UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): January 8, 2015
PERK
INTERNATIONAL, INC.
(Exact
Name of Registrant as Specified in Charter)
| Nevada |
|
333-189540 |
|
46-2622704 |
(State or other jurisdiction
of incorporation) |
|
(Commission File Number) |
|
(IRS
Employer
Identification No.) |
5401
Eglinton Avenue West Suite 205
Toronto,
Ontario Canada |
|
M9C
5K6 |
| (Address
of principal executive offices) |
|
(Zip
Code) |
Registrant’s
telephone number, including area code: 647-966-5156
2470
East 16th Street, Brooklyn, NY 11235
(Former name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
| ☐ |
Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425) |
| ☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12) |
| ☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b)) |
| ☐ |
Pre-commencement communications pursuant to Rule 13e-4 (c) under the Exchange
Act (17 CFR 240.13e-4(c)) |
Section
1 – Registrant’s Business and Operations
Item
1.01 Entry into a Material Definitive Agreement
On
January 8, 2015, Perk International, Inc., a Nevada corporation (the “Company”), entered into a Share Exchange
Agreement (the “Exchange Agreement”) with Tech 9 Inc., a privately held company incorporated under the laws of
the Province of Ontario (“Tech 9”), and the shareholders of Tech 9. As a result of the transaction (the
“Exchange”), Tech 9 became a wholly-owned subsidiary of the Company. In accordance with the terms of the Exchange
Agreement, at the closing an aggregate of 70,000,000 shares of the Company’s common stock were issued to the holders of
Tech 9’s common stock in exchange for their shares of Tech 9. Each of the Company, Tech 9 and the shareholders of Tech
9 provided customary representations and warranties, pre-closing covenants and closing conditions in the Exchange
Agreement.
Immediately
subsequent to the Exchange, the Company entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption
of Obligations (the “Conveyance Agreement”) with our prior officers and directors, Messrs. Andrew Gaudet and Leon
Golden. Pursuant to the Conveyance Agreement, we transferred all assets and business operations associated with our daily deals/coupons
business to Messrs. Gaudet and Golden. In exchange, Messrs. Gaudet and Golden agreed to cancel their collective 45,000,000 shares
in our company and to assume and cancel all liabilities relating to our former business.
As
a result of the Agreement, we are no longer pursuing our former business plan. Under the direction of our newly appointed officers
and directors, as set forth below, we are in the business of deploying, installing and managing “Digital Place-Based Networks”
(“DPN’s”) that are designed for healthcare, automotive, institutional, financial and high traffic C-store and
retail locations.
The
foregoing description of the Exchange Agreement and Conveyance Agreement does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Exchange Agreement and Conveyance Agreement, which are filed as Exhibits 2.1
and 2.2 to this Current Report and incorporated herein by reference.
Section
2 – Financial Information
Item
2.01 Completion of Acquisition or Disposition of Assets
The
information provided in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
The
Company completed the acquisition of Tech 9 pursuant to the Exchange Agreement, under the terms of which, the shareholders of Tech 9
received 70,000,000 shares of the Company’s common stock in exchange for 100% of the outstanding capital stock of Tech 9.
Pre-Exchange
stockholders of Tech 9 will be required to exchange their existing stock certificates for the Company’s certificates. The
Company’s common stock is currently quoted on the OTCPink operated by OTC Markets Group, Inc. under the symbol PRKI.
The
Exchange and its related transactions were approved by the holders of a requisite number of shares of Tech 9’s common stock.
The
Exchange is being accounted for as a reverse acquisition and recapitalization. Tech 9 is the acquirer for accounting purposes and
the Company is the issuer. Accordingly, Tech 9’s historical financial statements for periods prior to the acquisition become
those of the acquirer retroactively restated for the equivalent number of shares received in the Exchange. The accumulated deficit
of Tech 9 is carried forward after the acquisition. Operations prior to the Exchange are those of Tech 9. Earnings per share for
the period prior to the Exchange are restated to reflect the equivalent number of shares outstanding.
Upon
the closing of the Exchange, Mr. Golden resigned as an officer and director of the Company and Mr. Gaudet resigned as President,
CEO and a director of the Company, but was appointed as Vice President. Robert J. Oswald was appointed as Chief Executive Officer
and President, Louis Isabella was appointed Chief Financial Officer, Secretary and Treasurer, and Matthew J. O’Brien was
appointed as Chief Technology Officer. Simultaneous with the closing, Messrs. Oswald and O’Brien were appointed as members
of our board of directors.
There
were 75,133,132 shares of the Company’s common stock outstanding before giving effect to the stock issuances in the Exchange.
Immediately following the Exchange, the Company’s majority shareholders cancelled their collective 45,000,000 shares. Following
these transactions, there were 100,133,132 shares outstanding, including:
| Shares: |
|
Held
By: |
| 70,000,000 |
|
Tech 9
Shareholders |
| 30,133,132 |
|
Existing
Company Shareholders |
Prior
to the Exchange, there were no material relationships between the Company and Tech 9, or any of their respective affiliates, directors
or officers, or any associates of their respective officers or directors, other than as disclosed in this Current Report.
The
shares issued in the Exchange were not registered under the Securities Act, but were issued in reliance upon the exemption from
registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder.
The Company
intends to carry on the business of Tech 9, as its primary line of business. The Company has relocated its principal executive
offices to 5401 Eglinton Avenue West, Suite 205 Toronto, Ontario M9C 5K6 and its telephone number is 647-966-5156.
Unless
the context otherwise requires, hereafter in this Current Report the terms “Tech 9,” “the Company,” “we”,
“us” or “our” refer to Perk International, Inc., after giving effect to the Exchange.
DESCRIPTION
OF BUSINESS
Forward
Looking Statements
Some
of the statements contained in this Form 8-K that are not historical facts are “forward-looking statements” which
can be identified by the use of terminology such as “estimates,” “projects,” “plans,” “believes,”
“expects,” “anticipates,” “intends,” or the negative or other variations, or by discussions
of strategy that involve risks and uncertainties. We urge you to be cautious of the forward-looking statements, that such statements,
which are contained in this Form 8-K, reflect our current beliefs with respect to future events and involve known and unknown
risks, uncertainties and other factors affecting operations, successful capital raises, market growth, services, and products.
No assurances can be given regarding the achievement of future results, as actual results may differ materially as a result of
the risks we face, and actual events may differ from the assumptions underlying the statements that have been made regarding anticipated
events. Factors that may cause actual results, performance or achievements, or industry results, to differ materially from those
contemplated by such forward-looking statements include without limitation:
| |
● |
Our
ability to attract and retain management and field personnel with experience in our industry; |
| |
● |
Our
ability to raise capital when needed and on acceptable terms and conditions; |
| |
● |
The
intensity of competition; and |
| |
● |
General
economic conditions. |
All
written and oral forward-looking statements made in connection with this Form 8-K that are attributable to us or persons acting
on our behalf are expressly qualified in their entirety by these cautionary statements. Given the uncertainties that surround
such statements, you are cautioned not to place undue reliance on such forward-looking statements.
Information
regarding market and industry statistics contained in this report is included based on information available to us that we believe
is accurate. It is generally based on academic and other publications that are not produced for purposes of securities offerings
or economic analysis. We have not reviewed or included data from all sources, and we cannot assure you of the accuracy or completeness
of the data included in this report. Forecasts and other forward-looking information obtained from these sources are subject to
the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue. We have no
obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could
affect those statements. See “Risk Factors” for a more detailed discussion of uncertainties and risks that may have
an impact on future results.
Our
Business
Perk
International Inc. was incorporated in the State of Nevada on April 10, 2013. Our original business plan was to become an e-commerce
marketplace that connects merchants to consumers by offering daily discounts on goods and services through our website located
at www.usellisave.com.
As
a result of the Exchange, we acquired 100% of Tech 9 Inc., an Ontario, Canada corporation that deploys, installs and manages “Digital
Place-Based Networks” (“DPN’s”) that are designed for; healthcare, automotive, institutional, financial
and high traffic retail locations.
Using
a DPN, we offer the location owner, retailer, sponsor or advertiser a proven method for distributing and displaying digital content
to a targeted audience at a specific location and time. DPN’s are different than traditional networks, such as television
or radio. DPN’s are comprised of flat screen monitors, kiosks, audio, digital media players, software, and other forms of
digital media technology (“Digital Media”) that display content, such as information, advertisements and entertainment
to a narrow audience at specific locations, aiming the content at specific segments of the public based on location, financial,
demographic and psychographic attributes. By placing DPN’s in visible high traffic locations, a large number of potential
viewers will have the opportunity to see the content that is being displayed on the Digital Media. By placing an advertisement
on Digital Media at one or many of these locations, an advertiser or sponsor can educate, entertain, engage and influence a viewer
about their product or service during the time they are at or near the location.
In-location
digital content has evolved from a future trend into the mainstream of today’s retail marketing. Many multi-location businesses
- from convenience stores and quick service restaurants to retailers, department stores, banks and credit unions - are now realizing
the benefits of a DPN as an integral part of their in-location marketing and customer engagement strategy. We believe the business
advantages of DPN’s are clear. An in-location digital content strategy offers the potential to boost sales, build brand,
and create a better customer experience. We believe that we have the systems integration expertise, highly qualified technical
resources, and depth of experience in managed network services to deploy, install and manage DPN’s.
Digital
Media is a multi-purpose communications channel. Digital Media can speak to an “audience of many” in serving as an
out-of-home Perk network, and also to a highly targeted audience (i.e. location, financial, demographic and psychographic attributes)
in a highly relevant and personal manner. It can also speak to an “audience of one” at a point of information need
or decision. Importantly, it can motivate a viewer to engage with someone in the store, download an app to their mobile phone,
register, sign-up, purchase, donate, answer a survey, enter a contest, or a number of other engagement activities.
Our
Industry
Ad-based
DPN’s: The Point of Purchase Advertising Institute’s (POPAI) 1995 Consumer Buying Habits Study stated that
70 percent of purchase decisions were being made in-store, and POPAI’s 2012 Shopper Engagement Study stated that in-store
purchase decision has now reached 76%. Marketers have a tremendous opportunity to reach consumers, build brand equity and stimulate
consumption through effective shopper marketing. The Neilson Company reports that 54% of the 237 million monthly exposures to
persons 18+ were displayed to male audiences, with 46% exposed to females. An estimated 50% of all the monthly exposures to adults
were displayed to men and women in the key 18-34 demographic.
In
2010, the overall industry grew more than 15 percent last year to $2.1 billion, according to Patrick Quinn, CEO and founder of
PQ Media, a Connecticut-based research and consulting firm. Quinn said gas station television is one of the largest and fastest
growing segments of that category, based in part on its verifiable audience. With digital TVs in gas stations, nearly 52 million
customers are getting snippets of weather, sports highlights, celebrity gossip and commercials with their gas each month, according
to Nielsen. The weekly reach is actually larger than most of the prime-time network television shows. The largest company in the
space is Gas Station TV with 27.5 million monthly viewers at more than 1,100 stations across the U.S., according to Nielsen. According
to the Nielsen Intercept Studies, 89 percent of the consumers are engaged and watching TV at the gas station and 88 percent love
watching every time they fuel because they have nothing else to do.
We
have created “Digital Pages” as a Digital Out-of-Home advertising solution (DOOH), which allows the host location
to educate, engage, entertain and influence their customers at the “point-of-care” or point-of-decision and other
sponsors or advertisers to reach customers who are at the location deciding on what products and services they should choose (“Point
of Purchase”).
Our
Products
We
provide an array of hardware and software solutions geared at the DPN market. Our business model is based solely on the boutique
location opportunities within the industry. We have established relationships with providers of hardware, software and installation
services. We have developed several proprietary DPN’s that have and will be deployed, installed and managed under the following
banners, Vision News Now, Hearing News Now, Pharmacy News Now and Medical News Now. Tech 9 has an established medical clinic model
in place along with opthamology and C-Stores. All banners are white-label ready for deployment in each boutique market. We are
also recognized by several DPN software manufactures and developers for deployment, ongoing management services and installation
services. These include ScreenScape Networks, Eye In Media, Adflow Networks, Front Desk, Media Signage and a host of others throughout
North America.
Marketing,
Sales and Distribution
We
intend to launch “The Digital Pages” as an advertising solution for DPN locations as a proprietary Digital
Media solution. Initially, we will target Medical, Ophthalmology, Boutique Healthcare, Automotive, C-Store, Retail and Financial
Institutions. We have existing relationships in all of these locations.
We
support effective media planning and buying based on consumer profile data to ensure maximum effectiveness of the targeting needs
of each advertising campaign. Advertising campaigns can be delivered across many or all locations of a DPN, or targeted to reach
a specific audience. Delivery is optimized within a targeted audience based on observed and expected response.
Our
objective is to position our company as the leading provider of DPN’s in this category.
To
achieve that objective, our strategic position includes:
| |
1. |
Developing an industry-leading “Digital Pages” advertising
and sponsorship format. |
| |
|
|
| |
2. |
Pursuing an aggressive growth strategy that will attract the attention
of brand advertisers and agencies that want to reach national audiences. |
| |
|
|
| |
3. |
Building a strong network of venues and locations. |
| |
|
|
| |
4. |
Creating a North American presence through the provision of managed systems
and hardware sales and remote management services. |
Research
and Development
We
use third party hardware and software providers, enabling us to focus on content creation, system management and revenue generation.
