and Litigation Expenses.
“Litigation
Expense” means any reasonable out-of-pocket expense incurred in defending a Proceeding or in any related investigation
or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’
fees and disbursements.
“Loss”
means any amount awarded in, or paid in settlement of, any Proceeding, including any interest but excluding any Litigation Expenses.
“Proceeding”
means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding.
“Representative”
means, with respect to an entity, any of that entity’s directors, officers, employees, agents, consultants, advisors, and
other representatives.
6. Amendment.
This Agreement may only be amended, modified or supplemented pursuant to a written agreement signed by each of the parties hereto.
7. Waivers.
The failure of a party hereto at any time or times to require performance of any provision hereof will in no manner affect the
right of such party at a later time to enforce the same. No waiver by a party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement will be effective unless in writing, and no waiver in any one or more instances
will be deemed to be a further or continuing waiver of any such condition or breach in other instances or a waiver of any other
condition or breach of any other term, covenant, representation or warranty.
8. Governing Law and Venue. This Agreement will be governed by and construed and enforced in accordance with the internal
laws of the State of Nevada, without giving effect to the principles of conflicts of law thereof. Any legal action must also be
brought in the state of Nevada.
9. Assignment.
This Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns;
provided, however, that no assignment of any rights or obligations shall be made by any party without the prior
written consent of all the other parties hereto.
10. No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and, to the extent provided
herein, their respective directors, officers, employees, agents and representatives, and no provision of this Agreement will be
deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right.
11. Further Assurances. Upon the reasonable request of the parties hereto, the other parties hereto shall, on and after
execution of this Agreement, execute and deliver such other documents, releases, assignments and other instruments as may be required
to effectuate completely the transactions contemplated by this Agreement.
12. Severability. If any provision of this Agreement will be held invalid, illegal or unenforceable, the validity, legality
or enforceability of the other provisions hereof will remain in full force and will not be affected thereby, and there will be
deemed substituted for such invalid, illegal or unenforceable provision a valid, legal and enforceable provision as similar as
possible to the provision at issue.
13. Remedies Cumulative. The remedies provided in this Agreement are cumulative and will not preclude the assertion or
exercise of any other rights or remedies available by law, in equity or otherwise.
14. Entire Understanding. This Agreement sets forth the entire agreement and understanding of the parties hereto and
supersede all prior agreements, arrangements and understandings between the parties.
15. Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of
which together constitute one and the same instrument. Facsimile transmissions of any signed original document, or transmission
of any signed facsimile document, will constitute delivery of an executed original. At the request of any of the parties, the parties
shall confirm facsimile transmission signatures by signing and delivering an original document.
16. Exhibits and Schedules. Each of the exhibits and schedules referenced in this Agreement is annexed hereto and is
incorporated herein by this reference and expressly made a part hereof.
SIGNATURE PAGE
IN WITNESS WHEREOF,
the parties hereto have caused this Agreement to be executed and delivered effective as of the date first above written.
Seller: |
Songbird Development Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Igor Kaspruk |
|
|
|
Igor Kaspruk, President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BUYER: |
By: |
/s/ Igor Ksaspruk |
|
|
|
Igor Kaspruk, Individually |
|
Schedule 1
[The Assets]
1. Office in
Odessa, Ukraine
2. Delivery Truck
Exhibit 3.1
ARTICLES OF INCORPORATION
OF
SONGBIRD DEVELOPMENT INC.
By approval of the Board
of Directors of the Company by Consent dated Dec. 27, 2012 and by approval of the Shareholders of the Company by Consent
dated Dec 27, 2012, do hereby Approve these Articles of Incorporation of SONGBIRD DEVELOPMENT INC.
ARTICLE I
NAME
The name of the Corporation
is: KNOWLEDGE MACHINE INTERNATIONAL, INC.
ARTICLE II
PERIOD OF DURATION
This
Corporation shall exist in perpetuity, from and after the date of filing Articles of Incorporation with the Secretary of State
of the State of Nevada unless dissolved according to law.
ARTICLE III
CAPITAL STRUCTURE
Section
1. Authorized Capital. The Corporation is authorized to issue two classes of stock to be designated, respectively, Common
Stock ("Common Stock") and Preferred Stock ("Preferred Stock"). The total number of shares of Common Stock
that the Corporation shall have authority to issue is Seventy Million (70,000,000). The total number of shares of Preferred Stock
the Corporation shall have authority to issue is Five Million (5,000,000). The Common Stock shall have a par value of $0.001 and
the Preferred Stock shall have a par value of $0.001.
1. Effective
the close of business on November 10, 2014, the outstanding shares of Common Stock of the Company shall be forward split at the
rate of one share for each ten shares outstanding with fractional shares rounded up to the nearest whole share.
Section
2. Common Stock. The Common Stock of the Corporation shall be non-assessable and shall have the following powers, rights,
qualifications, limitations and restrictions.
1. The
holders of the Common Stock shall be entitled to one vote for each share of Common Stock held by them of record at the time for
determining the holders thereof entitled to vote.
2. After
the requirements with respect to the preferential dividends of Preferred Stock, if any, shall have been met and after this Corporation
shall comply with the requirements, if any, with respect to the setting aside of funds as sinking funds or redemption or purchase
accounts and subject further to any other conditions which may be affixed in accordance with the provisions hereof, then but not
otherwise, the holders of Common Stock shall be entitled to receive such dividends, if any, as may be declared from time to time
by the Board of Directors; and
3. After
distribution in full of the preferential amount, if any, to be distributed to the holders of Preferred Stock in the event of a
voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of this Corporation, the holders
of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever
kind available for distribution to stock holders, ratably in proportion to the number of shares of Common Stock held by each.
Section
3. Preferred Stock. The Corporation, by resolution of its Board of Directors, may divide and issue the Preferred Stock
in series. Preferred Stock of each series when issued shall be designated to distinguish them from the shares of all other series.
The Board of Directors is hereby expressly vested with the authority to divide the class of Preferred Stock into series and to
fix and determine the relative rights and preferences of the shares of any such series so established to the full extent permitted
by these Articles of Incorporation and the Nevada Revised Statutes in respect to the following:
1. | | The number of shares to constitute such series, and the distinctive designations thereof; |
(a) | | The rate and preference of dividends, if any, the time of payment of dividends, whether
dividends are cumulative and the date from which any dividend shall accrue; |
(b) | | Whether shares may be redeemed and, if so, the redemption price and the terms and
conditions of redemption; |
(c) | | The amount payable upon shares in event of involuntary liquidation; |
(d) | | The amount payable upon shares in event of voluntary liquidation; |
(e) | | Sinking fund or other provisions, if any, for the redemption or purchase of shares; |
(f) | | The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of conversion; |
(g) | | Voting powers, if any; and |
(h) | | Any other relative rights and preferences of shares
of such series, including, without limitation, any restriction on an increase in the number of shares of any series theretofore
authorized and any limitation or restriction of rights or powers to which shares of any future series shall be subject. |
Section
4. Assessment and Consideration. The capital stock, after the amount of the subscription price has been paid in, shall
not be subject to assessment to pay the debts of the Corporation.
Section
5. Issuance of Additional Stock. Any stock of the Corporation may be issued for money, property, services rendered, labor
done, cash advances for the Corporation, or for any other assets of value in accordance with the action of the Board of Directors,
whose judgment as to value received in return therefore shall be conclusive and, upon the receipt of said consideration, when
issued shall be fully paid and nonassessable shares.
ARTICLE IV
PURPOSES AND POWERS
The purposes and powers for
which the Corporation is organized are as follows:
(a) To
engage in all lawful business for which corporations may be incorporated pursuant to the Nevada
(b) To
have, enjoy and exercise all of the rights, powers and privileges conferred upon corporations incorporated pursuant to Nevada law,
whether now or hereafter in effect and whether or not herein specifically mentioned.
(c) To
have all of the rights, privileges and powers now or hereinafter conferred upon corporations by the Nevada Revised Statutes.
The foregoing
enumeration of purposes and powers shall not limit or restrict in any manner the transaction of other business, the pursuit of
other purposes, or the exercise of other and further rights and powers that may now or hereafter be permitted or provided by law.
ARTICLE V
QUORUM FOR SHAREHOLDERS' MEETINGS
Unless
otherwise provided in the bylaws, fifty one percent (51%) of the outstanding shares shall constitute a quorum at any meeting of
shareholders.
ARTICLE VI
BOARD OF DIRECTORS
The
corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed
under the direction of a Board of Directors. The number of directors shall be fixed and may be altered from time to time as may
be provided in the Bylaws. In case of any increase in the number of Directors, the additional directors may be elected by the Directors
or by the Stockholders at an annual or special meeting as shall be provided in the bylaws.
ARTICLE VII
NON CUMULATIVE VOTING
At all
elections for Directors cumulative voting shall not be allowed. At each election for Directors every shareholder entitled to vote
at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as
there are Directors to be elected and for whose election he has a right to vote. A shareholder may not cumulate his votes on the
same principal among any number of candidates.
ARTICLE VIII
PREEMPTIVE RIGHTS
No holder
of any shares of the Corporation, whether now or hereafter authorized, shall have any preemptive or preferential right, to purchase,
subscribe for or otherwise acquire any new or additional shares of stock of the corporation of any class, including shares or securities
held in the treasury of the Corporation, or any options or warrants to purchase, subscribe for or otherwise acquire any such new
or additional shares, or any shares, bond, notes, debentures or other securities convertible into or carrying options or warrants
to purchase, subscribe for or otherwise acquire any such new or additional shares.
ARTICLE IX
PROVISIONS FOR REGULATION
OF THE INTERNAL CORPORATE AFFAIRS
The following
provisions are inserted for the management of the business and for the regulation of the internal affairs of the Corporation, and
the same are in furtherance of and not in limitation or exclusion of the powers conferred by law.
Section
1. Bylaws. The Board of Directors shall have the power to adopt, alter, amend or repeal, from time to time, such
Bylaws as it deems proper for the management of the affairs of the Corporation, according to these Articles and the laws in such
cases made and provided.
Section
2. Executive Committee: The Bylaws may provide for designation by the Board of Directors of an Executive Committee and
one or more other committees, the personnel and authority of which and the other provisions relating to which shall be as may
be set forth in the Bylaws.