By eliminating significant overheads associated with development and manufacturing costs for both hardware and software our business
model allows for focused deployment and management of DPN’s.
Competition
There
are a multitude of competitors in the Digital Out-of Home (DOOH) market place. Many of these competitors have substantial assets,
revenues and goodwill. We are developing a niche approach to the industry by aligning and partnering with third party software
and hardware manufactures to support and develop locations for; C-stores, restaurant, healthcare, automotive and retail locations
that require a third party to manage and deploy their DPN. In this market, the major players are; Captivate Network, Cineplex
Digital, Astral Media, Adflow, BroadSign and Scala.
Intellectual
Property
We
rely on third party providers for all software, hardware and technology. Our intellectual property is comprised of our knowledge
and know-how.
Government
Regulation
We
do not require compliance with regulatory agencies in North America to provide the defined services or product offering delivered
to end users or venues.
Employees
As
of the date of this Current Report we had 4 employees/consultants.
PROPERTIES
Our headquarters
are located at 5401 Eglinton Avenue West, Suite 205 Toronto, Ontario Canada M9C 5K6. Tech 9 Inc. rents space from AIM (Alain Isabella
McLean) on a month to month basis.
LEGAL
PROCEEDINGS
The
Company does not know of any material, existing or pending legal proceedings against it, nor is the Company involved as a plaintiff
in any material proceeding or pending litigation. There are no proceedings in which the Company’s directors, officers or
any affiliates, or any registered or beneficial shareholder, are an adverse party or have a material interest adverse to its interest.
RISK
FACTORS
Risks
Related to the Business and Financial Condition
Because
our auditor has issued a going concern opinion regarding our company, there is an increased risk associated with an investment
in our company.
Tech 9
incurred cumulative net losses of $103,667 since inception to August 31, 2014. Perk International, Inc., before its acquisition
of Tech 9, also had incurred cumulative net losses of $77,734 since inception to August 31, 2014. We have recurring losses and
are dependent upon obtaining financing or generating revenue from operations to continue operations for the next twelve months.
As of August 31, 2014, Tech 9 had no cash. As such, there is substantial doubt about our ability to continue as a going concern.
Our future is dependent upon our ability to obtain financing or upon future profitable operations. We reserve the right to seek
additional funds through private placements of our common stock and/or through debt financing. Our ability to raise additional
financing is unknown. We do not have any formal commitments or arrangements for the advancement or loan of funds. For these reasons,
our auditors stated in their report that they have substantial doubt we will be able to continue as a going concern. As a result,
there is an increased risk that you could lose the entire amount of your investment in our company.
We
have a limited operating history and if we are not successful in continuing to grow the business, then we may have to scale back
or even cease ongoing business operations.
We
have a very limited history of revenues from operations. There can be no assurance that we will ever operate profitably. Operations
will be subject to all the risks inherent in the establishment of a developing enterprise and the uncertainties arising from the
absence of a significant operating history. Potential investors should be aware of the difficulties normally encountered in commercializing
new products. We will continue to encounter risks and difficulties that companies at a similar stage of development frequently
experience, including the potential failure to:
| ● | Offer
products to attract customers; |
| | | |
| ● | Increase
awareness of our brand and develop customer loyalty; |
| | | |
| ● | Respond
to competitive market conditions; |
| | | |
| ● | Respond
to changes within the industry and new Technologies; |
| | | |
| ● | Manage
risks associated with intellectual property rights; |
| | | |
| ● | Maintain
effective control of our costs and expenses; and |
| | | |
| ● | Attract,
retain and motivate qualified personnel. |
We
may fail to successfully develop, market and promote our products and services. Successfully developing, marketing and promoting
products will be a complex and uncertain process, dependent on the efforts of management, outside consultants and general economic
conditions, among other things. Any factors that adversely impact the development, marketing and sales, including, but not limited
to, competition, acceptance in the marketplace, or delays related to production and distribution or regulatory issues, will likely
have a negative impact on our cash flow and operating results. The commercial success of our products also depends upon:
| ● | advertising,
hardware, management and installation sales; |
| | | |
| ● | small
business commerce; |
| | | |
| ● | unmet
signage deployment schedule; |
| | | |
| ● | the
ability to secure strategic host locations; |
| | | |
| ● | the
quality and acceptance of other competing brands and products; |
| | | |
| ● | creating
effective distribution channels and brand awareness; |
| | | |
| ● | the
availability of alternatives; |
| | | |
| ● | general
economic conditions; and |
| | | |
| ● | other
tangible and intangible factors. |
If
we are unable to address any or all of the foregoing risks, our business may be materially and adversely affected.
Each
of these factors is subject to change and cannot be predicted with certainty. We cannot assure you that we will be successful
in developing or marketing any potential enhancements to our existing products. Our inability to successfully market our current
products and/or successfully develop and market additional products, or any enhancements to our products which we may develop,
would have a material adverse effect on our business and results of operations. If our business plan is not successful, and we
are not able to operate profitably, investors may lose some or all of their investment in us.
Our
failure to raise additional capital or generate cash flows necessary to expand our operations and invest in products could reduce
our ability to compete successfully and adversely affect our results of operations.
We
may need to raise additional funds to achieve our future strategic objectives, and we may not be able to obtain additional debt
or equity financing on favorable terms, if at all. If we raise additional equity financing, our security holders may experience
significant dilution of their ownership interests and the value of shares of our common stock could decline. If we engage in debt
financing, we may be required to accept terms that restrict our ability to incur additional indebtedness, force us to maintain
specified liquidity or other ratios or restrict our ability to pay dividends or make acquisitions. If we need additional capital
and cannot raise it on acceptable terms, we may not be able to, among other things:
| |
● |
develop
and enhance our existing products and services; |
| |
|
|
| |
● |
continue
to expand our product development, sales and/or marketing organizations; |
| |
● |
hire,
train and retain employees; or |
| |
|
|
| |
● |
respond
to competitive pressures or unanticipated working capital requirements. |
Our
inability to do any of the foregoing could reduce our ability to compete successfully and adversely affect our results of operations.
We
are a small company with limited resources compared to some of our current and potential competitors and we may not be able to
compete effectively and increase market share.
We
face competitors that will attempt to create, or are already creating, products that are similar to ours. Many of our current
and potential competitors have significantly longer operating histories and significantly greater managerial, financial, marketing,
technical and other competitive resources, as well as greater name recognition, than we do. These competitors may be able to respond
more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional
activities, offer more attractive terms to customers or adopt more aggressive pricing policies. We cannot assure you that we will
be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our
business.
The
products we intend to distribute may not gain market acceptance, which would prevent us from achieving sales and market share.
The
development of a successful market for our products may be adversely affected by a number of factors, some of which are beyond
our control, including:
| |
● |
our
failure to offer products that compete favorably against other similar products on the basis of cost, quality and performance; |
| |
● |
our
failure to market and distribute our products effectively; |
| |
● |
our
failure to create profitable business opportunities for our customers; |
| |
● |
our
failure to meet the public’s demand for instant access to an unlimited amount of information, products and services;
and |
| |
● |
our
failure to develop and maintain successful relationships with customers, investors and strategic business partners. |
If
the products we intend to distribute fail to gain market acceptance, we will be unable to achieve sales and market share.
Our
commercial success depends significantly on our ability to develop and commercialize our potential products without infringing
the intellectual property rights of third parties.
Our
commercial success will depend, in part, on operating our business without infringing the patents or proprietary rights of third
parties. Third parties that believe we are infringing on their rights could bring actions against us claiming damages and seeking
to enjoin the development, marketing and distribution of our products. If we become involved in any litigation, it could consume
a substantial portion of our resources, regardless of the outcome of the litigation. If any of these actions are successful, we
could be required to pay damages and/or to obtain a license to continue to develop or market our products, in which case we may
be required to pay substantial royalties. However, any such license may not be available on terms acceptable to us or at all.
Ultimately, we could be prevented from commercializing a product or forced to cease some aspect of our business operations as
a result of patent infringement claims, which would harm our business.
Our
success depends on continuing to hire and retain qualified personnel, including our director and officers and our technical personnel.
If we are not successful in attracting and retaining these personnel, our business will suffer.
Our
success depends substantially on the performance of our management team and key personnel. In particular, the services of Robert
J. Oswald, our Chief Executive Officer, and Matthew J. O’Brien our Chief Technology Officer are integral to the creation
of our current and future products and the execution of our business strategy. Furthermore, Mr. Oswald and Mr. O’Brien are
not subject to any non-competition or non-solicitation restrictions subsequent to the termination of their employment with us.
Due to the specialized nature of our business, we are particularly dependent on our personnel. Our future success will depend
on our ability to attract, integrate, motivate and retain qualified technical, sales, operations, and managerial personnel, as
well as our ability to successfully implement a plan for management succession. Competition for qualified personnel in our business
area is intense, and we may not be able to continue to attract and retain key personnel. In addition, if we lose the services
of any of our management team or key personnel and are not able to find suitable replacements in a timely manner, our business
could be disrupted and we may incur increased operating expenses.
Our
officers have no experience with Sarbanes Oxley, which increases the risk that we will be unable to establish and maintain all
required disclosure controls and procedures and internal controls over financial reporting and meet the public reporting and the
financial requirements for our business.
Our
management has a legal and fiduciary duty to establish and maintain disclosure controls and control procedures in compliance with
the securities laws, including the requirements mandated by the Sarbanes-Oxley Act of 2002. Although our officers have substantial
business experience, they have no experience with Sarbanes Oxley. The standards that must be met for management to assess the
internal control over financial reporting as effective are new and complex, and require significant documentation, testing and
possible remediation to meet the detailed standards. Because our officers have no prior experience with the management of a public
company, we may encounter problems or delays in completing activities necessary to make an assessment of our internal control
over financial reporting, and disclosure controls and procedures. If we cannot assess our internal control over financial reporting
as effective or provide adequate disclosure controls or implement sufficient control procedures, investor confidence and share
value may be negatively impacted.
If
we are unable to attract new customers, or if our existing customers do not purchase additional products, the growth of our business
and cash flows will be adversely affected.
To
increase our revenues and cash flows, we must regularly add new customers and, to a somewhat lesser extent, sell additional products
to our existing customers. If we are unable to sell our products to customers that have been referred to us, unable to generate
sufficient sales leads through our marketing programs, or if our existing or new customers do not perceive our products to be
of sufficiently high value and quality, we may not be able to increase sales and our operating results would be adversely affected.
In addition, if we fail to sell new products to existing or new customers, our operating results will suffer, and our revenue
growth, cash flows and profitability may be materially and adversely affected.
If
we do not successfully maintain our brand in our existing markets or successfully market our brand in new markets, our revenues
and earnings could be materially and adversely affected.
We
are highly dependent upon positive consumer perceptions of the safety and quality of our products as well as similar products
distributed by our competitors. Consumer perception of Digital place based networks (DPN’s) products and our products in
particular can be substantially influenced by scientific research or findings, national media attention and other publicity about
product use. Adverse publicity from such sources regarding the safety, quality or efficacy of DPN’s, in general, and our
products in particular, could harm our reputation and results of operations. The mere publication of reports asserting that such
products may be harmful or questioning their efficacy could have a material adverse effect on our business, financial condition
and results of operations, regardless of whether such reports are scientifically supported.
We
believe that developing, maintaining and enhancing our brand in a cost-effective manner is critical in expanding our customer
base. Some of our competitors have well-established brands. Promotion of our brand will depend largely on continuing our sales
and marketing efforts and providing high-quality products to our customers. We cannot be assured that these efforts will be successful
in marketing our brand. If we are unable to successfully promote our brand, or if we incur substantial expenses in attempting
to do so, our revenues and earnings could be materially and adversely affected.
We
have not developed independent corporate governance.
We
do not presently have independent directors or audit, compensation, or nominating committees. This lack of independence and independent
controls over our corporate affairs may result in conflicts of interest between our officers, directors and our shareholders.
We presently have no policy to resolve such conflicts. As a result, our directors have the ability to, among other things, determine
their own level of compensation.
Until
we comply with such corporate governance measures to appoint a majority of independent directors and form audit and other board
committees in a manner consistent with rules of a national securities exchange, there is no assurance that we will not be subject
to any conflicts of interest. As a result, potential investors may be reluctant to provide us with funds necessary to expand our
operations.
We
are dependent on third-party suppliers and manufacturers.
We
rely on third parties to provide us with the hardware, software and installation for our products and to manufacture specific
parts for our products. If our suppliers cannot provide us with the required hardware, software installation or parts in a timely
fashion or a manufacturer is unable to produce sufficient quantities of a part for our products, our business and revenues will
be adversely affected.
Our
business is dependent on continually developing or acquiring new and advanced products and processes and our failure to do so
may cause us to lose our competitiveness and may cause our profits to decline.
To
remain competitive in our industry, we believe it is important to continually develop new and advanced products and processes.
There is no assurance that our competitors’ new products and processes will not render our existing products obsolete or
non-competitive. Our competitiveness in the marketplace relies upon our ability to enhance our current products, introduce new
products, and develop and implement new technologies and processes. Our failure to evolve and/or develop new or enhanced products
may cause us to lose our competitiveness in the marketplace and may cause our profits to decline.
If
we are unable to manage our growth effectively, our business, financial condition and results of operations may be adversely affected.
Expansion
of our business across is a key element of our marketing strategy. The Company intends to increase our customer base, expand our
product offerings and pursue market opportunities. The expansion of our operations and employee base is expected to place
a significant strain on our management, operational and financial resources. There can be no assurance that our current management
or sales, marketing & support or technical personnel will be able to support our future operations or to identify, manage
and exploit potential markets and opportunities. If we are unable to manage growth effectively, such inability could have a material
adverse effect on our business, financial condition and results of operations.
We
may be exposed to material product liability claims, which could increase our costs and adversely affect our reputation and business.
As
a marketer and distributor of products designed for human use, we are subject to product liability claims if the use of our products
is alleged to have resulted in injury. Previously unknown adverse reactions resulting from human use could occur. The cost of
defending against such claims can be substantially higher than the cost of settlement even when such claims are without merit.
The high cost to defend or settle product liability claims could have a material adverse effect on our business and operating
results.
Our
insurance coverage may be insufficient to cover our legal claims or other losses that we may incur in the future.
We
expect to maintain insurance, including property, general and product liability and other forms of insurance to protect ourselves
against potential loss exposures. In the future, insurance coverage may not be available at adequate levels or on adequate terms
to cover potential losses. If insurance coverage is inadequate or unavailable, we may face claims that exceed coverage limits
or that are not covered, which could increase our costs and adversely affect our operating results.
Our
research and development may be costly and/or untimely, and there are no assurances that our research and development will either
be successful or completed within the anticipated timeframe, if ever at all.
The
continued research and development of our products and their subsequent commercialization is important to our success. In addition,
the development of new products requires significant research, development and testing efforts. We have limited resources to devote
to and limited capabilities to conduct the continued development of new products. We currently have only 3 employees who are engaged
in business development systems integration and network management. We may enter into agreements with third party vendors to engage
in further development for us. However, the failure of the third-parties to perform under agreements entered into with us, or
our failure to renew important contacts or agreements with a third party, may delay or curtail our business development efforts.
The research and development of new products is costly and time consuming, and there are no assurances that our research and development
will either be successful or completed within the anticipated time frame, if at all. Even if a new product is developed, there
is no assurance that it will be commercialized or result in sales.
We
may not be able to protect our intellectual property rights upon which our business relies, which could cause our assets to lose
value.
Our
business depends and will continue to depend on our intellectual property, including our valuable brands, content, services and
internally developed technology. We believe our intellectual property rights are important to our continued success and our competitive
position. However, we may be unable or unwilling to strictly enforce our intellectual property rights, including our trademarks,
from infringement. In addition, we have not patented our intellectual property nor have we submitted a patent application to the
U.S. Patent and Trademark Office for our product. Our failure to enforce our intellectual property rights could diminish the value
of our brands and product offerings and harm our business and future growth prospects.
In
addition, unauthorized parties may attempt to copy or otherwise obtain and use our services, Technology and other intellectual
property, and we cannot be certain that the steps we have taken to protect our proprietary rights will prevent any misappropriation
or confusion among consumers and merchants, or unauthorized use of these rights. Advancements in Technology have exacerbated the
risk by making it easier to duplicate and disseminate intellectual property. In addition, as our business becomes more global
in scope, we may not be able to protect our proprietary rights in a cost-effective manner in a multitude of jurisdictions with
varying laws. If we are unable to procure, protect and enforce our intellectual property rights, we may not realize the full value
of these assets, and our business may suffer. If we must litigate in the United States or elsewhere to enforce our intellectual
property rights or determine the validity and scope of the proprietary rights of others, such litigation may be costly and divert
the attention of our management.
We
may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property
rights and we may be unable to protect our rights to, or use, our products.
Third
parties may challenge the validity of our intellectual property rights, resulting in costly litigation or other time-consuming
and expensive proceedings, which could deprive us of valuable rights. If we become involved in any intellectual property litigation,
interference or other judicial or administrative proceedings, we will incur substantial expenses and the diversion of financial
resources and technical and management personnel. An adverse determination may subject us to significant liabilities or require
us to seek licenses that may not be available from third parties on commercially favorable terms, if at all. Further, if such
claims are proven valid, through litigation or otherwise, we may be required to pay substantial financial damages, which can be
tripled if the infringement is deemed willful, or be required to discontinue or significantly delay development, marketing, selling
and licensing of the affected products and intellectual property rights.
Our
competitors may have filed, and may in the future file, patent applications covering products similar to ours. Any such patent
application may have priority over our patent applications and could further require us to obtain rights to issued patents covering
such products. There may be third-party patents, patent applications and other intellectual property relevant to our potential
products that may block or compete with our products or processes. If another party has filed a United States patent application
on products similar to ours, we may have to participate in an interference proceeding declared by the United States Patent and
Trademark Office to determine priority of invention in the United States. The costs of these proceedings could be substantial,
and it is possible that such efforts would be unsuccessful, resulting in a loss of our United States patent position with respect
to such products. In addition, we cannot assure you that we would prevail in any of these suits or that the damages or other remedies
if any, awarded against us would not be substantial. Claims of intellectual property infringement may require us to enter into
royalty or license agreements with third parties that may not be available on acceptable terms, if at all. We may also become
subject to injunctions against the further development and use of our technology, which would have a material adverse effect on
our business, financial condition and results of operations. Some of our competitors may be able to sustain the costs of complex
patent litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties
resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise
the funds necessary to continue our operations.
Our
current management can exert significant influence over us and make decisions that are not in the best interests of all stockholders.
Our
executive officers and directors beneficially own a majority of our outstanding shares of common stock. As a result, our executive
officer will be able to assert significant influence over all matters requiring stockholder approval, including the election and
removal of directors and any change in control. In particular, this concentration of ownership of our outstanding shares of common
stock could have the effect of delaying or preventing a change in control, or otherwise discouraging or preventing a potential
acquirer from attempting to obtain control. This, in turn, could have a negative effect on the market price of our common stock.
It could also prevent our stockholders from realizing a premium over the market prices for their shares of common stock. Moreover,
the interests of the owners of this concentration of ownership may not always coincide with our interests or the interests of
other stockholders and, accordingly, could cause us to enter into transactions or agreements that we would not otherwise consider.
Risks
Related to our Common Stock
Because
we have available a significant number of authorized shares of common stock, we may issue additional shares for a variety of reasons
which will have a dilutive effect on our shareholders and on your investment, resulting in reduced ownership and in our company
and decreased voting power, or may result in a change of control.
Our
board of directors has the authority to issue additional shares of common stock up to the authorized amount stated in our Articles
of Incorporation. Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or other
types of property, or to provide additional financing in the future. The issuance of any such shares may result in a reduction
of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares, such
issuance also will cause a reduction in the proportionate ownership and voting power of all other shareholders. Further, any such
issuance may result in a change of control of the company.
Additional
financings may dilute the holdings of our current shareholders.
In
order to provide capital for the operation of the business, we may enter into additional financing arrangements. These arrangements
may involve the issuance of new shares of common stock, preferred stock that is convertible into common stock, debt securities
that are convertible into common stock or warrants for the purchase of common stock. Any of these items could result in a material
increase in the number of shares of common stock outstanding, which would in turn result in a dilution of the ownership interests
of existing common shareholders. In addition, these new securities could contain provisions, such as priorities on distributions
and voting rights, which could affect the value of our existing common stock.
We
do not foresee paying cash dividends in the foreseeable future and, as a result, our investors’ sole source of gain, if
any, will depend on capital appreciation, if any.
We
do not plan to declare or pay any cash dividends on our shares of common stock in the foreseeable future and currently intend
to retain any future earnings for funding growth. As a result, investors should not rely on an investment in our securities if
they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole
source of gain for the foreseeable future. Moreover, investors may not be able to resell their common stock at or above the price
they paid for them.
There
is currently a limited public market for our common stock. Failure to develop or maintain a trading market could negatively affect
its value and make it difficult or impossible for you to sell your shares.
There
has been a limited public market for our common stock and an active public market for our common stock may not develop. Failure
to develop or maintain an active trading market could make it difficult for you to sell your shares or recover any part of your
investment in us. Even if a market for our common stock does develop, the market price of our common stock may be highly volatile.
In addition to the uncertainties relating to future operating performance and the profitability of operations, factors such as
variations in interim financial results or various, as yet unpredictable, factors, many of which are beyond our control, may have
a negative effect on the market price of our common stock.
We
could issue “blank check” preferred stock without stockholder approval with the effect of diluting then current stockholder
interests and impairing their voting rights, and provisions in our charter documents and under Nevada law could discourage a takeover
that stockholders may consider favorable.
Our
certificate of incorporation provides for the authorization to issue up to 1,000,000 shares of “blank check” preferred
stock with designations, rights and preferences as may be determined from time to time by our board of directors. Our board of
directors is empowered, without stockholder approval, to issue a series of preferred stock with dividend, liquidation, conversion,
voting or other rights which could dilute the interest of, or impair the voting power of, our common stockholders. The issuance
of a series of preferred stock could be used as a method of discouraging, delaying or preventing a change in control. For example,
it would be possible for our board of directors to issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of our company. In addition, advanced notice is required prior to stockholder
proposals.
“Penny
Stock” rules may make buying or selling our common stock difficult.
If
the market price for our common stock is below $5.00 per share, trading in our common stock may be subject to the “penny
stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security that has a market
price of less than $5.00 per share, subject to certain exceptions. These rules would require that any broker-dealer that would
recommend our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make a special
written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the transaction.
Unless an exception is available, the regulations would require the delivery, prior to any transaction involving a penny stock,
of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market. In
addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our
common stock.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
information and financial data discussed below is derived from the audited financial statements of Tech 9 Inc. for the year ended
May 31, 2014 with comparative period from inception (January 11, 2013) to May 31, 2013; and unaudited financial statements of
Tech 9 Inc. for the 3 month periods ended August 31, 2014 and 2013. The financial statements of Tech 9 Inc. were prepared and
presented in accordance with United States generally accepted accounting principles and are expressed in United States Dollars.
The information and financial data discussed below is only a summary and should be read in conjunction with the financial statements
and related notes of Tech 9 Inc. contained elsewhere in this Current Report, which fully represent the financial condition and
operations of Tech 9 Inc. but which are not necessarily indicative of future performance. See “Cautionary Note Regarding
Forward Looking Statements” for a discussion of forward-looking statements and the significance of such statements in the
context of this Current Report.
All
amounts within this Management’s Discussion and Analysis are expressed in United States Dollars unless otherwise noted.
The
following discussion and analysis relates to the results of Tech 9 Inc., our wholly-owned subsidiary, only and should be read
in conjunction with the financial statements and the related notes thereto and other financial information contained elsewhere
in this Form 8-K. Please see our unaudited pro forma combined financial information of Perk International Inc.and its subsidiaries
filed elsewhere in this current report. For a discussion and analysis related to the results of Perk International Inc., please
see our Form 10-K for the fiscal year ended May 31, 2014 filed with the SEC on September 9, 2014, and Form 10-Q for the quarter
ended August 31, 2014 filed with the SEC on October 20, 2014.
Overview
Tech 9 Inc.
was incorporated on January 11, 2013 in Ontario, Canada under the Business Corporation Act. The Company is engaged in the business
of digital signage network, implementation, services and solutions. The Company’s sales and services include hardware and
software sales, project management, installation, implementation and monitoring services.
Recent
Developments
On
July 15, 2014, Tech 9 Inc. signed a letter of intent with Perk International Inc. (“Perk”) (An SEC registered shell
public Company) whereby Perk is to acquire all the issued and outstanding common shares of Tech 9 Inc. in exchange for common
shares of Perk.
On
January 8, 2015 Tech 9 Inc. closed its share exchange with Perk whereby all the 200 common shares issued and outstanding of Tech
9 Inc. were acquired by Perk in exchange for 70,000,000 common shares of Perk.
Critical
Accounting Policies
Basis
of Preparation
The
Company's financial statements have been prepared in accordance with United States generally accepted accounting principles.
Use
of Estimates
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions of future events that
affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements,
such as accrued liabilities and recovery value of equipment, and the reported amounts of revenues and expenses for the reporting
period. Actual results may differ from those reported.
Income
Taxes
Deferred
tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities
that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded
for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets
and liabilities during the period.
Foreign
Currency Translation
The Company’s
functional currency is the Canadian Dollar and its presentation currency is the United States (“U.S.”) Dollar. The
Company uses the “Current rate method” to translate its financial statements from Canadian Dollar into U.S. Dollars.
The assets and liabilities of the Company, except for the capital, are translated into U.S. Dollars using the rate of exchange
prevailing at the balance sheet date. The capital is translated at the historical rate. Adjustments resulting from the translation
of the balance sheet of the Company into U.S. Dollars are recorded in stockholders' equity as part of other comprehensive income.