Section
3: Place of Meeting. Both Stockholders' and Directors' meetings may be held either within or without the State of
Nevada, as may be provided in the bylaws.
Section
4. Compensation to Directors. The Board of Directors is authorized to make provisions for reasonable compensation to
its members for their services as Directors. Any Director of the Corporation may also serve the Corporation in any other capacity
and receive compensation therefore in any form.
Section
5. Conflicts of Interest. No transaction of the Corporation with any other person, firm or corporation, or in which
this Corporation is interested, shall be affected or invalidated solely by: (a) the fact that any one or more of the Directors
or Officers of this Corporation is interested in or is a director or officer of another corporation; or (b) the fact that any
Director or Officer, individually or jointly with others, may be a party to or may be interested in any such contract or transaction.
Section
6. Registered owner of Stock. The Corporation shall be entitled to treat the registered holder of any shares of the
Corporation as the owner thereof for all purposes, including all rights deriving from such shares, on the part of any other person,
including, but not limited to, a purchaser, assignee or transferee of such shares or rights deriving from such shares, unless
and until such purchaser, assigns, transferee or other person becomes the registered holder of such shares, whether or not the
Corporation shall have either actual or constructive notice of the interest of such purchaser, assignee, transferee or other person.
The purchaser, assignee or transferee of any of the shares of the Corporation shall not be entitled to:
(a) receive notice of the
meetings of the Shareholders; (b) vote at such meetings; (c) examine a list of the Shareholders; (d) be paid dividends or other
sums payable to Shareholders, or (e) own, enjoy or exercise any other property or rights deriving from such shares against the
Corporation, until such purchaser, assigns or transferee has become the registered holder of such shares.
Section
7. Conduct of Business. The Corporation may conduct part or all of its business, not only in the State of Nevada,
but also in every other state of the United States and the District of Columbia, and in any territory, district and possession
of the United States, and in any foreign country, and the Corporation may qualify to do business in any of such locations and
appoint an agent for service of process therein. The Corporation may hold, purchase, mortgage, lease and convey real and personal
property in any of such locations. Part or all of the business of the Corporation may be carried on beyond the limits of the State
of Nevada, and the Corporation may have one or more offices out of the State of Nevada.
Section
8. Action of the Shareholders. To the fullest extent now or hereafter permitted by the Nevada Revised Statutes, the
vote or consent or a majority of the issued and outstanding shares of the Corporation entitled to vote on such matter shall be
sufficient to approve any matter requiring shareholder action, including, but not limited to, the right from time to time, to
amend, alter or repeal, or add any provisions to, the Corporation's Articles of Incorporation. Shareholders holding shares having
not less than the minimum number of votes that would be necessary to authorize or take at an action at any meeting at which the
requisite number of shares entitled to vote thereon were present and voted may consent, in lieu of a meeting, to such action in
writing in accordance with the procedure of the Nevada Revised Statutes, as then currently in place from time to time.
Section
9. Quorum For Voting. A quorum of Shareholders for any matter to come before any meeting of Shareholders of the Corporation
shall consist of one-third of the issued and outstanding shares entitled to vote on the matter, except where a greater number is
specifically required by the provisions of the Nevada Revised Statutes, as then currently in place from time to time.
Section
10. Restrictions on Stock. The Directors shall have the right, from time to time, to impose restrictions or to enter
into agreements on behalf of the Corporation imposing restrictions on the transfer of all or a portion of the Corporation's shares,
provided that no restrictions shall be imposed on the transfer of shares outstanding at the time the restrictions are adopted
unless the holder of such shares consents to the restrictions.
ARTICLE X
INDEMNIFICATION OF DIRECTORS
A
director of the Corporation shall not be personally liable to the Corporation or to its shareholders for damages for breach of
fiduciary duty as a director of the Corporation or to its shareholders for damages otherwise existing for (i) any breach of the
director's duty of loyalty to the Corporation or to its shareholders;
(ii)
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law; (iii) acts specified
in the Nevada Revised Statutes; or (iv) any transaction from which the director directly or indirectly derived any improper personal
benefit. Ifthe Nevada Revised Statutes is hereafter amended to eliminate or limit further the liability of a director, then, in
addition to the elimination and limitation of liability provided by the foregoing, the liability of each director shall be eliminated
or limited to the fullest extent permitted under the provisions of the Nevada Revised Statutes as so amended. Any repeal or modification
of the indemnification provided in these Articles shall not adversely affect any right or protection of a director of the Corporation
under these Articles, as in effect immediately prior to such repeal or modification, with respect to any liability that would have
accrued, but for this limitation of liability, prior to such repeal or modification.
The Corporation
shall indemnify, to the fullest extent permitted by applicable law in effect from time to time, any person, and the estate and
personal representative of any such person, against all liability and expense (including attorneys' fees and costs of litigation)
incurred by reason of the fact that he is or was a director or officer of the Corporation or, while serving as a director or officer
of the Corporation, he is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee,
fiduciary, or agent of, or in any similar managerial or fiduciary position of, another domestic or foreign corporation or other
individual or entity or of an employee benefit plan.
The Corporation
shall also indemnify any person who is serving or has served the Corporation as director, officer, employee, fiduciary, or agent,
and that person's estate and personal representative, to the extent and in the manner provided in any bylaw, resolution of the
shareholders or directors, contract, or otherwise, so long as such provision is legally permissible.
ARTICLE XI
INTERESTED CONTRACTS
No
contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and
any other corporation, firm association, or entity in which one or more of its directors are directors or officers or are
financially interested, shall be void or voidable solely for this reason, or solely because such directors are present at the
meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such contract or transactions
or solely because their votes are counted for such purpose if (i) the material facts of such relationship or interest and as
to the contract or transaction are disclosed or known to the Board of Directors or committee, and the Board of Directors or
the committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even through the disinterested directors be less than a quorum; or (ii) the material facts of such
relationship or interest and as to the contract or transaction are disclosed or known to the shareholders entitled to vote,
and the contract or transaction is specifically approved in good faith by the vote of the shareholders; or (iii) the contract
or transaction is fair and reasonable to the Corporation as of the time it is authorized, approved or ratified, by the Board
of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee thereof which authorizes, approves, or ratifies
such contract or transaction.
ARTICLE XII
DIVIDENDS
Dividends
in cash, property or shares of the Corporation may be paid upon the stock, as and when declared by the Board of Directors, out
of this Corporation, or securities convertible into shares of capital stock or carrying capital purchase warrants or privileges.
ARTICLE XIII
OFFICES AND AGENT
The address
of the Corporation's registered office shall be named by the Board of Directors and can be changed at the will of the Board of
Directors.
The Registered
Agent for the Corporation for the State of Nevada shall be named by the Board of Directors and can be changed at the will of the
Board of Directors. Both the Registered Office and the Registered Agent shall be filed with Secretary of State of Nevada with the
appropriate filings
ARTICLE XIV
RESERVATION
The
Corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation, in
the manner now or thereafter prescribed by statute, and all rights conferred upon shareholders herein are granted subject to this
reservation.
ARTICLE XV
EFFECTIVE DATE AND TIME
These Articles
of Incorporation shall become effective upon the date so listed below and upon the signing of the Incorporator and Directors.
ARTICLE XVI
OFFICES AND AGENT
Section 1. Initial Principal
Office.
Principal
Office. The address of the Corporation's initial principal office is: 108 dnipropertrovska doroha street, apt 110, Odesa,Ukraine
65000
Section 2. Registered Agent.
The name and address of the Corporation's
registered agent is:
Nevada Business Services
1805 N. Carson Street Suite
X
Carson
City, NV 89701
ARTICLE XVII
INITIAL BOARD OF DIRECTORS
The
initial board of directors of the Corporation shall consist of not less than 1 and
not more than 9 members. The name of the initial Directors is:
NAME: IGOR KASPRUK
ARTICLE XVIII
INCORPORATOR
The name and address of the incorporator
is: IGOR KASPRUK
Exhibit 10.1
General
Release.
For
and in consideration of US$14,200 paid by Songbird Development Inc., a Nevada corporation (the “Company”),
the undersigned, individually and in his capacity as a former officer, director, shareholder, creditor, or employee of or consultant
to the Seller, on behalf of himself, or anyone claiming through him, irrevocably and unconditionally releases, acquits, and forever
discharges the Company, its parent corporation, subsidiaries, divisions, predecessors, successors, affiliates, and assigns, as
well as their past and present officers, directors, employees, shareholders, trustees, joint venturers, partners, and anyone claiming
through them (collectively referred to as “Releasees”), in their individual and/or corporate capacities, from
any and all claims, liabilities, promises, actions, damages, debts, and the like, known or unknown, which the undersigned ever
had against any of the Releasees arising out of or relating to the undersigned’s employment the Company, service as an officer
or director of the Company, creditor of the Company, as a shareholder of the Company, or otherwise, and hereby covenants not to
assert such claims against any Releasee through a lawsuit, an administrative proceeding or otherwise.
Prior to executing this
General Release, the undersigned has consulted with, or has been advised by the Company to consult with, legal counsel.
In
witness whereof, the undersigned has executed this General Release of his own free will, this 22th day of October
2014.
|
/s/ Igor Kaspruk |
|
Igor Kaspruk |
Exhibit 10.2
Stock
Purchase Agreement
THIS STOCK PURCHASE AGREEMENT (this “Agreement”),
dated as of October 22, 2014, is entered into by and among Knowledge Machine, Inc., a Nevada corporation (“Knowledge Machine”),
Igor Kaspruk (the “Seller”), and Songbird Development Inc., a Nevada corporation (the “Company”).
RECITALS
WHEREAS, the Seller owns 4,000,000 of the
issued and outstanding shares of capital stock of the Company (the “Shares”);
WHEREAS, Knowledge Machine desires to acquire
some of the Shares of capital stock of the Company and the Seller desires to sell the same, on the terms and conditions contained
herein;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and agreements hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:
ARTICLE
I.
SALE AND PURCHASE OF SHARES
1.1 Purchase and Sale of Company Shares. Subject to and upon the terms and conditions hereinafter set forth, at the Closing,
and in reliance upon the representations and warranties contained in this Agreement or made pursuant hereto, the Seller hereby
agrees to sell, assign, transfer, and deliver to Knowledge Machine, and Knowledge Machine hereby agrees to purchase from the Seller,
2,464,716 of the Shares (the “Acquired Shares”) free and clear of all Encumbrances for the Purchase Price (the
“Transaction”).
1.2 Cash
Purchase Price. In consideration of the aforesaid sale, assignment, transfer and delivery of the Acquired Shares, Knowledge
Machine shall, at the Closing, pay or cause to be paid to the Seller an amount, in cash, equal to Thirty-five Thousand Eight Hundred
Dollars ($35,800) (the “Purchase Price”). All payments of cash must be made in immediately available funds
by wire transfer to an account or accounts specified by the Seller at least two (2) Business Days prior to the date such payments
are to be made.
1.3 Closing Date. Except as otherwise provided below, the closing of the Transaction contemplated by this Agreement (the
“Closing”) will take place at The Law Offices of Ronald N. Vance & Associates, Attorneys at Law,
1656 Reunion Avenue, Suite 250, South Jordan, Utah, at 10:00 a.m., mountain daylight time, on October 20, 2014, or as soon as practicable
after the satisfaction or waiver of the conditions set forth in this Agreement, or such other date, time, and place as each of
the parties hereto may otherwise agree in writing (the “Closing Date”). If a party hereto is not in attendance
at the Closing, Closing may be held by conference call and delivery of the Closing documents may be accomplished by nationally
recognized overnight delivery services or as otherwise as determined by the parties hereto. If the Closing is extended one or more
times by mutual consent of the parties to this Agreement, the Trigger Date, as defined in Section 1(a) of the Escrow Agreement
dated September 29, 2014, among the Seller, the Buyer, and the escrow agents designated therein (the “Escrow Agreement”),
shall automatically be extended to the last date of any new Closing Date. The end of the Closing is considered the “Effective
Time” and the date that the Closing is accomplished is the “Effective Date.”
1.4 Seller
Representations. In connection with the sale of the Acquired Shares, the Seller represents and warrants to Knowledge Machine
as follows:
(a)
Owner of Acquired Shares. The Seller is the record and beneficial owner and holder of the Acquired Shares as of the
date hereof and will continue to own the Acquired Shares until the delivery thereof to Knowledge Machine on the Closing Date.
(b)
Affiliate Status. Seller is an “affiliate” of the Company as defined in Rule 144 promulgated by the SEC
under the Securities Act.
(c)
Acquired Shares Free and Clear of Encumbrances. All of the Acquired Shares are or will be on the Closing Date owned
free and clear of all liens, encumbrances, charges and assessments of every nature and subject to no restrictions with respect
to transferability.
(d)
Disposition Power and Authority. Seller currently has, and will have at Closing, full power and authority to dispose,
assign, and transfer the Acquired Shares in accordance with the terms of this Agreement.
(e)
Voting Power. Seller currently has, and will have at Closing, full power and authority to vote the Acquired Shares,
without restriction of any kind.
(f)
Outstanding Commitments. Except for this Agreement, there are no outstanding options, contracts, calls, commitments,
agreements or demands of any character relating to the Acauired Shares.
(g)
No Third Party Interests. No other person has or will have any pecuniary interest in the Acquired Shares or any right
to the proceeds from the sale of the Acquired Shares.
1.5 Purchaser
Representations. In connection with the purchase of the Acquired Shares, Knowledge Machine represents and warrants to the
Company as follows:
(a)
Restricted Securities. Knowledge Machine understands that the Acquired Shares have not been registered pursuant to
the Securities Act, or any state securities act, and thus are “restricted securities” as defined in Rule 144 promulgated
by the SEC.
(b)
Investment Purpose. Knowledge Machine acknowledges that the Acquired Shares are being purchased for its own account,
for investment, and not with the present view towards the distribution, assignment, or resale to others or fractionalization in
whole or in part.
(c)
Limitations on Resale; Restrictive Legend. Knowledge Machine acknowledges that it will not sell, assign, hypothecate,
or otherwise transfer any rights to, or any interest in, the Acquired Shares except (i) pursuant to an effective registration statement
under the Securities Act, or (ii) in any other transaction which, in the opinion of counsel acceptable to the Company, is exempt
from registration under the Securities Act, or the rules and regulations of the SEC thereunder. Knowledge Machine also acknowledges
that an appropriate legend will be placed upon each of the certificates representing the Acquired Shares stating that the Acquired
Shares have not been registered under the Securities Act and setting forth or referring to the restrictions on transferability
and sale of the Acquired Shares.
(d)
Information. The undersigned representative of Knowledge Machine has been furnished with (i) all requested materials
relating to the business, finances, and operations of the Company; (ii) information deemed material to making an informed investment
decision; and (iii) additional requested information necessary to verify the accuracy of any documents furnished to the undersigned
by the Company. Such person has had access to all of the SEC Reports. Such person has been afforded the opportunity to ask questions
of the Company and its management and to receive answers concerning the terms and conditions of the stock issuance.
(e)
Knowledge and Experience in Business and Financial Matters. The undersigned representative of Knowledge Machine has
such knowledge and experience in business and financial matters that he is capable of evaluating the risks of the prospective investment,
and that the financial capacity of Knowledge Machine is of such proportion that the total cost of the Acquired Shares would not
be material when compared with its total financial capacity.
1.6 Transfer
of Acquired Shares. Upon completion of the Closing, the Company shall promptly cause its transfer agent to transfer the Acquired
Shares to Knowledge Machine.
ARTICLE
II.
REPRESENTATIONS AND WARRANTIES OF SELLER AND THE COMPANY
The Seller and the
Company represent and warrant to Knowledge Machine that all of the statements contained in this Article are true as of the date
of this Agreement (or, if made as of a specified date, as of such date) except as otherwise provided in this Agreement.
2.1 Due Incorporation. The Company is a corporation duly organized, validly existing, and in good standing under the
laws of the State of Nevada, with all requisite power and authority to own, lease and operate its properties and to carry on its
business as it is now being owned, leased, operated, and conducted. The Company does not have any wholly or partially owned subsidiaries
and does not own any economic, voting or management interests in any other Person. Copies of the certificate of incorporation,
bylaws, certificate of organization, and/or operating agreement of the Company, as the case may be (the “Organizational
Documents”) that have been made available to Knowledge Machine are true, complete and accurate in all respects. The Company
minutes and Company records that have been made available to Knowledge Machine are true, complete, and accurate in all mutual respects.
The capital stock register and transfer records of the Company that have been made available to Knowledge Machine are true, complete
and accurate in all respects.
2.2 Due Authorization. The Seller and the Company have full capacity, power, and authority to enter into this Agreement
and to consummate the Transaction contemplated hereby. The execution, delivery, and performance by the Seller and the Company of
this Agreement have been duly and validly approved and no other actions or proceedings are necessary to authorize this Agreement
and the Transaction contemplated hereby. The Seller and the Company have both duly and validly executed and delivered this Agreement.
This Agreement constitutes the legal, valid, and binding obligation of the Seller and the Company, enforceable in accordance with
its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or other laws from time to time in effect which affect creditors’ rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
2.3 Consents; Non-Contravention. No Permit or filing or registration with, any Governmental Authority or any other Person
not a party to this Agreement, is necessary in connection with the execution, delivery, and performance by the Seller or the Company
of this Agreement or the consummation of the Transactions contemplated hereby, or for the lawful continued operation by the Company
following the Effective Time of the respective businesses currently conducted by the Company. The execution, delivery, and performance
by the Seller and the Company of this Agreement will not (i) violate any Law; (ii) violate or conflict with, result in a breach
or termination of, or constitute a default (or a circumstance which, with or without notice or lapse of time or both, would constitute
a default) under any of the Seller and the Company’s material Contracts; (iii) give any third party any additional right
(including a termination right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes
not yet due and payable) upon any of the assets or properties of the Seller and the Company under any Contract to which the Seller
or the Company a party or by which the Seller or the Company or any of their respective assets or properties are bound; (iv) permit
the acceleration of the maturity of any indebtedness of the Seller and the Company or indebtedness secured by the Seller and the
Company’s assets or properties; (v) violate or conflict with any provision of the articles of incorporation or bylaws of
the Company; or (vi) result in the activation of any anti-dilution rights or a reset or re-pricing of any debt or security instrument
of any creditor or equity holder of the Company except as provided for in this Agreement.
2.4 Capitalization.
(a)
The authorized capital stock of the Company consists of 70,000,000 shares of the Company common stock (“Company
Common Stock”) and 5,000,000 shares of the Company preferred stock. On the date hereof, there are issued and outstanding
5,000,000 shares of the Company Common Stock and no shares of preferred stock. All of the issued and outstanding shares
of the Company Common Stock are validly issued, fully paid, and non-assessable and the issuance thereof was not subject to preemptive
rights or was issued in compliance therewith.
(b)
The Company represents as follows: (i) no shares of the Company’s capital stock are subject to preemptive rights or
any other similar rights or any Liens suffered or permitted by the Company; (ii) there are no outstanding debt securities; (iii)
there are no outstanding shares of capital stock, options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company, or Contracts
by which the Company is or may become bound to issue additional shares of capital stock of the Company or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into,
any shares of capital stock of the Company; (iv) there are no agreements or arrangements under which the Company is obligated to
register the sale of any of its securities under the Securities Act; (v) there are no outstanding securities of the Company which
contain any redemption or similar provisions, and there are no Contracts by which the Company is or may become bound to redeem
a security of the Company; (vi) there are no securities or instruments containing anti-dilution or similar provisions that will
be triggered by the issuance of the shares as described in this Agreement; (vii) the Company does not have any stock appreciation
rights agreements or any similar agreement; and (viii) there is no dispute as to the class of any shares of the Company’s
capital stock.