The statement of operations is translated at average rates during the reporting period. Gains or losses resulting from transactions
in currencies other than the functional currencies are reflected in the statement of operations for the reporting periods.
Revenue
Recognition
The
Company’s revenue recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when
it is realized, or realizable and earned. The Company considers revenue to be realized, or realizable and earned, when the following
revenue recognition requirements are met: persuasive evidence of an arrangement exists, the products have been delivered and /or
installed or services have been performed; the sales price is fixed or determinable within the contract; and collectability is
reasonably assured. For product sales, the Company determines that the earnings process is complete when title, risk of loss and
the right to use equipment has transferred to the customer. Where the Company is contractually responsible for installation, revenue
recognition occurs upon completion of the installation of equipment at a job site. Where the Company is not contractually responsible
for installation, revenue recognition of these items is upon shipment or delivery to a customer location depending on the terms
in the contract.
The
application of ASC 605 to the Company's customer contracts requires judgment, including the determination of whether an arrangement
includes multiple deliverables such as hardware, maintenance and/or other services. For contracts that contain multiple deliverables,
total arrangement consideration is allocated at the inception of the arrangement to each deliverable based on the relative selling
price method. The relative selling price method is based on a hierarchy consisting of vendor specific objective evidence (VSOE)
(price when sold on a stand-alone basis), if available, or third-party evidence (TPE), if VSOE is not available, or estimated
selling price (ESP) if neither VSOE nor TPE is available.
Comprehensive
income or loss
The Company
reports comprehensive income or loss in the statements of changes in stockholders’ equity. In addition to items included
in net income or loss, comprehensive income or loss includes items currently charged or credited directly to stockholders’
equity such as foreign currency translation adjustment.
Income
Taxes
The Company
recognizes a liability or asset for deferred tax consequences of all temporary differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future
years when the reported amounts of the assets and liabilities are recovered or settled. These deferred tax assets or liabilities
are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred
tax assets are reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not
that some or all of the deferred tax assets may not be realized.
Financial
Instruments
The Company’s
financial instruments consist of account receivables, accounts payable and accrued liabilities and amounts due to related party.
Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, or credit risks
arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due
to the relatively short period to maturity for these instruments. The Company’s financial assets and liabilities are generally
classified and measured as follows;
| Assets/Liabilities
|
|
Classification
|
|
Measurement
|
| Accounts Receivable
|
|
Loans and
receivables |
|
Amortized
cost |
| Accounts
payable and accrued liabilities |
|
Other liabilities
|
|
Amortized cost
|
| Customer deposit |
|
Other liabilities |
|
Amortized cost |
| Due to related
party |
|
Other liabilities
|
|
Amortized cost
|
The
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1 —
Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 —
Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar
assets or liabilities in markets that are not active or inputs, other than quoted prices in active markets that are observable
either directly or indirectly.
Level 3 —
Unobservable inputs for which there is little or no market data.
Earnings
(Loss) Per Share
The Company
computes net loss of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period
using the treasury stock method. In computing diluted EPS, the average stock price for the period is used in determining the number
of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.
Recently
Issued Accounting Standards
ASU
2014-15 “Presentation of Financial Statements” – Going Concern (subtopic 205-40) disclosure of uncertainties
about an entity’s ability to continue as a going concern. The amendment are intended to define management’s responsibility
to evaluate whether there is substantial doubt about its ability to continue as a going concern and to provide related disclosures.
The amendment is effective for annual periods ending after December 15, 2016. The Company has not evaluated the impact of this
amendment.
ASU
2014-13 “Consolidation (Topic 810) - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized
Financing Entity”. The amendments in ASU 2014-13 provide an alternative to Topic 820, Fair Value Measurement, for measuring
the financial assets and the financial liabilities of a consolidated collateralized financing entity to eliminate the difference
in the fair value of the financial assets of a collateralized financing entity, as determined under GAAP, when they differ from
the fair value of its financial liabilities even when the financial liabilities have recourse only to the financial assets. When
the measurement alternative is elected, both the financial assets and the financial liabilities of the collateralized financing
entity should be measured using the more observable of the fair value of the financial assets or the fair value of the financial
liabilities. The amendments clarify that when the measurement alternative is elected, a reporting entity’s consolidated
net income (loss) should reflect the reporting entity’s own economic interests in the collateralized financing entity, including:
(1) changes in the fair value of the beneficial interests retained by the reporting entity, and (2) beneficial interests that
represent compensation for services. The amendment is effective for the annual periods beginning after December 15, 2015. The
Company has not evaluated the impact if this amendment on its financial statements.
ASU
2014-12 “Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in ASU 2014-12
require that a performance target that affects vesting and that could be achieved after the requisite service period be treated
as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation,
as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should
not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable
to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being
achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively
over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service
period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately
vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award
if the performance target is achieved. The amendment is effective for periods beginning after December 15, 2015
ASU
2014-11 “Transfers and Servicing (Topic 860) - Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures'-
The amendments in ASU 2014-11 align the accounting for repurchase-to-maturity transactions and repurchase agreements executed
as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would
all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and
supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted
for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. ASU
2014-11 also brings U.S. GAAP into greater alignment with IFRS for repurchase-to-maturity transactions.
The
amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor
retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the
transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase
agreements and similar transactions accounted for as secured borrowings. The amendment is effective for the annual periods beginning
after December 15, 2014. The Company has not evaluated the impact on its financial statements.
ASU
2014-09 “Revenue from Contracts with Customers”. The amendments in ASU 2014-09 affects any entity that either enters
into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless
those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede
the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic
606 Revenue from Contracts with Customers. The amendment is effective for the periods beginning after December 15, 2016. The Company
has not evaluated the impact of this amendment.
Going
Concern
The
financial statements included in our filings have been prepared in conformity with generally accepted accounting principles that
contemplate the continuance of our company as a going concern. Tech 9 Inc.’s ability to continue as a going concern
is dependent on the ability to obtain adequate financing and to reach profitable cash flow from operations. Management recognizes
that Tech 9 Inc. must generate additional revenue to achieve profitable operations. Tech 9 Inc. cannot assure that it will be
successful in these activities. Should any of these events not occur, its financial condition will be adversely affected.
Results
of Operations for the year ended May 31, 2014 with comparative period from inception (January 11, 2013) to May 31, 2013
Revenues
| | |
2014 | | |
2013 | |
| Sales | |
| | | |
| | |
| Products | |
$ | 151,311 | | |
$ | 280,700 | |
| Services | |
| 165,740 | | |
| 88,297 | |
| | |
| 317,051 | | |
| 368,997 | |
| Cost of sales | |
| | | |
| | |
| Products | |
| 128,507 | | |
| 225,735 | |
| Services | |
| 86,974 | | |
| 42,277 | |
| | |
| 215,481 | | |
| 268,012 | |
| | |
| | | |
| | |
| Gross profit | |
| 101,570 | | |
| 100,985 | |
The
Company generated revenue of $317,051 for the period of 12 months ended May 31, 2014 as compared to revenue of $368,997 for a
shorter comparative period from date of incorporation (January 11, 2013) to May 31, 2013. The cost of sales for 2014 was $215,481
(prior period $268,012) resulting in a gross profit of $101,570 (prior period $100,985). This resulted in a gross margin of 32%
in 2014 as compared to a gross margin of 27% in 2013.
Expenses
| Operating expenses: | |
2014 | | |
2013 | |
| Consulting and professional | |
$ | 208,549 | | |
$ | 50,580 | |
| General and administrative | |
| 99,653 | | |
| 5,660 | |
| Depreciation | |
| 4,308 | | |
| 7,114 | |
| | |
| 312,510 | | |
| 63,354 | |
| | |
| | | |
| | |
| Operating profit (loss) | |
| (210,940 | ) | |
| 37,631 | |
Tech
9 Inc. incurred an operating loss of $210,940 in 2014 as compared to an operating profit for $37,631 in 2013. In 2014, the Company
had a 12 month reporting period as compared to a shorter period of less than 5 month in 2013. The Company expensed management
fees to its two directors for $103,559 in 2014 as compared to $23,261 in 2013. In addition, the Company incurred additional audit
and legal fees in 2014 which were included in consulting and professional fees. General and administrative expense includes $28,359
written off as bad debt in 2014 (prior period $nil).
Results
of Operation for the three months ended August 31, 2014 and 2013
Revenues
| | |
2014 | | |
2013 | |
| Sales | |
| | |
| |
| Products | |
$ | 96,909 | | |
$ | 56,071 | |
| Services | |
| 60,752 | | |
| 38,092 | |
| | |
| 157,661 | | |
| 94,163 | |
| Cost of sales | |
| | | |
| | |
| Products | |
| 35,162 | | |
| 56,309 | |
| Services | |
| 23,913 | | |
| 26,324 | |
| | |
| 59,075 | | |
| 82,633 | |
| | |
| | | |
| | |
| Gross profit | |
| 98,586 | | |
| 11,530 | |
The
Company generated revenue of $157,661 for the period of 3 months ended August 31, 2014 as compared to revenue of $94,163 for the
same period ended 2013. The cost of sales for 2014 was $59,075 (prior period $82,633) resulting in a gross profit of $98,586 (prior
period $11,530).
Expenses
| Operating expenses: | |
2014 | | |
2013 | |
| Consulting and professional | |
$ | 39,244 | | |
$ | 107,904 | |
| General and administrative | |
| 20,437 | | |
| 24,577 | |
| Depreciation | |
| - | | |
| 2,952 | |
| | |
| 59,681 | | |
| 135,433 | |
| | |
| | | |
| | |
| Operating profit (loss) | |
| 38,905 | | |
| (123,903 | ) |
Tech
9 Inc. incurred an operating profit of $38,905 for the 3 months ended August 31, 2014 as compared to an operating loss of $123,903
for the same period ended 2013. In the prior period, the Company incurred additional audit and legal expenses which were part
of consulting and professional expenses.
Liquidity
and Capital Resources
For
the year ended May 31, 2014 with comparative period from inception (January 11, 2013) to May 31, 2013
As
at May 31, 2014, Tech 9 Inc. had total assets of $189,230 consisting of cash of $34,089 and accounts receivable of $155,141. We
had total liabilities of $331,103 consisting of accounts payable and accrued liabilities of $202,889, customer deposit for $92,234,
due to related party for $21,181 and loan payable for $14,799.
As
at May 31, 2013, Tech 9 Inc. had total assets of $242,999 consisting of cash of $12,873, accounts receivable of $185,041, deferred
costs of $8,070 and equipment of $37,015. We had total liabilities of $212,032 consisting of accounts payable and accrued
liabilities of $139,896, income tax payable for $5,833, due to related party for $15,798 and obligation under capital lease for
$50,505.
At
May 31, 2014, Tech 9 Inc. had negative working capital of $130,276 and an accumulated deficit of $142,572.
Net
cash flow from operating activities
For
the year ended May 31, 2014, Tech 9 Inc. used $2,092 (prior period $400) in operating activities to fund administrative and selling
activities.
Net
cash flow from investing activities
For
the year ended May 31, 2014, Tech 9 Inc. provided $3,499 (prior period used $419) in investing activities. The positive cash flow
from investing activities in 2014 relate to insurance proceeds received on write off of equipment.
Net
cash flow from financing activities
For
the year ended May 31, 2014, Tech 9 Inc. provided $20,096 (prior period $14,744) in financing activities. In 2014, Tech 9 Inc,
received $15,048 as term loan from a bank.
For
the three months ended August 31, 2014 and 2013
As
at August 31, 2014, Tech 9 Inc. had total assets of $133,742 consisting of accounts receivable of $133,172 and due from related
party for $570. We had total liabilities of $236,594 consisting of accounts payable and accrued liabilities of $219,124,
bank indebtedness for $3,471and term loan for $13,999.
At
August 31, 2014, Tech 9 Inc. had negative working capital of $92,050 and an accumulated deficit of $103,667.
Net
cash flow from operating activities
For
the three month period ended August 31, 2014, Tech 9 Inc. used $15,049 (prior period $10,013) in operating activities to fund
administrative and selling activities.
Net
cash flow from investing activities
There
were no investing activities for the three month period ended August 31, 2014 (prior period usage for $2,030).
Net
cash flow from financing activities
Net
cash used by financing activities for the three month period ended August 31, 2014 was ($19,072) as compared to net cash provided
for $35,002 in 2013. In 2014, Tech 9 Inc. repaid $21,771 advances it had received from related parties
Satisfaction
of Our Cash Obligations for the Next 12 Months
Based
on Tech 9 Inc.’s current monthly expenses, management believes cash and cash equivalents on hand at August 31, 2014 will
not be sufficient to meet the anticipated cash requirements for operations and funding our growth plans over the next 12 months. As
a result, Tech 9 Inc intends to raise additional funds through debt or equity financing. No assurances can be made
that these funds will be available on a timely basis or on terms acceptable to management of Tech 9 Inc.