(c)
To the Knowledge of the Seller and the Company, (i) neither Seller nor the Company has any control over the other shareholders
of the Company or the shares of Company Common Stock held by these parties; (ii) each such shareholder purchased his, her, or its
shares of Company Common Stock with his, her, or its individual funds without contribution from any outside party; (iii) such shares
were acquired by these shareholders without agreement or understanding as to voting or disposition of the shares; (iv) no other
party as any right or interest in or to such shares; (v) no other person has or will have any right to any proceeds from the sale
of these shares; and (vi) no other shareholder of the Company is an affiliate of the Company or the Seller as such term is defined
in Rule 144 promulgated by the SEC under the Securities Act.
2.5 No
Material Liabilities. Except as set forth in Schedule 2.5 the Company has no material debts, liabilities or obligations
of any nature.
2.6
Contracts. Schedule 2.6 sets forth each material Contract (including insurance Contracts) of the Company.
The Company has delivered to Knowledge Machine a correct and complete copy of each material Contract set forth in Schedule 2.6.
Except as set forth in Schedule 2.6, with respect to each such Contract: (i) the Contract is legal, valid, binding, enforceable,
and in full force and effect; (ii) the Contract will continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the Transaction; (iii) no party is in breach of default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or permit termination, modification, or acceleration, under
the Contract; and (iv) no party has repudiated any provision of the Contract.
2.7
SEC Reports; Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents
required to be filed by it under the Securities Act and the Exchange Act since its S-1 registration statement filed on September
13, 2013 (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively
referred to herein as the “SEC Reports”) on a timely basis or has received a valid extension of such time of
filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC
Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and
none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the SEC Reports (the “Company Financial Statements”)
comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto
as in effect at the time of filing. Such financial statements have been prepared in accordance with GAAP (except (i) as may be
otherwise indicated in the Company Financial Statements or the notes thereto, or (ii) in the case of unaudited interim statements,
to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects
the financial position of the Company as of and for the dates thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments.
2.8
Material Changes; Undisclosed Events, Liabilities or Developments. Since the period covered by the Company Financial
Statements, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has
had or that could reasonably be expected, individually or in the aggregate, to result in or cause a Company Material Adverse Effect
or would cause the Company to become a shell company as defined in Rule 405 promulgated by the SEC under the Securities Act, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other than trade payables and accrued expenses incurred
in the ordinary course of business consistent with past practice, (iii) the Company has not altered its method of accounting, (iv)
the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed
or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate. Except for the transactions contemplated by this Agreement, no event, liability, fact, circumstance,
occurrence or development has occurred or exists or is reasonably expected to occur or exist with respect to the Company that would
result in or cause a Company Material Adverse Effect. The Company has not taken any steps, and does not currently expect to take
any steps, to seek protection pursuant to any bankruptcy or similar law nor does the Company have any Knowledge or reason to believe
that its creditors intend to initiate involuntary bankruptcy or similar proceedings against it or the Seller.
2.9
Litigation. There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the Knowledge of the Seller or the Company, threatened against the Company or any of
its officers or directors in their capacity as such, or any of its properties or businesses or against the Seller, and the Seller
and the Company have no Knowledge of any facts or circumstances which may reasonably be likely to give rise to any of the foregoing.
Neither the Seller nor the Company is subject to any order, judgment, decree, injunction, stipulation or consent order of or with
any court or other Governmental Authority. Neither the Seller nor the Company has entered into any agreement to settle or compromise
any proceeding pending or threatened in writing against it which has involved any obligation for which the Company has any continuing
obligation. There are no claims, actions, suits, proceedings, or investigations pending or, to the Knowledge of the Seller or the
Company, threatened by or against the Seller or the Company with respect to this Agreement or in connection with the Transaction
contemplated hereby, and the Seller and the Company have no reason to believe there is a valid basis for any such claim, action,
suit, proceeding, or investigation.
2.10
Full Disclosure. No representation or warranty by the Seller or the Company contained in this Agreement contains
any untrue statement of material fact or omits to state a material fact necessary, in light of the circumstances under which it
was made, to make any of the representations and warranties therein not misleading.
2.11
Financial Statements; Undisclosed Liabilities; Promotions and Allowances; Inventory. The Company Financial Statements
(i) have been prepared from the books and records of the Company in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and (ii) fairly present, in all material respects, the financial condition of the Company and the results
of operations and cash flow of each of the Company for the periods covered thereby. The statements of operations included in the
Company Financial Statements do not include any item of special or non-recurring income, except as specifically identified therein.
Since the date of the Company Financial Statements, the Company (i) has conducted its business in the ordinary course of business
consistent with past practice and in a commercially reasonable manner, (ii) has not incurred any liabilities, debts or obligations
(whether absolute, accrued, contingent or otherwise), except for liabilities incurred in the ordinary course of business consistent
with past practice and in a commercially reasonable manner, which such liabilities are consistent with the representations and
warranties contained in this Agreement and (iii) notwithstanding anything to the contrary in clause (i) or (ii) of this sentence,
has not incurred any liability, debt or obligation (whether absolute, accrued, contingent or otherwise) to or of any Affiliated
Person or made any Affiliate Loans. Since the date of the Company Financial Statements, no event has occurred or facts or circumstances
exist which, individually or in the aggregate, has had or is reasonably likely to result in a Company Material Adverse Effect.
2.12
Taxes. The Company has timely filed with the appropriate taxing authorities all Returns required to be filed by it
(taking into account any extension of time to file). The information on such Returns is complete and accurate. The Company has
paid, or, where payment is not yet due, has established an adequate accrual on the most recent balance sheet, in accordance with
GAAP for the payment of all Taxes (whether or not shown on any Return) due and payable. There are no liens for Taxes (other than
for Permitted Encumbrances) upon the properties or assets of any of the Company. No unpaid (or unreserved in accordance with GAAP)
and unresolved deficiencies for Taxes have been claimed, proposed or assessed, in each case in writing, by any taxing authority
or other Governmental Authority with respect to any of the Company and there are no pending or, to the Knowledge of Seller and
the Company, threatened audits, investigations, claims or assessments for or relating to any liability in respect of Taxes of or
with respect to the Company.
2.13
Real, Personal and Intellectual Property. The Company’s assets are set forth on Schedule 2.13.
(a)
Schedule 2.13 contains a complete list by address of all real property owned, leased, operated or used by the Company
(collectively, the “Real Property”), indicating the nature of the interest of the Company (the “Real
Property Interests”). No litigation, condemnation, expropriation, eminent domain or similar proceeding affecting all
or any portion of any Real Property is pending or, to the Knowledge of Seller and the Company, threatened. The Company has furnished
to Knowledge Machine true, correct, and complete copies of all documents relating to the Real Property Interests (the “Real
Property Documents”). The Company is not a party to any oral agreements with respect to any Real Property Interest and
there are no other oral agreements with respect to any Real Property Interest. No Real Property Document requires that the consent
or approval of any third party be obtained in order to consummate the transactions contemplated by this Agreement, nor do such
transactions violate any Real Property Document or cause the Company to be in default under any Real Property Document. Neither
the Company nor Seller has given or received a notice of default under any Real Property Document, nor is in default thereunder.
No option to extend, renew, surrender, terminate or purchase arising under any Real Property Document has been exercised by any
the Company nor by any other party thereto. No guaranty or other undertaking with respect to the performance of any obligation
arising under any Real Property Document has been delivered by the Company.
(b)
Except as set forth in Schedule 2.13, the Company has good and marketable title to all of the properties and assets,
real and personal, tangible and intangible, it owns or purports to own, including those reflected on its books and records and
on the most recent balance sheet (except those sold or disposed of subsequent to the date thereof in the ordinary course of business
consistent with past practice and in a commercially reasonable manner), free and clear of all Encumbrances, except for Permitted
Encumbrances. The Company has a valid and enforceable fee, leasehold, license or other interest in all of the other properties
and assets, real or personal, tangible or intangible, which are used in the operation of the business of the Company as presently
conducted, free and clear of all Encumbrances, except for Permitted Encumbrances.
(c)
All Company IP Rights are set forth in Schedule 2.13. The Company IP Rights are sufficient to conduct the business
of the Company as now conducted and as is expected to be conducted as of the Closing. To the Knowledge of the Seller and the Company,
no Person is infringing, misappropriating, or otherwise violating any Company IP Rights and the Company is not infringing, misappropriating,
or otherwise violating any IP rights of any other Person.
2.14 Compliance with Laws. The Company is not subject to or in default under any order of any court, Governmental Authority
or other agency or arbitration board or tribunal to which it is or was subject; and the Company is not in violation of any Laws
(including, but not limited to, those relating to environmental, safety, building, product safety or health standards or labor
or employment matters), except for such violations as would not, individually or in the aggregate, have a Company Material Adverse
Effect. The businesses of the Company have been conducted in material compliance with all Applicable Laws, except to the extent
failure, individually or in the aggregate, would not have a Company Material Adverse Effect.
2.15
Employees. Schedule 2.15 sets forth each full or part-time employee of the Company. The Company does not have any
unpaid wages, salaries or other commitments to employees.
2.16
Environmental Matters. The Company is, and has been, in material compliance with all Environmental Laws. There has
been no release or threatened release of any pollutant, petroleum or any fraction thereof, contaminant or toxic or hazardous material
(including toxic mold or asbestos), substance or waste (each a “Hazardous Substance”) by the Company, and to
the Knowledge of the Seller by any third party, on, upon, into or from any site currently or heretofore owned, leased or otherwise
used by the Company. There have been no Hazardous Substances generated by the Company that have been disposed of or come to rest
at any site that has been included in any published U.S. federal, state or local “superfund” site list or any other
similar list of hazardous or toxic waste sites published by any Governmental Authority in the United States.
2.17
Transactions with Affiliated Persons. The Company has not, and has not since its inception, in the ordinary course
of business consistent with past practice or otherwise, directly or indirectly, (a) purchased, leased or otherwise acquired any
property or obtained any services from, or sold, leased or otherwise disposed of any property or furnished any services to, any
Affiliated Person; (b) the Company does not owe any amount to any Affiliated Person; (c) no Affiliated Person owes any amount to
any of the Company; and (d) no part of the property or assets of any Affiliated Person is used by the Company in the conduct or
operation of its business.
2.18
Brokers and Finders. Except as set forth in Schedule 2.18, no broker, finder or investment advisor has been engaged
by Seller or by the Company in connection with the Transaction contemplated by this Agreement.