DIRECTORS
AND EXECUTIVE OFFICERS,
PROMOTERS
AND CONTROL PERSONS
Directors
and Executive Officers
The
following persons became our executive officers and directors on January 8, 2015, upon the effectiveness of the Exchange, and
hold the positions set forth opposite their respective names:
| Name |
|
Age |
|
Positions
and Offices Held |
| Robert
J. Oswald |
|
48 |
|
President,
Chief Executive Officer, and Director |
| Louis
Isabella |
|
50 |
|
Chief
Financial Officer, Treasurer and Secretary |
| Matthew
J. O’Brien |
|
35 |
|
Chief
Technology Officer and Director |
| Andrew
Gaudet |
|
41 |
|
Vice
President |
Our
directors hold office for one-year terms or until their successors have been duly elected and qualified. Our officers are elected
annually by the board of directors and serve at the discretion of the board. Set forth below is a summary description of the principal
occupation and business experience of each of our directors and executive officers for at least the last five years.
Robert
J. Oswald has spent the past 27 years developing and operating Medical Clinics, Hearing Health Care Centers and Digital
networks globally. Mr. Oswald was a founder of both HearAtlast the Hearing Store and the Hearing News Network. From March 2013
to present, Mr. Oswald has been the CEO of Tech 9 Inc. From 2004-2013 he was the President, Executive Vice President and Founder
of HearAtlast and the Hearing News Network Inc.
Louis
Isabella is a partner in the chartered accounting firm of Allain, Isabella & Mclean LLP. Prior to this, Mr. Isabella
spent the past 20 years as a partner in both small and mid-size public accounting firms after establishing his own practice for
about nine years. Mr. Isabella has significant expertise in providing accounting and tax services for small-business clients and
has assisted many clients over the years in the areas of business development, expansion, financing and succession planning. Mr.
Isabella has been the CFO of Tech 9, Inc. since March 2013. From 2009 – 2011 Mr. Isabella was a partner at Evans Martin LLP.
From 1998 - 2009 Mr. Isabella had his own private public accounting practice.
Matthew
J. O’Brien is an innovative hands-on technical leader in Digital Signage. Mr. O’Brien’s expertise includes
leading teams in network management and hardware infrastructure, with particular emphasis on overall system architecture and design
of large scale, high performance systems leading to maintainable, extensible solutions, which meet customer expectations. Mr.
O’Brien has been an independent consultant to the DPN industry for the past 7 years, where he developed and created relationships
in Digital Signage. From March of 2013 to present Mr. O’Brien was the founder and Chief Technology Officer Tech 9, Inc. From
2007 - 2012 Mr. O’Brien has been an independent consultant for the Digital Signage Industry. From 2003 - 2007 Mr. O’Brien
was a Systems Analyst at Lunarstorm Technology in Guelph, Ontario.
Andrew
Gaudet has an extensive background in the financial services industry, going back more than fifteen years. His expertise
includes working in Europe, Asia, Latin America and the Caribbean where his experience has included working with high-net-worth
clients, investors and companies. Mr. Gaudet is currently only employed with our company. From 2012 to 2013, Mr. Gaudet was a
Senior Associate for Phoenix Capital Partners Inc., a company based in Toronto, Ontario in the business of corporate finance,
bridge and mezzanine financing. From 2010 to 2012, Mr. Gaudet was Vice President of Business Development for Seaquest Global Corporation,
a company based in Toronto, Ontario in the business of corporate finance. From 2009 to 2010, Mr. Gaudet was Director of Business
Development for Bishops Legal in the Turks and Caicos Islands, where he managed all business development and marketing activities
for a law firm providing services in the areas of real estate law, corporate law, complex litigation, trusts and international
taxation. From 2003 to 2009, Mr. Gaudet was Managing Director of Marketing and Business Development for Richmond Consultants,
Ltd., a corporate consulting company firm that created custom structures for development and investment projects in the Turks
and Caicos Islands where he managed the company’s sales and marketing team.
There
are no family relationships among our directors and executive officers.
Involvement
in Certain Legal Proceedings
To
the best of our knowledge, during the past ten years, none of the following occurred with respect to our present or former director,
executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in
a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
(3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type
of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the
SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended or vacated.
Committees
of the Board
Our
company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does
our company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary
to have such committees, at this time, because the functions of such committees can be adequately performed by the board of directors.
Our
company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations
for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be
premature and of little assistance until our business operations develop to a more advanced level. Our company does not currently
have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process
or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management
or shareholders, and make recommendations for election or appointment.
A
shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our President
and director, Michael Richard Hawthorne, at the address appearing on the first page of this Current Report.
Code
of Ethics
As
of May 30, 2014, we had not adopted a Code of Ethics for Financial Executives, which would include our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions.
EXECUTIVE
COMPENSATION
The
Company presently not does have employment agreements with its named executive officers and it has not established a system of
executive compensation or any fixed policies regarding compensation of executive officers. Due to financial constraints typical
of those faced by start-up business, the company has not paid any cash and/or stock compensation to its named executive officers.
Summary
Compensation
The following
table sets forth, for the last two fiscal years and interim period, the compensation earned by our executive officers.
| Name and Principal Position | |
| Year | | |
| Salary
($) | | |
| Bonus
($) | | |
Stock Awards
($) | |
Option Awards
($) | |
Non-Equity Incentive Plan Compensation ($) | |
Nonqualified Deferred Compensation Earning
($) | |
All Other Compensation ($) | |
| Total ($) | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
| | |
Robert J. Oswald President, CEO and Director(1) | |
| 2014 2013 | | |
| 0 0 | | |
| 0 0 | | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
50,572
11,845 | |
| 50,572 11,845 | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
| | |
Louis Isabella CFO, Secretary and Treasurer(1) | |
| 2014 2013 | | |
| 0 0 | | |
| 0 0 | | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
| 0 0 | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
| | |
| Matthew J. O’Brien9(1) | |
| 2014 2013 | | |
| 0 0 | | |
| 0 0 | | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
52,987
11,845 | |
| 52,987 11,845 | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
| | |
Andrew Gaudet
Vice President and Former Chairman, CEO, President and Director | |
| 2014 2013 | | |
| 0 0 | | |
| 0 0 | | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
| 0 0 | |
| | |
| | | |
| | | |
| | | |
| |
| |
| |
| |
| |
| | |
Leon Golden
Former CFO, Secretary and Director | |
| 2014 2013 | | |
| 0 0 | | |
| 0 0 | | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
0
0 | |
| 0 0 | |
| |
(1) |
Represents compensation earned as an officer for Tech 9, Inc. Mr. Oswald received $11,846 on his
consulting agreement in 2013 and received $50,572 on his consulting agreement in 2014. Mr. O’Brien received $11,846 on his
consulting agreement in 2013 and $52,987 on his consulting agreement in 2014. The difference between the contractual amount in
each of Messrs. Oswald and O’Brien’s consulting agreements and the actual amounts they received has been waived as
required by the Share Exchange Agreement.
|
Narrative to Summary Compensation Table
Effective May 1, 2013, the Company executed
agreements with Robert Oswald and Matthew O’Brien to pay each director annual compensation as follows:
CAD$144,000 in the first year along with bonus at the rate of 1.5%
of net sales and 100 common shares in the Company;
CAD $188,000 in the second year along with bonus at the rate of
1.5% of net sales;
CAD $225,000 in the third year along with bonus at the rate of
1.5% of net sales;
CAD $275,000 in the fourth year along with bonus at the rate of
1.5% of net sales;
CAD $315,000 in the fifth year along with bonus at the rate of
1.5% of net sales
The agreements provide for compensatory damages for early termination
without cause.
On January 8, 2015, as provided for in the
Share Exchange Agreement, management of Tech 9 agree to cancel all accrued consulting fees with the company before July 15, 2014.
From July 15, 2014 and onward, management of Tech 9 may accrue consulting fees, which will be paid as soon as possible. It is
expected that Tech 9 management will enter into new employment agreements at current levels of compensation and such compensation
shall remain until such time as we have net free cash flow.
Director
Compensation
We
do not currently compensate our directors for acting as such, although we may do so in the future.
As
of May 31, 2014, none of our directors or executive officers held unexercised options, stock that had not vested, or equity incentive
plan awards.
We
have no pension, annuity, bonus, insurance, equity incentive, non-equity incentive, stock options, profit sharing or similar benefit
plans.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Other
than as disclosed below and in the section “Executive Compensation” above, there have been no transactions, or proposed
transactions, which have materially affected or will materially affect us in which any director, executive officer or beneficial
holder of more than 10% of the outstanding common stock, or any of their respective relatives, spouses, associates or affiliates,
has had or will have any direct or material indirect interest. We have no policy regarding entering into transactions with affiliated
parties.
During
2013, we expensed management fees for $23,691 (CAD $24,000) to directors of the Company of which $11,845 was owed as of May 31,
2013 and included in accounts payable and accrued liabilities. During 2014, we expensed management fees for $103,559 (CAD $110,425)
to two directors of our company of which $nil was owed as of May 31, 2014 and included in accounts payable and accrued liabilities.
During the quarter, we expensed management fee of $69,394 (CAD $72,000) to two directors of our company of which $53,656 (CAD
$56,500) was owed as of August 31, 2013 and included in accounts payable and accrued liabilities.
The
Company recorded revenue of $28,359 (CAD $30,239) being sales to an entity in which a director had an interest. As of May 31,
2014, the receivable of $28,359 (CAD $30,239) from this entity was written off as bad debts.
As
of August 31, 2013, we have loans payable to related parties for $31,235. The loan is due to a director and shareholder and is
unsecured, free of interest and due on demand.
For
the quarter ended August 31, 2013, we expensed fee of $19,277 (CAD $20,000) as consulting fees to a partnership in which an officer
of our company is a partner. As of August 31, 2013, the entire amount expensed was payable and included in accounts payable and
accrued liabilities.
During
the quarter ended August 31, 2013, we paid lease rent of $7,229 (CAD $7,500) for use of office space in Toronto, Canada, to a
partnership in which an officer of our company is a partner.
On
January 8, 2015, we entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (the
“Agreement”) with our former officers and directors, Andrew Gaudet and Leon Golden. Pursuant to the Agreement, we
transferred all assets related to our prior business to these former officers and directors. In exchange for this assignment of
assets, they agreed to assume and cancel all liabilities relating to our former business and cancel their collective 45,000,000
shares.
Further,
Mr. Golden provides us with office space free of charge.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the beneficial ownership of our common stock, taking into account the
consummation of the Exchange (1) by each person or entity who is known by us to beneficially own more than 5% of our common stock,
(2) by each of the named executive officers and directors; and (3) by all of the named executive officers and directors as a group,
as of January 8, 2015.
Unless
otherwise indicated in the footnotes to the following table, each of the stockholders named in the table has sole voting and investment
power with respect to such shares of common stock and the address of each of the stockholders listed below is c/o Perk International,
Inc., 5401 Eglinton Avenue West Suite 205 Toronto, Ontario Canada M9C 5K6.
| NAME OF OWNER | |
TITLE OF
CLASS | |
NUMBER OF
SHARES
OWNED
(1) | | |
PERCENTAGE OF
COMMON STOCK
(2) | |
| | |
| |
| | |
| |
| Robert J. Oswald | |
Common | |
| 35,000,000 | | |
| 35 | % |
| Matthew J. O’Brien | |
Common | |
| 35,000,000 | | |
| 35 | % |
| All executive officers and directors as a group (3 persons) | |
Common Stock | |
| 70,000,000 | | |
| 70 | % |
(1)
Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of January 8, 2015 are deemed outstanding
for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage
of any other person.
(2)
Based upon 100,133,132 shares issued and outstanding on January 8, 2015.
DESCRIPTION
OF SECURITIES
Our
authorized capital stock consists of 250,000,000 shares of common stock, with a par value of $0.0001 per share, and 1,000,000
shares of preferred stock, with a par value of $0.001 per share. Prior to the Exchange, there were 75,133,132 shares of common
stock issued and outstanding. In connection with the Exchange, the Company issued (i) 70,000,000 shares of common stock in exchange
for the issued and outstanding shares of common stock of Tech 9, and (ii) cancelled 45,000,000 shares held by Andrew Gaudet and
Leon Golden. The outstanding shares of common stock are validly issued, fully paid and non-assessable. There are no shares of
preferred stock issued and outstanding.
Common
Stock
Our
common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election
of directors. Except as otherwise required by law or provided in any resolution adopted by our board of directors with respect
to any series of preferred stock, the holders of our common stock will possess all voting power. Generally, all matters to be
voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes
entitled to be cast by all shares of our common stock that are present in person or represented by proxy, subject to any voting
rights granted to holders of any preferred stock. Holders of our common stock representing fifty percent (50%) of our capital
stock issued, outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any
meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental
corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation
do not provide for cumulative voting in the election of directors.
Subject
to any preferential rights of any outstanding series of preferred stock created by our board of directors from time to time, the
holders of shares of our common stock will be entitled to such cash dividends as may be declared from time to time by our board
of directors from funds available therefore.
Subject
to any preferential rights of any outstanding series of preferred stock created from time to time by our board of directors, upon
liquidation, dissolution or winding up, the holders of shares of our common stock will be entitled to receive pro rata all assets
available for distribution to such holders.
In
the event of any merger or consolidation with or into another company in connection with which shares of our common stock are
converted into or exchangeable for shares of stock, other securities or property (including cash), all holders of our common stock
will be entitled to receive the same kind and amount of shares of stock and other securities and property (including cash). Holders
of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our
common stock.
Preferred
Stock
Our
board of directors is authorized by our articles of incorporation to divide the authorized shares of our preferred stock into
one or more series, each of which must be so designated as to distinguish the shares of each series of preferred stock from the
shares of all other series and classes. Our board of directors is authorized, within any limitations prescribed by law and our
articles of incorporation, to fix and determine the designations, rights, qualifications, preferences, limitations and terms of
the shares of any series of preferred stock including, but not limited to, the following:
| |
1. |
The
number of shares constituting that series and the distinctive designation of that series, which may be by distinguishing number,
letter or title; |
| |
2. |
The
dividend rate on the shares of that series, whether dividends will be cumulative, and if so, from which date(s), and the relative
rights of priority, if any, of payment of dividends on shares of that series; |
| |
3. |
Whether
that series will have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting
rights; |
| |
4. |
Whether
that series will have conversion privileges, and, if so, the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board of Directors determines; |
| |
5. |
Whether
or not the shares of that series will be redeemable, and, if so, the terms and conditions of such redemption, including the
date or date upon or after which they are redeemable, and the amount per share payable in case of redemption, which amount
may vary under different conditions and at different redemption dates; |
| |
6. |
Whether
that series will have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount
of such sinking fund; |
| |
7. |
The
rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment of shares of that series; |
| |
8. |
Any other relative
rights, preferences and limitations of that series |
Provisions
in Our Articles of Incorporation and By-Laws That Would Delay, Defer or Prevent a Change in Control
Our
articles of incorporation authorize our board of directors to issue a class of preferred stock commonly known as a "blank
check" preferred stock. Specifically, the preferred stock may be issued from time to time by the board of directors as shares
of one (1) or more classes or series. Our board of directors, subject to the provisions of our Articles of Incorporation and limitations
imposed by law, is authorized to adopt resolutions; to issue the shares; to fix the number of shares; to change the number of
shares constituting any series; and to provide for or change the following: the voting powers; designations; preferences; and
relative, participating, optional or other special rights, qualifications, limitations or restrictions, including the following:
dividend rights, including whether dividends are cumulative; dividend rates; terms of redemption, including sinking fund provisions;
redemption prices; conversion rights and liquidation preferences of the shares constituting any class or series of the preferred
stock.
In
each such case, we will not need any further action or vote by our shareholders. One of the effects of undesignated preferred
stock may be to enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by
means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of our management. The issuance
of shares of preferred stock pursuant to the board of director's authority described above may adversely affect the rights of
holders of common stock. For example, preferred stock issued by us may rank prior to the common stock as to dividend rights, liquidation
preference or both, may have full or limited voting rights and may be convertible into shares of common stock. Accordingly, the
issuance of shares of preferred stock may discourage bids for the common stock at a premium or may otherwise adversely affect
the market price of the common stock.
Dividend
Policy
We
have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to
finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.
Warrants
and Options
We
issued 30,000,000 stock warrants in connection with the issuance of common stock. On April 3, 2014 the exercise price for all
the outstanding warrants was revised from $0.25 to $0.15 per share.
During
the year ended May 31, 2014 warrants were exercised for 66,666 common shares of stock, for $10,000 in cash.
During
the fiscal quarter ended August 31, 2014, 66,666 warrants were exercised at $0.15 per share, resulting in 66,666 shares of common
stock being issued for $10,000 in cash.
There
are 29,866,668 stock warrants remaining as of August 31, 2014. The remaining warrants will expire on September 30, 2017.
Convertible
Securities
We
have not issued and do not have outstanding any securities convertible into shares of our common stock or any rights convertible
or exchangeable into shares of our common stock.
Nevada
Anti-Takeover Laws
Nevada
Revised Statutes sections 78.378 to 78.379 provide state regulation over the acquisition of a controlling interest in certain
Nevada corporations unless the articles of incorporation or bylaws of the corporation provide that the provisions of these sections
do not apply. Our articles of incorporation and bylaws do not state that these provisions do not apply. The statute creates a
number of restrictions on the ability of a person or entity to acquire control of a Nevada company by setting down certain rules
of conduct and voting restrictions in any acquisition attempt, among other things. The statute is limited to corporations that
are organized in the state of Nevada and that have 200 or more stockholders, at least 100 of whom are stockholders of record and
residents of the State of Nevada; and does business in the State of Nevada directly or through an affiliated corporation. Because
of these conditions, the statute currently does not apply to our company.
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The
Company’s common stock is currently quoted on the OTCPink operated by OTC Markets Group, Inc. under the symbol PRKI. There
is limited trading activity in the Company’s stock.
Penny
Stock
The
SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are
generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such
securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny
stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature
and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of
the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation
of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market,
including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a
toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or
in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type
size and format, as the SEC shall require by rule or regulation.
The
broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations
for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares
to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for
such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In
addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the
broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive
the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving
penny stocks, and a signed and dated copy of a written suitability statement.
These
disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may
have difficulty selling our securities.
Dividends
The
Company has not declared, or paid, any cash dividends since inception and does not anticipate declaring or paying a cash dividend
for the foreseeable future.
Nevada
law prohibits our board from declaring or paying a dividend where, after giving effect to such a dividend, (i) we would not be
able to pay our debts as they came due in the ordinary course of our business, or (ii) our total assets would be less than the
sum of our total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of distribution,
to satisfy the rights of any creditors or preferred stockholders.
Securities
Authorized for Issuance under Equity Compensation Plans
We
do not have any equity compensation plans.
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
Our
officers and directors are indemnified as provided by the Nevada Revised Statutes and our bylaws.
Under
the governing Nevada statutes, director immunity from liability to a company or its shareholders for monetary liabilities applies
automatically unless it is specifically limited by a company's articles of incorporation. Our articles of incorporation do not
contain any limiting language regarding director immunity from liability. Excepted from this immunity are:
| |
1. |
a
willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has
a material conflict of interest; |
| |
2. |
a
violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable
cause to believe that his or her conduct was unlawful); |
| |
3. |
a
transaction from which the director derived an improper personal profit; and |
Our
bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law; provided,
however, that we may modify the extent of such indemnification by individual contracts with our directors and officers; and, provided,
further, that we shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof)
initiated by such person unless:
| |
1. |
such
indemnification is expressly required to be made by law; |
| |
2. |
the
proceeding was authorized by our Board of Directors; |
| |
3. |
such
indemnification is provided by us, in our sole discretion, pursuant to the powers vested us under Nevada law; or; |
| |
4. |
such
indemnification is required to be made pursuant to the bylaws. |
Our
bylaws provide that we will advance to any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director or officer, of the company, or is or was serving at the request of the company as a director or executive
officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding,
promptly following request therefore, all expenses incurred by any director or officer in connection with such proceeding upon
receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under our bylaws or otherwise.
Our
bylaws provide that no advance shall be made by us to an officer of the company, except by reason of the fact that such officer
is or was a director of the company in which event this paragraph shall not apply, in any action, suit or proceeding, whether
civil, criminal, administrative or investigative, if a determination is reasonably and promptly made: (a) by the board of directors
by a majority vote of a quorum consisting of directors who were not parties to the proceeding, or (b) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is made demonstrate clearly and convincingly that
such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of
the company.
Section
3 – Securities and Trading Markets
Item
3.02 Unregistered Sales of Equity Securities.
The
information provided in Items 1.01 and 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
The
shares issued in the Exchange were exempt from registration as they were issued in a private offering under Section 4(a)(2) of
the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
Section
5 – Corporate Governance and Management
Item
5.01 Changes in Control of Registrant.
The
information provided in Items 1.01 and 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
Item
5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements
of Certain Officers.
The
information provided in Items 1.01 and 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
Upon
the closing of the Exchange, Mr. Golden resigned as an officer and director of the Company and Mr. Gaudet resigned as President,
CEO and a director of the Company, but was appointed as Vice President. Robert J. Oswald was appointed as Chief Executive Officer
and President, Louis Isabella was appointed Chief Financial Officer, Secretary and Treasurer, and Matthew J. O’Brien was
appointed as Chief Technology Officer. Simultaneous with the closing, Messrs. Oswald and O’Brien were appointed as members
of our board of directors.
Item
5.06 Change in Shell Company Status.
The
information provided in Items 1.01 and 2.01 of this Current Report on Form 8-K is incorporated herein by reference.
Following
the consummation of the Exchange describer in Item 2.01 of this Current Report on Form 8-K, the Company believes that it is not
a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
Section
9 – Financial Statements and Exhibits
Item
9.01 Financial Statements and Exhibits.
| |
(a) |
Financial
Statements of Business Acquired. |
| |
|
|
Audited Financial Statements of Tech 9. |
| |
|
|
Unaudited Financial Statements of Tech 9 |
| |
|
|
|
| |
(b) |
Pro
forma financial information. |
| |
|
|
Pro forma financial statements |
| |
|
|
|
| |
(d) |
Exhibits.
All exhibits are filed herewith unless otherwise indicated. |
Exhibit
Number |
|
Description |
| 2.1 |
|
Share
Exchange Agreement, dated January 8, 2015 |
| 3.1 |
|
Articles of Incorporation(1) |
| 3.2 |
|
Bylaws(1) |
| 10.1 |
|
Consulting Agreement,
dated May 1, 2013 |
| 10.2 |
|
Consulting Agreement,
dated May 1, 2013 |
| 99.1 |
|
Balance
sheets of Tech 9 as of May 31, 2014 and 2013 and the related statements of operations, statements of shareholder’s deficit
and cash flows for the years ended May 31, 2014 and 2013 |
| 99.2 |
|
Balance
sheets of Tech 9 as of August 31, 2014 and May 31, 2014 and the related statements of operations and cash flows for the quarters
ended August 31, 2014 and 2013 |
| 99.3 |
|
Pro
forma financial information for August 31, 2014 and May 31, 2014 |
| |
(1) |
Incorporated by
reference on Form S-1 of the Company's Registration Statement filed on June 21, 2013. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Perk International,
Inc.
| By: |
/s/ Robert
J. Oswald |
|
| Robert J. Oswald |
|
| Date: January 8, 2015 |
|
31
Exhibit 2.1
SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement, dated as of January
8, 2015, is made by and among PERK INTERNATIONAL INC., a Nevada corporation (the "Acquiror" or “Perk”), each
of the Persons listed on the signature page hereto (collectively, the "Acquiror Shareholders," and individually an "Acquiror
Shareholder") each of the Persons listed on Exhibit B hereto (collectively, the "Shareholders," and individually
a "Shareholder"), and TECH 9 INC., an Ontario Corporation (the "Company").
BACKGROUND
The Shareholders have agreed to transfer to
the Acquiror, and the Acquiror has agreed to acquire from the Shareholders, all of the Shares, which Shares constitute 100% of
the outstanding capital stock of the Company, in exchange for 70,000,000 shares of the Acquiror's Common Stock to be issued on
the Closing Date (the "Acquiror Shares"), which Acquiror Shares shall constitute approximately 70% of the issued
and outstanding shares of Acquiror's Common Stock immediately after the closing of the transactions contemplated herein, in each
case, on the terms and conditions as set forth herein.
SECTION I
DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Section 1 will have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural
forms of any of the terms herein defined.
1.1 “Accredited Investor" has the meaning set forth in
Regulation D under the Securities Act and as set forth on Exhibit C.
1.2 “Acquired Companies" means, collectively, the Company
and any Company Subsidiaries.
1.3 “Acquiror Balance Sheet" means the Acquiror's audited
balance sheet at May 31, 2014 and its unaudited balance sheet as of 1st quarter ended August 31, 2014.
1.4 “Acquiror Board" means the Board of Directors of
the Acquiror.
1.5 “Acquiror Companies" means, collectively, the Acquiror
and the Acquiror Subsidiaries, if any.
1.6 “Acquiror's Common Stock" means the PERK INTERNATIONAL
INC., common stock, par value $0.0001 per share.
1.7 “Acquiror Subsidiaries" means all of the direct and
indirect Subsidiaries of the Acquiror, if any.
1.8 “Affiliate" means any Person that directly or indirectly
controls, is controlled by or is under common control with the indicated Person.
1.9 “Agreement" means this Share Exchange Agreement,
including all Schedules and Exhibits hereto, as this Share Exchange Agreement may be from time to time amended, modified or supplemented.
1.10 “Approved Plans" means any stock option or similar
plan for the benefit of employees or others which has been approved by the stockholders of the Acquiror.
1.11 “Closing Acquiror Shares" means the aggregate number
of Acquiror Shares issuable to the Shareholders at Closing.
1.12 “Closing Date" has the meaning set forth in Section
3.
1.13 “Code" means the Internal Revenue Code of 1986,
as amended.
1.14 “Common Stock" means the Company's common stock,
no par value per share.
1.15 “Commission" means the Securities and Exchange
Commission of the United States of America or any other federal agency then administering the Securities Act.
1.16 “Company Board" means the Board of Directors of
the Company.
1.17 “Company Indemnified Party" has the meaning set
forth in Section 12.2.1.
1.18 “Company Subsidiaries" means all of the direct and
indirect Subsidiaries of the Company, if any.