2.19
Shell Status. To the Knowledge of the Seller and the Company, the Company is not a “shell company” as
defined in Rule 405 promulgated by the SEC under the Securities Act, is not a “blank check” company subject to Rule
419 promulgated by the SEC under the Securities Act, and has never been, is not now, and will not be at Closing, subject to the
limitations set forth in Rule 144(i) promulgated by the SEC under the Securities Act.
ARTICLE
III.
REPRESENTATIONS OF THE KNOWLEDGE MACHINE
Knowledge Machine represents and warrants
to the Seller that all of the statements contained in this Article are true as of the date of this Agreement (or, if made as of
a specified date, as of such date) except as otherwise provided in this Agreement.
3.1
Due Incorporation; Foreign Qualification. Knowledge Machine is a corporation duly organized, validly existing and
in good standing under the laws of the State of Nevada, with all requisite power and authority to own, lease and operate its properties
and to carry on its businesses as they are now being owned, leased, operated, and conducted.
3.2
Due Authorization. Knowledge Machine has full power and authority to enter into this Agreement and to consummate
the Transaction contemplated hereby. The execution, delivery and performance by Knowledge Machine of this Agreement have been duly
and validly approved and authorized by the boards of directors and no other actions or proceedings on the part of Knowledge Machine
is necessary to authorize this Agreement or the transactions contemplated hereby. Knowledge Machine has duly and validly executed
and delivered this Agreement. This Agreement constitutes the legal, valid, and binding obligation of Knowledge Machine, enforceable
in accordance with its terms as to Knowledge Machine, except as such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization or other laws from time to time in effect which affect creditors’ rights
generally, and by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity
or at law).
3.3
Non-Contravention. No Permit or filing or registration with, any Governmental Authority, or any other Person not
a party to this Agreement, is necessary in connection with the execution, delivery and performance by Knowledge Machine of this
or the consummation of the Transaction contemplated hereby, or for the lawful continued operation of the respective businesses
currently conducted by Knowledge Machine following the Effective Time. There are no Contracts to which Knowledge Machine is a party
that require a novation or consent to the Merger or change of control, as the case may be, prior to the Effective Time. The execution,
delivery, and performance Knowledge Machine of this Agreement does not and will not (i) violate any Law; (ii) violate or conflict
with, result in a breach or termination of, or constitute a default (or a circumstance which, with or without notice or lapse of
time or both, would constitute a default) under any Contract; (iii) give any third party any additional right (including a termination
right) under, permit cancellation of, or result in the creation of any Lien (except for any Lien for taxes not yet due and payable)
upon any of the assets or properties of Knowledge Machine under any Contract to which Knowledge Machine is a party or by which
Knowledge Machine or any of its assets or properties are bound; (iv) permit the acceleration of the maturity of any indebtedness
of Knowledge Machine or indebtedness secured by Knowledge Machine’s assets or properties; (v) violate or conflict with any
provision of the Certificate of Incorporation or Bylaws of Knowledge Machine; or (vi) result in the activation of any anti-dilution
rights or a reset or re-pricing of any debt or security instrument of any creditor or equity holder of Knowledge Machine except
as provided for in this Agreement.
3.4
Litigation. There are no actions, suits, arbitrations, regulatory proceedings or other litigation, proceedings or
governmental investigations pending or, to the Knowledge of the Knowledge Machine, threatened against Knowledge Machine or any
of its officers or directors, in their capacities as such, control persons, or any properties or businesses of the Company or any
of its officers or directors; and, to the Knowledge of Knowledge Machine, there are no facts or circumstances which may reasonably
be likely to give rise to any of the foregoing. The Company is not subject to any order, judgment, decree, injunction, stipulation
or consent order of or with any court or other Governmental Authority; and Knowledge Machine has not entered into any agreement
to settle or compromise any proceeding pending or threatened in writing which has involved any obligation for which Knowledge Machine
has any continuing obligation. There are no claims, actions, suits, proceedings or investigations pending or, to the Knowledge
of Knowledge Machine, threatened by or against Knowledge Machine with respect to this Agreement or in connection with the transactions
contemplated hereby, and Knowledge Machine has no reason to believe there is a valid basis for any such claim, action, suit, proceeding
or investigation.
3.5
Compliance with Laws. Knowledge Machine is not subject to or in default under any order of any court, Governmental
Authority or other agency or arbitration board or tribunal to which it is or was subject; and Knowledge Machine is not in violation
of any Laws (including, but not limited to, those relating to environmental, safety, building, product safety or health standards
or labor or employment matters), except for such violations as would not, individually or in the aggregate, have a Knowledge Machine
Material Adverse Effect. The businesses of the Company have been conducted in material compliance with all Applicable Laws, except
to the extent failure, individually or in the aggregate, would not have a Knowledge Machine Material Adverse Effect.
3.6
Full Disclosure. No representation or warranty by Knowledge Machine contained in this Agreement contains any untrue
statement of material fact or omits to state a material fact necessary, in light of the circumstances under which it was made,
to make any of the representations and warranties therein not misleading.
ARTICLE
IV.
COVENANTS
4.1
Implementing Agreement. Subject to the terms and conditions hereof, each party hereto shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action required of it to consummate and make effective the Transaction
contemplated by this Agreement.
4.2
Access to Information and Facilities; Confidentiality. From and after the date of this Agreement, the Company shall
allow Knowledge Machine and its representatives access during normal business hours to all of the facilities, properties, books,
Contracts, commitments and records of the Company and shall make the officers and employees of the Company available to Knowledge
Machine and its representatives as Knowledge Machine or its representatives from time to time reasonably requests. The Company
shall furnish Knowledge Machine and its representatives with any and all information concerning Knowledge Machine and its subsidiaries,
which Knowledge Machine or its representatives reasonably request and can be obtained by the Company without unreasonable effort
or expense. With respect to the information disclosed pursuant to this Section, the parties shall maintain the confidentiality
of any material non-public information furnished by the other party.
4.3
Preservation of Business. Subject to the terms of this Agreement, from the date of this Agreement until the Closing
Date, the Company and Knowledge Machine shall operate only in the ordinary and usual course of business consistent with past practice,
and shall use reasonable commercial efforts to: (a) preserve intact the present business organization, and (b) not permit any action
or omission within its control which would cause any of the representations or warranties of the Company contained herein to become
inaccurate in any material respect.
4.4
Certain Notices. From and after the date of this Agreement until the Effective Time, each party hereto shall promptly
notify the other party hereto of: (a) the occurrence, or non-occurrence, of any event that would be likely to cause any condition
to the obligations of any party to effect the Transaction contemplated by this Agreement not to be satisfied; or (b) the failure
of the Company or Knowledge Machine, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it pursuant to this Agreement which would reasonably be expected to result in any condition to the obligations
of any party to effect the Transaction contemplated by this Agreement not to be satisfied; provided, however, that
the delivery of any notice pursuant to this Section will not cure any breach of any representation or warranty requiring disclosure
of such matter prior to the date of this Agreement or otherwise limit or affect the remedies available hereunder to the party receiving
such notice.
4.5
Consents and Approvals. The parties shall use commercially reasonable efforts to obtain all consents, approvals,
certificates, and other documents required in connection with the performance by it of this Agreement and the consummation of the
transactions contemplated hereby. The parties shall make all filings, applications, statements, and reports to all Governmental
Authorities and other Persons that are required to be made prior to the Closing Date by or on behalf of the parties pursuant to
Applicable Law or one of the parties’ material Contracts in connection with this Agreement and the transactions contemplated
hereby.
4.6
Supplemental Information. From time to time prior to the Closing, the parties, shall promptly disclose to the parties
of this Agreement, in writing, any matter hereafter arising which, if existing, occurring or known at the date of this Agreement
would have been required to be disclosed to the other parties hereto or which would render inaccurate any of the representations,
warranties or statements set forth in this Agreement.
4.7
Purchase of Knowledge Machine. Prior to or at Closing, the Company shall duly authorize the following to be effective
immediately following Closing: (i) the purchase of all of the outstanding shares of Knowledge Machine solely in return for 37,625,000
post-split shares of Company Common Stock; (ii) a ten-for-one forward stock split of the 1,000,000 shares of Company Common Stock
held by shareholders other than the Seller; (iii) an amendment to the Company’s Articles of Incorporation to change the name
of the Company to a name designated by Knowledge Machine; and (iv) the appointment of two new directors of the Company designated
by Knowledge Machine.
4.8
Spinout of Prior Business. Promptly following the acquisition of Knowledge Machine by the Company, the Company shall
sell the prior business of the Company to the Seller for $22,300 payable with 1,535,284 of the Shares, which Shares shall be cancelled
and returned to the authorized but unissued shares of the Company.
4.9
Resignation of Current Management. At Closing the Seller shall tender his resignation as an officer of the Company.
Upon completion of the purchase of Knowledge Machine and the spinout of the prior business, Seller shall resign as a director of
the Company.
4.10
Satisfaction of Liabilities. Except as provided herein, prior to Closing the Company must satisfy all outstanding
liabilities, including all material liabilities as set forth in Schedule 2.5, of the Company such that at Closing the Company will
have no material liabilities. Notwithstanding the foregoing, at Closing Knowledge Machine shall advance funds to the Company which
shall pay $14,200 to Seller as satisfaction in full of all obligations payable by the Company to the Seller. In addition, at Closing
Knowledge Machine shall pay $1,500 to the escrow agent for Seller in accordance with the terms of the Escrow Agreement.
4.11
Financial Statements and Records. Prior to Closing, Seller shall deliver to Knowledge Machine audited financial statements
for the fiscal year ended July 31, 2014, suitable for inclusion in the Company’s annual report on Form 10-K for the fiscal
year then ended. In addition, at Closing Seller shall deliver to Knowledge Machine all of the financial records of the Company,
including, but not limited to, sufficient records for the preparation of the interim financial statements for the quarter ending
October 31, 2014, suitable for inclusion in the Company’s report on Form 10-Q for the period then ending.
4.12
Form 10-K and 10-Q. Following the Closing, the Seller shall cooperate with the Company in the preparation of the
annual report of the Company on Form 10-K for the year ended July 31, 2014, and the quarterly report of the Company on Form 10-Q
for the quarter ending October 31, 2014.
4.13
Anti-Money Laundering, Anti-Corruption and Anti-Terrorism Laws. The Seller and the Company confirm that the funds
represented as payments under this Agreement will not represent proceeds of crime for the purpose of any applicable anti-money
laundering or anti-terrorist legislation, regulation or guideline and the Target is in compliance with, and has not previously
violated, the United States of America Patriot Act of 2001, as amended through the date of this Agreement, to the extent applicable
to the Target and all other applicable anti-money laundering, anti-corruption and anti-terrorism laws and regulations.
ARTICLE
V.
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SELLER
The obligations of
the Seller under this Agreement are subject to the satisfaction (or waiver by Knowledge Machine) of the following conditions precedent
on or before the Closing Date:
5.1
Representations and Warranties. Without supplementation after the date of this Agreement, the representations and
warranties of Knowledge Machine contained in this Agreement must be, with respect to those representations and warranties qualified
by any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other representations
and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect as if made as
of the Closing Date.
5.2
Compliance with Agreements and Covenants. Knowledge Machine must have performed and complied in all material respects
with all of its covenants, obligations, and agreements contained in this Agreement to be performed and complied with by it on or
prior to the Closing Date.
5.3
Actions or Proceedings. No action or proceeding by any Governmental Authority or other Person has been instituted
or threatened which: (a) is likely to have a Knowledge Machine Material Adverse Effect; or (b) could enjoin, restrain or prohibit,
or could result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE
VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF KNOWLEDGE MACHINE
The obligations of Knowledge Machine under
this Agreement are subject to the satisfaction (or waiver by the Seller) of the following conditions precedent on or before the
Closing Date:
6.1
Representations and Warranties. Without supplementation after the date of this Agreement, the representations and
warranties of the Seller and the Company contained in this Agreement must be, with respect to those representations and warranties
qualified by any materiality standard, true and correct in all respects, as of the Closing Date, and with respect to all other
representations and warranties, true and correct in all material respects, as of the Closing Date, with the same force and effect
as if made as of the Closing Date.
6.2
Compliance with Agreements and Covenants. The Seller and the Company must have performed and complied in all material
respects with all of their covenants, obligations, and agreements contained in this Agreement to be performed and complied with
by it on or prior to the Closing Date.
6.3
No Material Assets or Liabilities. At the Closing Date, except for the assets transferred to the Seller and the cancellation
of all debts owed to the Seller, the Company must have no material assets or liabilities.
6.4
Actions or Proceedings. No action or proceeding by any Governmental Authority or other Person has been instituted
or threatened which: (a) is likely to have a Company Material Adverse Effect; or (b) could enjoin, restrain or prohibit, or could
result in substantial damages in respect of, any provision of this Agreement or the consummation of the transactions contemplated
hereby.
ARTICLE
VII.
DELIVERIES AT CLOSING
7.1 Knowledge Machine Closing Deliveries. At the Closing, in addition to any other documents or agreements required under
this Agreement, Knowledge Machine shall deliver to the Company and the Seller the following:
(a)
Resolutions of the Board of Directors of Knowledge Machine duly authorizing this Agreement and the Transactions and the
sale of Knowledge Machine in compliance with Section 4.7;
(b)
The $35,800 for purchase of the Acquired Shares in compliance with Section 1.2, $14,200 for satisfaction of Company debt
in compliance with Section 4.10, and $1,500 for payment to the escrow agent in accordance with Section 4.10, which funds will be
transferred to the escrow agent for Seller for disbursal; and
(c)
All other instruments and documents that the Seller and the Company and their counsel, in the reasonable exercise of their
reasonable discretion, deem necessary: (i) to fulfill any obligation required to be fulfilled by Knowledge Machine on the Closing
Date; and (ii) to evidence satisfaction of any conditions to Closing.
7.2 The
Seller and the Company Closing Deliveries. At the Closing, or prior thereto, in addition to any other documents or agreements
required under this Agreement, the Seller and the Company must deliver to Knowledge Machine the following:
(a)
Resolutions of the Board of Directors of the Company duly authorizing this Agreement and the Transactions, and the purchase
of Knowledge Machine, forward stock split, name change and appointment of new directors in compliance with Section 4.7;
(b)
Written confirmation from Seller’s escrow agent that the funds set forth in Section 7.1(b) were disbursed in
accordance with the terms of this Agreement;
(c)
The stock certificate(s) representing the Shares duly executed by the Seller for cancellation and stock certificate(s) transferring
the Acquired Shares to Knowledge Machine, all duly endorsed for transfer;
(d)
Resignation of Seller as an officer in compliance with Section 4.9;
(e)
Proof of satisfaction of all debts of the Company in compliance with Section 4.10;
(f)
The audited financial statements of the Company in compliance with Section 4.11;
(g)
All books and records of the Company, including, but not limited to, the Company minute book, financial and accounting records,
and tax returns; and
(h)
All other instruments and documents that Knowledge Machine or its counsel, in the reasonable exercise of their reasonable
discretion, deems necessary: (i) to fulfill any obligation required to be fulfilled by the Seller and the Company on the Closing
Date; and (ii) to evidence satisfaction of any conditions to Closing.
ARTICLE
VIII.
TERMINATION
8.1 Agreement
Termination. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and the Transaction
contemplated hereby may be abandoned at any time prior to the Closing Date, only as follows:
(a)
by mutual written agreement of the parties;
(b)
by the Seller or the Company (if the Seller or the Company are not then in material breach of their obligations under this
Agreement) if: (i) a material default or breach by Knowledge Machine with respect to the due and timely performance of any of its
covenants and agreements contained herein and such default is not cured within ten (10) days; (ii) Knowledge Machine makes an amendment
or supplement to any Schedule hereto and such amendment or supplement reflects a Knowledge Machine Material Adverse Effect after
the date of this Agreement; or (iii) a Knowledge Machine Material Adverse Effect occurs after the date of this Agreement.
(c)
by Knowledge Machine (if Knowledge Machine is not then in material breach of its obligations under this Agreement) if: (i)
a material default or breach shall be made by Seller or the Company with respect to the due and timely performance of any of its
covenants and agreements contained herein and such default is not cured within ten (10) days; (ii) the Seller or the Company makes
an amendment or supplement to any schedule hereto and such amendment or supplement reflects a Company Material Adverse Effect after
the date of this Agreement; or (iii) a Company Material Adverse Effect occurs after the date of this Agreement.
(d)
by any of the parties if the Closing has not occurred by October 31, 2014.
8.2 Effect of Termination. In the event of termination of this Agreement authorized pursuant to this Article, written
notice thereof shall be given to the other parties and all obligations of the parties will terminate and, except as otherwise provided
in this Section, no party will have any right against any other party hereto for any loss, damage, expense (including out-of-pocket
expenses) or liability, including, without limitation, reasonable attorneys’ fees and disbursements arising out of the preparation
and execution of this Agreement, fulfilling in whole in part its obligations under this Agreement or otherwise incurred by a party
in any action or proceeding between such party and the other party hereto or between such party and a third party, which is determined
to have been sustained, suffered or incurred by a party and to have arisen from or in connection with an event or state of facts
which is subject to claim under this Agreement.
ARTICLE
IX.
MISCELLANEOUS
9.1 Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below:
“Affiliate
Loans” means loans made to Affiliated Persons by the Company.
“Affiliated
Person” means the Seller, any immediate family member of the Seller, or any other Person that, directly or indirectly,
alone or together with others, controls, is controlled by or is under common control with the Company, the Seller or any immediate
family member of the Seller.
“Applicable
Law” means all Laws, to the extent applicable to any Person.
“Business
Day” means any day that is not a Saturday or Sunday or a legal holiday on which banks are authorized or required by law
to be closed in New York, New York.
“Company IP
Rights” means all intellectual property rights used in the business of the Company that is owned, used or held for use
by the Company.
“Company Material
Adverse Effect” means any change or effect that is, or is reasonably likely to be, materially adverse to the business,
assets and liabilities (taken together), financial condition or operations or results of operations of the Company and its subsidiaries,
taken as a whole; provided, however, that none of the following will be deemed (either alone or in combination) to constitute
such a change or effect: (a)(i) any adverse change attributable to the announcement or pendency of the transactions contemplated
by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting the United States economy or financial
markets in general; (b) any act or threat of terrorism or war anywhere in the world, any armed hostilities or terrorist activities
anywhere in the world, any threat or escalation of armed hostilities or terrorist activities anywhere in the world or any governmental
or other response or reaction to any of the foregoing; or (c) any action by the Company or the Merger Sub approved or consented
to in writing by the Target.
“Contract”
shall mean any contract, lease, arrangement, commitment or understanding, sales order, purchase order, agreement, indenture, mortgage,
note, bond, instrument or license, whether written or verbal, which is intended or purports to be a binding and enforceable agreement.
“Encumbrance”
means any lien, pledge, mortgage, security interest, charge, restriction, adverse claim or other encumbrance of any kind or nature
whatsoever.
“Environmental
Law” means any Law that governs protection or improvement of human health or the environment.
“GAAP”
means United States generally accepted accounting principles applied on a consistent basis during the periods involved.
“Governmental
Authority” means, in addition to what is stated in Section 9.1, the following: (a) the government of the United
States: (b) the government of any foreign country; (c) the government of any state or political subdivision of the government of
the United States or the government of any foreign country; or (d) any entity, body or authority exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
“Hazardous
Substance” means without regard to amount or concentration (a) any element, compound, gas or chemical that is defined,
listed, classified or regulated as hazardous or toxic under any Environmental Law, including, without limitation, any material
or substance that is defined as a “hazardous waste,” “hazardous material,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “subject waste,” “contaminant,”
“toxic waste,” “toxic substance” or similar term under any provision of any Environmental Law; (b) petroleum,
petroleum-based or petroleum-derived products; and (c) any substance containing polychlorinated biphenyls, asbestos, lead, urea
formaldehyde or radon gas.