1.19 “Covered Persons" means all Persons, other than
Acquiror, who are parties to indemnification and employment agreements with Acquiror existing on or before the Closing Date.
1.20 “Damages" has the meaning set forth in Section 12.1.
1.21 “Distributor” means any underwriter, dealer or
other person who participates, pursuant to a contractual arrangement, in the distribution of the securities offered or sold in
reliance on Regulation S.
1.22 “Equity Security" means any stock or similar security,
including, without limitation, securities containing equity features and securities containing profit participation features, or
any security convertible into or exchangeable for, with or without consideration, any stock or similar security, or any security
carrying any warrant, right or option to subscribe to or purchase any shares of capital stock, or any such warrant or right.
1.23 “ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
1.24 “Exchange Act" means the Securities Exchange Act
of 1934 or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same will then be
in effect.
1.25 “Exhibits" means the several exhibits referred to
and identified in this Agreement.
1.26 “GAAP" means, with respect to any Person, Accounting
Principles Generally Accepted in the United States of America applied on a consistent basis with such Person's past practices.
1.27 “Governmental Authority” means any federal or national,
state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission,
department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator
or arbitral body, in each case whether U.S. or non-U.S.
1.28 “Indebtedness" means any obligation, contingent
or otherwise. Any obligation secured by a Lien on, or payable out of the proceeds of, or production from, property of the relevant
party will be deemed to be Indebtedness.
1.29 “Indemnified Persons" has the meaning set forth
in Section 8.6.1.
1.30 “Intellectual Property" means all industrial and
intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks,
trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common
law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered
or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists,
confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions,
development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda,
and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.
1.31 “Laws" means, with respect to any Person, any U.S.
or non-U.S. federal, national, state, provincial, local, municipal, international, multinational or other law (including common
law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.
1.32 “Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement,
any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction and including any lien or charge arising by Law.
1.33 “Material Acquiror Contract" means any and all agreements,
contracts, arrangements, leases, commitments or otherwise, of the Acquiror Companies, of the type and nature that the Acquiror
is required to file with the Commission.
1.34 “Material Adverse Effect" means, when used with
respect to the Acquiror Companies or the Acquired Companies, as the case may be, any change, effect or circumstance which, individually
or in the aggregate, would reasonably be expected to (a) have a material adverse effect on the business, assets, financial condition
or results of operations of the Acquiror Companies or the Acquired Companies, as the case may be, in each case taken as a whole
or (b) materially impair the ability of the Acquiror or the Company, as the case may be, to perform their obligations under this
Agreement, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions
contemplated by this Agreement, (ii) changes in the United States securities markets generally, or (iii) changes in general economic,
currency exchange rate, political or regulatory conditions in industries in which the Acquiror Companies or the Acquired Companies,
as the case may be, operate.
1.35 “Order" means any award, decision, injunction, judgment,
order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Authority.
1.36 “Organizational Documents" means (a) the articles
or certificate of incorporation and the bylaws or code of regulations of a corporation; (b) the partnership agreement and any statement
of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a
limited partnership; (d) the articles or certificate of formation and operating agreement of a limited liability company; (e) any
other document performing a similar function to the documents specified in clauses (a), (b), (c) and (d) adopted or filed in connection
with the creation, formation or organization of a Person; and (f) any and all amendments to any of the foregoing.
1.37 “Permitted Liens" means (a) Liens for Taxes not
yet payable or in respect of which the validity thereof is being contested in good faith by appropriate proceedings and for the
payment of which the relevant party has made adequate reserves; (b) Liens in respect of pledges or deposits under workmen's compensation
laws or similar legislation, carriers, warehousemen, mechanics, laborers and material men and similar Liens, if the obligations
secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings conducted and for
the payment of which the relevant party has made adequate reserves; (c) statutory Liens incidental to the conduct of the business
of the relevant party which were not incurred in connection with the borrowing of money or the obtaining of advances or credits
and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the
operation of its business; and (d) Liens that would not have a Material Adverse Effect.
1.38 “Person" means all natural persons, corporations,
business trusts, associations, companies partnerships, limited liability companies, joint ventures and other entities, governments,
agencies and political subdivisions.
1.39 “Preferred Stock" means the Company's Blanket Preferred
Shares, $0.001 par value per share.
1.40 Deliberately Deleted
1.41 “Proceeding" means any action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative or investigative) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Authority.
1.42 “Regulation S" means Regulation S under the
Securities Act, as the same may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.
1.43 “Rule 144" means Rule 144 under the Securities
Act, as the same may be amended from time to time, or any successor statute.
1.44 Deliberately Deleted
1.45 “Schedules" means the several schedules referred
to and identified herein, setting forth certain disclosures, exceptions and other information, data and documents referred to at
various places throughout this Agreement.
1.46 “SEC Documents" has the meaning set forth
in Section 6.26.
1.47 “Section 4(a)(2)" means Section 4(a)(2) under
the Securities Act, as the same may be amended from time to time, or any successor statute.
1.48 “Securities Act" means the Securities Act
of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same
will be in effect at the time.
1.49 “Shares" means the (a) 200 issued and outstanding
shares of Common Stock of the Company and (b) -0- issued and outstanding shares of Preferred Stock, in each case, owned by the
Shareholders and exchanged pursuant to this Agreement.
1.50 “Subsidiary" means, with respect to any Person,
any corporation, limited liability company, joint venture or partnership of which such Person (a) beneficially owns, either directly
or indirectly, more than 50% of (i) the total combined voting power of all classes of voting securities of such entity, (ii) the
total combined equity interests, or (iii) the capital or profit interests, in the case of a partnership; or (b) otherwise has the
power to vote or to direct the voting of sufficient securities to elect a majority of the board of directors or similar governing
body.
1.51 “Survival Period" has the meaning set forth
in Section 12.1.
1.52 “Taxes" means all foreign, federal, state
or local taxes, charges, fees, levies, imposts, duties and other assessments, as applicable, including, but not limited to, any
income, alternative minimum or add-on, estimated, gross income, gross receipts, sales, use, transfer, transactions, intangibles,
ad valorem, value-added, franchise, registration, title, license, capital, paid-up capital, profits, withholding, payroll, employment,
unemployment, excise, severance, stamp, occupation, premium, real property, recording, personal property, federal highway use,
commercial rent, environmental (including, but not limited to, taxes under Section 59A of the Code) or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalties
or additions to tax with respect to any of the foregoing; and "Tax" means any of the foregoing Taxes.
1.53 “Tax Group" means any federal, state, local
or foreign consolidated, affiliated, combined, unitary or other similar group of which the Acquiror is now or was formerly a member.
1.54 “Tax Return" means any return, declaration,
report, claim for refund or credit, information return, statement or other similar document filed with any Governmental Authority
with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
1.55 “Transaction Documents" means, collectively,
all agreements, instruments and other documents to be executed and delivered in connection with the transactions contemplated by
this Agreement.
1.56 “U.S." means the United States of America.
1.57 “U.S. person" has the
meaning set forth in Regulation S under the Securities Act and set forth on Exhibit C hereto.
SECTION II
RETIREMENT OF SHARES AND ISSUANCE OF SHARES
AND SHARE CONSIDERATION
2.1 Share Exchange. Each Acquior’s shareholders will retire
22,500,000 shares for a total of 45,000,000 shares in accordance with an Agreement of Conveyance, Transfer and Assignment of Assets
and Assumption of Obligations entered into on even date herewith. The Shareholders desire to acquior from the Acquior (Perk) 70,000,000
newly issued shares of Perk International from Perk treasury. Acquiror desires to acquire from the Shareholder, that number of
Shares set out beside the respective names of the Shareholders in Exhibit “B” for the consideration and on the terms
set forth in this Agreement. Subject to Section 3.2, the aggregate consideration for the Shares acquired by the Acquiror pursuant
to this Agreement will be 70,000,000 shares of the Acquiror's Common Stock to be issued on a pro rata basis among the Shareholders
based on the percentage of the Shares owned by each Shareholder as set forth in Exhibit B.
2.2 Officers and Directors of Acquiror at Closing. Simultaneously
with the Closing of the transactions contemplated by this Agreement, the current directors of the Acquiror shall appoint Robert
Oswald as President, CEO and Director, Louis Isabella as Chief Financial Officer, Secretary and Treasurer, and Matt O’Brien
as Chief Technology Officer and Director. Andrew Gaudet shall resign as President and CEO, but will remain as a Director and be
appointed as Vice President of the Acquiror. Leon Golden shall resign as an Officer and Director of the Acquiror. Each of Messrs.
Gaudet and Golden shall return to Acquiror’s treasury 22,500,000 shares (total 45,000,000 shares) of the Acquiror’s
common stock.
SECTION III
CLOSING
3.1 Closing. The closing (the "Closing") of the share
exchange will occur at the offices of Acquiror’s counsel in Las Vegas, Nevada on January 7, 2015 or at such later date as
all of the closing conditions set forth in Sections 9 and 10 have been satisfied or waived (the "Closing Date"). At the
Closing, each Shareholder will deliver to the Acquiror certificate(s) evidencing the number of Shares held by such Shareholder
(as set forth in Exhibit B), along with executed medallion guaranteed stock powers transferring such Shares to the Acquiror, against
delivery to each Shareholder by the Acquiror of a certificate evidencing such Shareholder's pro rata share of the Acquiror Shares
(as set forth in Exhibit B).
3.2 The Company shall provide the Acquiror with all audited financial
information necessary for Acquiror to file a report on Form 8K and/or Form 10K and/or any Registration Statement with the SEC.
Such information will be audited by an accounting firm that is qualified to practice before the SEC and contain no qualifications
as to compliance with US GAAP.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
4.1 Generally. Each Shareholder, severally and not jointly, hereby
represents and warrants to the Acquiror:
4.1.1 Authority. Such Shareholder has the right,
power, authority and capacity to execute and deliver this Agreement and each of the Transaction Documents to which such Shareholder
is a party, to consummate the transactions contemplated by this Agreement and each of the Transaction Documents to which such Shareholder
is a party, and to perform such Shareholder's obligations under this Agreement and each of the Transaction Documents to which such
Shareholder is a party. This Agreement has been, and each of the Transaction Documents to which such Shareholder is a party will
be, duly and validly authorized and approved, executed and delivered by such Shareholder. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the parties thereto other than such Shareholder, this
Agreement is, and as of the Closing each of the Transaction Documents to which such Shareholder is a party will have been, duly
authorized, executed and delivered by such Shareholder and constitute or will constitute the legal, valid and binding obligation
of such Shareholder, enforceable against such Shareholder in accordance with their respective terms, except as such enforcement
is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors
rights generally.
4.1.2 No Conflict. Neither the execution or
delivery by such Shareholder of this Agreement or any Transaction Document to which such Shareholder is a party, nor the consummation
or performance by such Shareholder of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene,
conflict with, or result in a violation of any provision of the Organization Documents of such Shareholder (if such Shareholder
is not a natural person); (b) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse
of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument
to which such Shareholder is a party or by which the properties or assets of such Shareholder are bound; or (c) contravene, conflict
with, or result in a violation of, any Law or Order to which such Shareholder, or any of the properties or assets of such Shareholder,
may be subject.
4.1.3 Ownership of Shares. Such Shareholder
owns, of record and beneficially, and has good, valid and indefeasible title to and the right to transfer to the Acquiror pursuant
to this Agreement, such Shareholder's Shares free and clear of any and all Liens. The Shareholder’s Shares represent all
of the issued and outstanding shares in the Company. There are no options, rights, voting trusts, stockholder agreements or any
other contracts or understandings to which such Shareholder is a party or by which such Shareholder or such Shareholder's Shares
are bound with respect to the issuance, sale, transfer, voting or registration of such Shareholder's Shares. At the Closing, the
Acquiror will acquire good, valid and marketable title to such Shareholder's Shares free and clear of any and all Liens.
4.1.4 Litigation. There is no pending Proceeding
against such Shareholder that challenges, or may have the effect of preventing, delaying or making illegal, or otherwise interfering
with, any of the transactions contemplated by this Agreement and, to the knowledge of such Shareholder, no such Proceeding has
been threatened, and no event or circumstance exists that is reasonably likely to give rise to or serve as a basis for the commencement
of any such Proceeding.
4.1.5 No Brokers or Finders. Except as disclosed
in Schedule 4.1.5, no Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against
such Shareholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity, and such Shareholder
will indemnify and hold the Acquiror harmless against any liability or expense arising out of, or in connection with, any such
claim.
4.2 Investment Representations. Each Shareholder, severally and
not jointly, hereby represents and warrants to the Acquiror:
4.2.1 Acknowledgment. Each Shareholder understands
and agrees that the Acquiror Shares have not been registered under the Securities Act or the securities laws of any state of the
U.S. and that the issuance of the Acquiror Shares is being effected in reliance upon an exemption from registration afforded either
under Section 4(a)(2) of the Securities Act for transactions by an issuer not involving a public offering or Regulation S for offers
and sales of securities outside the U.S.
4.2.2 Status. By its execution of this Agreement,
each Shareholder, severally and not jointly, represents and warrants to the Acquiror as indicated on its signature page to this
Agreement, either that:(a) it is an Accredited Investor; or (b) it is not a U.S. person.