“Knowledge”
means, as it relates to the Company, the actual knowledge of the Seller, in each case upon reasonable inquiry; and as it relates
to Knowledge Machine, the actual knowledge of Vivek R. Dave, in each case upon reasonable inquiry.
“Knowledge
Machine Material Adverse Effect” means any change or effect that is, or is reasonably likely to be, materially adverse
to the business, assets, and liabilities (taken together), financial condition or operations or results of operations of the Knowledge
Machine and its subsidiaries, taken as a whole; provided, however, that none of the following will be deemed (either alone
or in combination) to constitute such a change or effect: (a) (i) any adverse change attributable to the announcement or pendency
of the transactions contemplated by this Agreement; or (ii) any adverse change attributable to or conditions generally affecting
the technology industry as a whole; the United States economy or financial markets in general; or any foreign economy or financial
markets in any location where Knowledge Machine has material operations or sales; (b) any act or threat of terrorism or war anywhere
in the world, any armed hostilities or terrorist activities anywhere in the world, any threat or escalation of armed hostilities
or terrorist activities anywhere in the world or any governmental or other response or reaction to any of the foregoing; or (c)
any action by Knowledge Machine approved or consented to in writing by the Company.
“Law”
means any law, statute, regulation, ordinance, rule, order, decree, judgment, consent decree, settlement agreement or governmental
requirement enacted, promulgated, entered into, agreed or imposed by any Governmental Authority.
“Lien”
means any mortgage, lien, charge, restriction, pledge, security interest, option, lease or sublease, claim, right of any third
party, easement, encroachment or encumbrance upon any of the assets or properties of any Person.
The terms “material”
and “materially” when used in this Agreement refer, with respect to a given Person, to a level of significance
that would have affected any decision of a reasonable person in that Person’s position regarding whether to enter into this
Agreement or would affect any decision of a reasonable person in that Person’s position regarding whether to consummate the
transactions contemplated by this Agreement.
“Permitted
Encumbrances” means (i) liens for Taxes not yet due and payable or which are being diligently contested in good faith
by appropriate proceedings and as to which appropriate reserves (to the extent required by GAAP) have been established in the books
and records of each of the Companies; (ii) mechanics’, materialmen’s, carriers’, warehousemen’s, landlord’s
and similar liens securing obligations not yet delinquent or which are being diligently contested in good faith by appropriate
proceedings and as to which appropriate reserves (to the extent required by GAAP) have been established in the books and records
of each of the Companies; (iii) such imperfections of title, Encumbrances and easements, restrictive covenants and rights of way
as do not and will not materially detract from or interfere with the use of the properties subject thereto or affected thereby,
or otherwise materially impair business operations involving such properties; and (iv) platting, subdivision, zoning, building
and other similar legal requirements affecting the building, structures and other improvements located on any real property whether
or not of record.
“Person” means any corporation,
proprietorship, firm, partnership, limited partnership, trust, association, individual or other entity.
“Returns”
means returns, reports, and information statements with respect to Taxes required to be filed with the IRS or any other Governmental
Authority, domestic or foreign, including consolidated, combined and unitary tax returns.
“SEC”
means the U.S. Securities and Exchange Commission.
“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Tax”
or “Taxes” means taxes, fees, levies, duties, tariffs, imposts and governmental impositions or charges of any
kind payable to any Governmental Authority in any jurisdiction, including (i) income, franchise, profits, gross receipts, ad valorem,
net worth, value added, sales, use, service, real or personal property, special assessments, capital stock, license, payroll, withholding,
employment, estimated, social security, workers’ compensation, unemployment compensation, utility, severance, production,
excise, stamp, occupation, premiums, windfall profits, transfer and gains taxes, and (ii) interest, penalties, additional taxes
and additions to tax imposed with respect thereto.
9.2
Other Definitions. In addition to the terms set forth in Section 9.2 and elsewhere in this Agreement, each of the
following terms is defined in the section set forth opposite such term:
Defined Term |
Location |
Acquired Shares |
§1.1 |
Agreement |
Preamble |
Closing |
§1.3 |
Closing Date |
§1.3 |
Company |
Preamble |
Company Common Stock |
§2.4 |
Company Financial Statements |
§4.9 |
Effective Date |
§1.3 |
Effective Time |
§1.3 |
Escrow Agreement |
§1.3 |
Hazardous Substance |
§2.1 |
Knowledge Machine |
Preamble |
Organizational Documents |
§2.1 |
Purchase Price |
§2.1 |
Real Property |
§2.13 |
Real Property Documents |
§2.13 |
Real Property Interests |
§2.13 |
SEC Reports |
§2.7 |
Shares |
Preamble |
Transaction |
§1.1 |
9.3
Expenses. Except as otherwise expressly provided herein, each party hereto shall bear its own expenses with respect
to this Agreement and the transactions contemplated hereby.
9.4
Amendment. This Agreement may only be amended, modified or supplemented pursuant to a written agreement signed by
each of the parties hereto.
9.5
Non-Survival of Representation and Warranty Breach. No breach of any of the representations and warranties in this
Agreement by any party hereto, or of any representation or warranty contained in any instrument delivered pursuant to this Agreement
by any party hereto, shall survive the Effective Time. This Section shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time.
9.6
Press Release; Public Announcements. The parties shall not make any other public announcements in respect of this
Agreement or the transactions contemplated herein without prior consultation and written approval by the other party as to the
form and content thereof, which approval shall not be unreasonably withheld. Notwithstanding the foregoing, any party may make
any disclosure which its counsel advises is required by Applicable Law or regulation, in which case the other party will be given
such reasonable advance notice as is practicable in the circumstances and the parties shall use their best efforts to cause a mutually
agreeable release or announcement to be issued.
9.7
Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder must
be in writing (including electronic format) and shall be effective (i) upon delivery in person (including by reputable express
courier service) at the address set forth below; (ii) upon delivery by facsimile (as verified by a printout showing satisfactory
transmission) at the facsimile number designated below (if sent on a business day during normal business hours where such notice
is to be received and if not, on the first business day following such delivery where such notice is to be received); (iii) by
electronic mail (as verified by a printout showing satisfactory transmission) at the electronic mail address set forth below (if
sent on a business day during normal business hours where such notice is to be received and if not, on the first business day following
such delivery where such notice is to be received); or (iv) upon three business days after mailing with the United States Postal
Service if mailed from and to a location within the continental United States by registered or certified mail, return receipt requested,
addressed to the address set forth below. Any party hereto may from time to time change its physical or electronic address or facsimile
number for notices by giving notice of such changed address or number to the other party hereto in accordance herewith.
If to Knowledge Machine at: |
Knowledge Machine, Inc. |
|
3344 Hill Street |
|
San Diego, CA 92106 |
|
Attention: Vivek R. Dave |
|
Facsimile No.: (619) 330-2200 |
|
Email Address: vivek.r.dave@nntech.com |
|
|
With a copy (which does not constitute notice) to: |
Ronald N. Vance |
|
The Law Office of Ronald N. Vance & Associates, P.C. |
|
1656 Reunion Avenue |
|
Suite 250 |
|
South Jordan, UT 84095 |
|
Facsimile No. (801) 446-8803 |
|
Email Address: ron@vancelaw.us |
|
|
If to the Seller or the Company at: |
Songbird Development, Inc.. |
|
1805 N. Carson Street, Suite X
Carson City, NV 89701 |
|
Attention: Igor Kaspruk, President |
|
Facsimile No.: |
|
Email Address: developmentsongbird@gmail.com |
|
|
With a copy (which does not constitute notice) to: |
Jody M. Walker, Esq. |
|
J. M. Walker & Associates |
|
7841 S. Garfield Way |
|
Centennial, CO 80122 |
|
Facsimile No.: (303) 482-2731 |
|
Email Address: jmwlkr85@gmail.com |
9.8
Waivers. The failure of a party hereto at any time or times to require performance of any provision hereof shall
in no manner affect the right of such party at a later time to enforce the same. No waiver by a party of any condition or of any
breach of any term, covenant, representation or warranty contained in this Agreement shall be effective unless in writing, and
no waiver in any one or more instances shall be deemed to be a further or continuing waiver of any such condition or breach in
other instances or a waiver of any other condition or breach of any other term, covenant, representation or warranty.
9.9
Interpretation. The headings preceding the text of Articles and Sections included in this Agreement are for convenience
only and shall not be deemed part of this Agreement or be given any effect in interpreting this Agreement. The use of the masculine,
feminine or neuter gender herein shall not limit any provision of this Agreement. The use of the terms “including”
or “include” shall in all cases herein mean “including, without limitation” or “include, without
limitation,” respectively.
9.10
Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the internal laws
of the State of Nevada, without giving effect to the principles of conflicts of law thereof.
9.11
Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no assignment of any rights or obligations shall be made by any party
without the prior written consent of all the other parties hereto.
9.12
No Third Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and, to the extent provided
herein, their respective directors, officers, employees, agents and representatives, and no provision of this Agreement shall be
deemed to confer upon other third parties any remedy, claim, liability, reimbursement, cause of action or other right.
9.13
Further Assurances. Upon the reasonable request of the parties hereto, the other parties hereto shall, on and after
the Closing Date, execute and deliver such other documents, releases, assignments and other instruments as may be required to effectuate
completely the transactions contemplated by this Agreement.
9.14
Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality
or enforceability of the other provisions hereof shall remain in full force and shall not be affected thereby, and there shall
be deemed substituted for such invalid, illegal or unenforceable provision a valid, legal and enforceable provision as similar
as possible to the provision at issue.
9.15
Remedies Cumulative. The remedies provided in this Agreement shall be cumulative and shall not preclude the assertion
or exercise of any other rights or remedies available by law, in equity or otherwise.
9.16
Entire Understanding. This Agreement sets forth the entire agreement and understanding of the parties hereto and
supersede all prior agreements, arrangements and understandings between the parties.
9.17
Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. Facsimile transmissions of any signed original document, or transmission
of any signed facsimile document, shall constitute delivery of an executed original. At the request of any of the parties, the
parties shall confirm facsimile transmission signatures by signing and delivering an original document.
9.18
Exhibits and Schedules. Each of the exhibits and schedules referenced in this Agreement is annexed hereto and is
incorporated herein by this reference and expressly made a part hereof.
[Signatures on following page]
IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed and delivered effective as of the date first above written.
KNOWLEDGE MACHINE: |
Knowledge Machine, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Vivek Dave |
|
|
|
Vivek Dave, President and CEO |
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPANY: |
Songbird Development Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ Igor Kaspruk |
|
|
|
Igor Kaspruk, President |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELLER: |
/s/ Igor Kaspruk |
|
|
Igor Kaspruk, Individually |
|
Exhibit 10.6
CONSULTING
AGREEMENT:
This
Consulting Agreement (the "Agreement"), dated
effective as of January 1, 2014 (the
"Effective Date"), is entered into on March
11, 2014, by
and between Knowledge Machine, Inc.,
a Nevada corporation (the "Company"),
and Northern New Hampshire
Technical Associates
LLC ("Consultant").
1. Consulting
Arrangement. The Company shall retain
Consultant, and Consultant
shall serve the Company
as a Consultant.
2. Duties.
(a)
Consultant Viii perform consulting services for the Company regarding his service as Chairman of the Science Advisory Board of
the Company and other consulting services as requested by the Board of Directors (collectively, the "Services").
(b)
Consultant agrees that he shall devote such time and attention to the Services herem1der as is required to fulfill Consultant's
obligations under this Agreement in a timely and professional manner, recognizing that the time demands may vary mont11to month.
3. Term.
The term of the Agreement
("Term") shall be for twelve
(12) months commencing on the Effective
Date. The Term shall be
automatically extended by
one additional year un1ess
Consultant or the
Company gives notice to the other,
in writing, at least
30 days prior
to January
1, 2015 or, thereafter,
1 month prior to the
expiration of this Agreement, of either party's desire
to terminate this
Agreement or modify its te1ms.
4. Compensation.
The Company shall pay
to Consultant $2,500 per month during the Term, with the first
payment due on the
date hereof,
and subsequent monthly
payments thereafter
due on the 1st day of
each month.
5.
Expenses. All travel, entertainment
and other reasonable
business expenses incident to the rendering of
Services by Consultant hereunder
will be promptly paid or
reimbursed by the Company
subject to
the submission being
in accordance with the
Company 's policies
in effect from time
to time.
6. Indemnification.
The Company shall
indemnify, hold hannless
and defend Consultant
and Vivek Dave, Ph.D.,
the managing
member of Consultant, from
and against any and all claims,
causes of action, damages,
penalties and costs which may result
from their respective
affiliation with or services
provided to or on behalf of the Company0
except where such
claims, causes of action, damages, penalties
or costs are attributable
primarily to Consultant's or Dr. Dave's
gross negligence
or willful misconduct.
7. Non-Disclosure.
Consultant will not at
any time after the date
of this Agreement
divulge, furnish, or make accessible
to anyone (other than
in the regular
course of business
of the Company) any
knowledge or information
with respect to confidential or secret processes,
inventions, discoveries,
improvements, formulas,
plans, material, devices, or ideas or
other know how,
whether patentable or
not, with respect
to any confidential or secret engineering,
development or research
work or with respect
to any other confidential
or secret
aspect of the
business of the Company.
8. Counterparts.
This Agreement may be executed
in counterparts, each of
which shall be deemed
to be one and
the same instrument
(Signature Page follows)
IN
WITNESS WHEREOF , the
parties have executed
this Agreement as of the
day and year first
above written.
|
KNOWLEDGE MACHINE, INC. |
|
|
|
|
|
/s/ Valeire V. Vekkos |
|
Name: Valerie V. Vekkos |
|
Title: President |
|
|
|
NORTHERN NEW HAMPSHIRE |
|
TECHNICAL ASSOCIATES LLC |
|
|
|
/s/ Vivek Dave |
|
Name: Vivek Dave |
|
Title: |
Exhibit 10.7
Option Agreement between Knowledge
Machine, Inc.
and Score Technologies, Inc.
Comes now the parties, Knowledge Machine,
Inc. , (“KMI”), a Nevada corporation with an address at 3344
Hill Street, San Diego, CA 92106, and Score Technologies, Inc. (“Score” or the “Company”), a Colorado
corporation with an address at 254 W. Hanley Ave., Suite A, Coeur d’Alene, Idaho, and agree as follows as of the date specified
on the last page of this agreement:
Whereas, Score has developed a computer
software App (the “SCOREISPAPP”) which is designed to maximize the bandwidth potential of a computer network;
Whereas, the SCOREISPAPP is now functional
in a demonstration version which may reside and function on an Apple Macbook or Apple MacAir or similar Apple Mac products but
is not yet developed for Windows or Android devices, but it is fully envisioned that the SCOREISAPP will extend to these devices
in the future;
Whereas, the SCOREISPAPP also needs certain
wrappers and consumer oriented coded functions so that it may be sold via various App stores, the Company website, and websites
of co-marketers of the Company;
Whereas, the SCOREISPAPP uses certain proprietary
data packet channeling techniques which are at the core of the functionality of the product and are the primary reason users experience
improvements in the functioning of their computer network while using the SCOREISPAPP;
Whereas, such proprietary data and functions
require additional protection to ensure that the consumer marketed model cannot be reverse engineered or proprietary techniques
compromised to outside parties;
Whereas, the remaining software coding
work to be done is estimated at about three months and funding of approximately $250,000;
Therefore, the Company estimates that given
sufficient funding the deliverable consumer product which could be marketed to the general public would be available by approximately
the end of September, 2014.
Whereas, KMI has expressed interest in
investing in the Company;
Whereas, KMI has also expressed interest
in marketing the SCOREISPAPP in the countries of India and China (including Taiwan);
Whereas, KMI is interested in obtaining
exclusive options on these territories wherein such options could be exercised after the SCOREISPAPP is fully market ready –
including all current and future versions including those for iPhone, Apple computer products, PC computer products, and Android
devices;
Therefore, it is agreed as follows;
KMI shall promptly invest $50,000 in the
current private placement funding of the Company at $0.50 per share using the subscription agreement substantially in the form
attached hereto as Exhibit A;
KMI shall pay the Company $25,000 for an
exclusive option to enter into a license agreement substantially in the form attached hereto as Exhibit B for the territory being
the Country of India. Such option period shall begin on the date of this agreement indicated below and shall terminate six months
after the date that the Company notifies KMI that a commercially available SCOREISPAPP is available for general sale and solicitation
to the public. During the option period, the Company shall not grant to any other person or entity a license (or an option to acquire
a license) covering such territory and the product described in Exhibit B. The Company shall use its best efforts to develop, as
promptly as possible, a commercially available SCOREISPAPP for general sale and solicitation to the public, and the Company shall
promptly notify KMI when the SCOREISPAPP is commercially available.
KMI shall additionally pay the Company
$25,000 for an exclusive option to enter into a license agreement substantially in the form attached hereto as Exhibit C for the
territory being the Countries of China and Taiwan. Such option period shall begin on the date of this agreement indicated below
and shall terminate six months after the date that the Company notifies KMI that a commercially available SCOREISPAPP is available
for general sale and solicitation to the public. During the option period, the Company shall not grant to any other person or entity
a license (or an option to acquire a license) covering such territory and the product described in Exhibit C.
KMI shall be entitled to elect, during
the option periods described above, (1) to enter into both of the license agreements referred to in the preceding two paragraphs
(either pursuant to one option exercise notice or two option exercise notices delivered on the same date or different dates), (2)
to elect to enter one of the license agreements but not the other license agreement, or (3) to elect not to enter into either license
agreement. Within three days after KMI notifies the Company in writing that it has elected to exercise its option to enter into
either or both of such license agreements, KMI and the Company shall execute and deliver the designated license agreement or license
agreements.
Should Score not have produced the consumer
marketable SCOREISPAPP by October 1, 2014 KMI may, at its sole option, terminate either or both Option Agreements. Within ten days
of notification to Score of such termination, Score shall repay to KMI either a) $25,000 in the case of termination of one of the
options; or b) $50,000 in the case of termination of both options.
Dated: July 2, 2014
Agreed and Accepted,
/s/ John P. Ryan __________________
Score Technologies, Inc.
John Ryan, Director and Vice President
Date: 7/2/14
Agreed and Accepted,
/s/ Vivek R. Dave__________________
Knowledge Machine, Inc.
Vivek Dave, Director and President
Exhibit 16.1
John Scrudato CPA
CERTIFIED PUBLIC ACCOUNTING FIRM
October 28, 2014
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Ladies and Gentlemen:
We have read Item 4.01(a)
of the Form 10-K dated October 28, 2014, of Songbird Development, Inc. and are in agreement with the statements contained
therein inasmuch as they relate to our firm. We have no basis to agree or disagree with other statements of the registrant contained
therein.
/s/ John Scrudato CPA
Califon, NJ
Exhibit 21.1
LIST OF SUBSIDIARIES
SONGBIRD DEVELOPMENT, INC.
Songbird Development, Inc., a Nevada corporation, has one subsidiary:
| 1. | Knowledge Machine, Inc. |
Exhibit 31
Certification
I, Vivek R. Dave, Ph.D., certify that:
1. I have reviewed this Form 10-K annual
report of Songbird Development Inc. for the year ended July 31, 2014;
2. Based on my knowledge, this report does
not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial
statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a–15(e) and 15d–15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f)
and 15d–15(f)) for the registrant and have:
(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying
officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal control
over financial reporting.
Date: October 28, 2014
/s/ Vivek R. Dave
Vivek R. Dave, Ph.D., President
(Principal Executive Officer and
Principal Financial Officer)
Exhibit 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION
1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the
quarterly report of Songbird Development Inc. (the “Company”) on Form 10-K for the year ended July 31, 2014, as filed
with the Securities and Exchange Commission (the “Report”), the undersigned principal executive and financial officer
of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company. |
Date: October 28, 2014
/s/ Vivek R. Dave
Vivek R. Dave, Ph.D., President
(Principal Executive Officer and Principal Financial Officer)
Dthera Sciences (GM) (USOTC:DTHR)
Historical Stock Chart
From Jun 2024 to Jul 2024
Dthera Sciences (GM) (USOTC:DTHR)
Historical Stock Chart
From Jul 2023 to Jul 2024