Each Shareholder severally understands that the
Acquiror Shares are being offered and sold to such Shareholder in reliance upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Shareholder set forth in this Agreement, in order that the Acquiror
may determine the applicability and availability of the exemptions from registration of the Acquiror Shares on which the Acquiror
is relying.
4.2.3 Additional Representations and Warranties
of Accredited Investors. Each Shareholder indicating that it is an Accredited Investor on its signature page to this Agreement,
severally and not jointly, further makes the representations and warranties to the Acquiror set forth on Exhibit E.
4.2.4 Additional Representations and Warranties
of Non-U.S. Persons. Each Shareholder indicating that it is not a U.S. person on its signature page to this Agreement, severally
and not jointly, further makes the representations and warranties to the Acquiror set forth on Exhibit F.
4.2.5 Stock Legends. Each Shareholder hereby
agrees with the Acquiror as follows:
(a) Securities Act Legend - Accredited Investors.
The certificates evidencing the Acquiror Shares issued to those Shareholders who are Accredited Investors, and each certificate
issued in transfer thereof, will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
(b) Securities Act Legend - Non-U.S. Persons.
The certificates evidencing the Acquiror Shares issued to those Shareholders who are not U.S. persons, and each certificate issued
in transfer thereof, will bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR
ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH THE PROVISIONS
OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, AND BASED ON AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT THE PROVISIONS OF REGULATION S HAVE BEEN SATISFIED (2) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR (3) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO THE COMPANY
AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER
CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. HEDGING TRANSACTIONS INVOLVING THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
THE SECURITIES ACT.
(c) Other Legends. The certificates representing
such Acquiror Shares, and each certificate issued in transfer thereof, will also bear any other legend required under any applicable
Law, including, without limitation, any U.S. state corporate and state securities law, or contract.
(d) Opinion. No Shareholder will transfer
any or all of the Acquiror Shares pursuant to Regulation S or absent an effective registration statement under the Securities Act
and applicable state securities law covering the disposition of such Shareholder's Acquiror Shares, without first providing the
Acquiror with an opinion of counsel (which counsel and opinion are reasonably satisfactory to the Acquiror) to the effect that
such transfer will be made in compliance with Regulation S or will be exempt from the registration and the prospectus delivery
requirements of the Securities Act and the registration or qualification requirements of any applicable U.S. state securities laws.
(e) Consent. Each Shareholder understands
and acknowledges that the Acquiror may refuse to transfer the Acquiror Shares, unless such Shareholder complies with this Section
4.2.5 and any other restrictions on transferability set forth in Exhibits E and F. Each Shareholder consents to the Acquiror making
a notation on its records or giving instructions to any transfer agent of the Acquiror's Common Stock in order to implement the
restrictions on transfer of the Acquiror Shares.
SECTION V
REPRESENTATIONS AND WARRANTIES BY THE COMPANY
The Company represents and warrants to the Acquiror as follows:
5.1 Organization and Qualification. The Company is duly incorporated
and validly existing under the laws of Ontario, Canada, has all requisite authority and power (corporate and other), governmental
licenses, authorizations, consents and approvals to carry on its business as presently conducted and as contemplated to be conducted,
to own, hold and operate its properties and assets as now owned, held and operated by it, to enter into this Agreement, to carry
out the provisions hereof except where the failure to be so organized, existing and in good standing or to have such authority
or power will not, in the aggregate, either (i) have a material adverse effect on the business, assets or financial condition of
the Company, or (ii) materially impair the ability of the Company and the Shareholders each to perform their material obligations
under this Agreement (any of such effects or impairments, a "Material Adverse Effect"). The Company is duly qualified,
licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or
its properties owned or leased makes such qualification, licensing or domestication necessary, except where the failure to be so
qualified, licensed or domesticated will not have a Material Adverse Effect. Set forth on Schedule 5.1 is a list of those jurisdictions
in which the Company presently conducts its business, owns, holds and operates its properties and assets.
5.2 Subsidiaries. Except as set forth on Schedule 5.2, the Company
does not own directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other
entity or enterprise.
5.3 Articles of Incorporation and Bylaws. The copies of the Articles
of Association of the Company (the "Organizational Documents") that have been delivered to the Acquiror prior to the
execution of this Agreement are true and complete and have not been amended or repealed. The Company is not in violation or breach
of any of the provisions of the Organizational Documents, except for such violations or breaches as, in the aggregate, will not
have a Material Adverse Effect.
5.4 Authorization and Validity of this Agreement. The execution,
delivery and performance by the Company of this Agreement and the recording of the transfer of the Shares and the delivery of the
Shares are within the Company's corporate powers, have been duly authorized by all necessary corporate action, do not require from
the Board or Shareholders of the Company any consent or approval that has not been validly and lawfully obtained, require no authorization,
consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board,
bureau, agency or instrumentality of government that has not been validly and lawfully obtained, filed or registered, as the case
may be, except for those that, if not obtained or made would not have a Material Adverse Effect.
5.5 No Violation. None of the execution, delivery or performance
by the Company of this Agreement or any other agreement or instrument contemplated hereby to which the Company is a party, nor
the consummation by the Company of the transactions contemplated hereby will violate any provision of the Organizational Documents,
or violate or be in conflict with, or constitute a default (or an event or condition which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or acceleration of, or result in the creation of imposition of
any Lien under, any agreement or instrument to which the Company is a party or by which the Company is or will be bound or subject,
or violate any laws.
5.6 Binding Obligations. Assuming this Agreement has been duly and
validly authorized, executed and delivered by the Acquiror, the Acquiror Shareholders and the Shareholders, this Agreement is,
and as of the Closing each other agreement or instrument contemplated hereby to which the Company is a party, will have been duly
authorized, executed and delivered by the Company and will be the legal, valid and binding Agreement of the Company and is enforceable
against the Company in accordance with its terms, except as such enforcement is limited by general equitable principles, or by
bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally.
5.7 Capitalization and Related Matters.
5.7.1 Capitalization. The authorized capital
stock of Tech 9 consists of an unlimited number of shares of Common Stock, of which 200 shares are issued and outstanding. Except
as set forth in Schedule 5.7.1, there are no outstanding or authorized options, warrants, calls, subscriptions, rights (including
any preemptive rights or rights of first refusal), agreements or commitments of any character obligating the Company to issue any
shares of its Common Stock or any other Equity Security of the Company. All issued and outstanding shares of the Company's capital
stock are duly authorized, validly issued, fully paid and nonassessable and have not been issued in violation of any preemptive
or similar rights.
5.7.2 No Redemption Requirements. Except as
set forth in Schedule 5.7.2, there are no outstanding contractual obligations (contingent or otherwise) of the Company to retire,
repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, the Company
or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.
5.7.3 Duly Authorized. The exchange of the Shares
has been duly authorized and, upon delivery to the Acquiror of certificates therefore in accordance with the terms of this Agreement,
the Shares will have been validly issued and fully paid and will be nonassessable, have the rights, preferences and privileges
specified, will be free of preemptive rights and will be free and clear of all Liens and restrictions, other than Liens set forth
on Schedule 5.7.3 or that might have been created by the Acquiror and restrictions on transfer imposed by this Agreement and the
Securities Act.
5.8 Shareholders. Exhibit B contains a true and complete list of
the names and addresses of the record and beneficial holders of all of the outstanding Equity Securities of the Company. Except
as expressly provided in this Agreement, no Holder of Shares or any other security of the Company or any other Person is entitled
to any preemptive right, right of first refusal or similar right as a result of the issuance of the shares or otherwise. There
is no voting trust, agreement or arrangement among any of the Holders of any Equity Securities of the Company affecting the exercise
of the voting rights of any such Equity Securities.
5.9 Compliance with Laws and Other Instruments. Except as would
not have a Material Adverse Effect, the business and operations of the Company have been and are being conducted in accordance
with all applicable foreign, federal, state and local laws, rules and regulations and all applicable orders, injunctions, decrees,
writs, judgments, determinations and awards of all courts and governmental agencies and instrumentalities. Except as would not
have a Material Adverse Effect, the Company is not, and is not alleged to be, in violation of, or (with or without notice or lapse
of time or both) in default under, or in breach of, any term or provision of the Organizational Documents or of any indenture,
loan or credit agreement, note, deed of trust, mortgage, security agreement or other material agreement, lease, license or other
instrument, commitment, obligation or arrangement to which the Company is a party or by which any of the Company's properties,
assets or rights are bound or affected. To the knowledge of the Company, no other party to any material contract, agreement, lease,
license, commitment, instrument or other obligation to which the Company is a party is (with or without notice or lapse of time
or both) in default thereunder or in breach of any term thereof. The Company is not subject to any obligation or restriction of
any kind or character, nor is there, to the knowledge of the Company, any event or circumstance relating to the Company that materially
and adversely affects in any way its business, properties, assets or prospects or that prohibits the Company from entering into
this Agreement or would prevent or make burdensome its performance of or compliance with all or any part of this Agreement or the
consummation of the transactions contemplated hereby or thereby.
5.10 Certain Proceedings. There is no pending Proceeding that has
been commenced against the Company and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated in this Agreement. To the Company's knowledge, no such Proceeding has been
threatened.
5.11 No Brokers or Finders. Except as disclosed in Schedule 5.11,
no person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Company for
any commission, fee or other compensation as a finder or broker, or in any similar capacity, and the Company will indemnify and
hold the Acquiror harmless against any liability or expense arising out of, or in connection with, any such claim.
5.12 Title to and Condition of Properties. The Company owns or holds
under valid leases or other rights to use all real property, plants, machinery and equipment necessary for the conduct of the business
of the Company as presently conducted, except where the failure to own or hold such property, plants, machinery and equipment would
not have a Material Adverse Effect on the Company. The material buildings, plants, machinery and equipment necessary for the conduct
of the business of the Company as presently conducted are structurally sound, are in good operating condition and repair and are
adequate for the uses to which they are being put, in each case, taken as a whole, and none of such buildings, plants, machinery
or equipment is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in
nature or cost.
5.13 Board Recommendation. The Board has, by unanimous written consent,
determined that this Agreement and the transactions contemplated by this Agreement, are advisable and in the best interests of
the Company's Shareholders.
SECTION VI
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
AND
THE ACQUIROR SHAREHOLDERS
The Acquiror and the Acquiror Shareholders, jointly and severally,
represents and warrants to the Shareholders and the Company as follows:
6.1 Organization and Qualification. Each of the Acquiror Companies
is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, has all requisite
authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business
as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, except where
the failure to be so organized, existing and in good standing, or to have such authority and power, governmental licenses, authorizations,
consents or approvals would not have a Material Adverse Effect. Each of the Acquiror Companies is duly qualified, licensed or domesticated
as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned, held
or operated makes such qualification, licensing or domestication necessary, except where the failure to be so duly qualified, licensed
or domesticated and in good standing would not have a Material Adverse Effect. Schedule 6.1 sets forth a true, correct and complete
list of each Acquiror Company's jurisdiction of organization and each other jurisdiction in which such Acquiror Company presently
conducts its business or owns, holds and operates its properties and assets.
6.2 Subsidiaries. Except as set forth on Schedule 6.2, no Acquiror
Company owns, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or
other entity or enterprise.
6.3 Organizational Documents. True, correct and complete copies
of the Organizational Documents of each Acquiror Company have been delivered to the Company prior to the execution of this Agreement,
and no action has been taken to amend or repeal such Organizational Documents except for the filing of any Amendment to the Certificate
of Incorporation of the Acquiror, as may have been disclosed in the Acquiror’s SEC Documents. No Acquiror Company is in violation
or breach of any of the provisions of its Organizational Documents, except for such violations or breaches as would not have a
Material Adverse Effect.
6.4 Authorization. The Acquiror has all requisite authority and
power (corporate and other), governmental licenses, authorizations, consents and approvals to enter into this Agreement and each
of the Transaction Documents to which the Acquiror is a party, to consummate the transactions contemplated by this Agreement and
each of the Transaction Documents to which the Acquiror is a party and to perform its obligations under this Agreement and each
of the Transaction Documents to which the Acquiror is a party. The execution, delivery and performance by the Acquiror of this
Agreement and each of the Transaction Documents to which the Acquiror is a party have been duly authorized by all necessary corporate
action and do not require from the Acquiror Board or the stockholders of the Acquiror any consent or approval that has not been
validly and lawfully obtained. The execution, delivery and performance by the Acquiror of this Agreement and each of the Transaction
Documents to which the Acquiror is a party requires no authorization, consent, approval, license, exemption of or filing or registration
with any Governmental Authority or other Person other than such customary filings with the Commission for transactions of the type
contemplated by this Agreement, if required.
6.5 No Violation. Neither the execution or delivery by the Acquiror
of this Agreement or any Transaction Document to which the Acquiror is a party, nor the consummation or performance by the Acquiror
of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a
violation of any provision of the Organizational Documents of any Acquiror Company; (b) contravene, conflict with, constitute a
default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in
the termination or acceleration of, or result in the imposition or creation of any Lien under, any agreement or instrument to which
any Acquiror Company is a party or by which the properties or assets of any Acquiror Company are bound; (c) contravene, conflict
with, or result in a violation of, any Law or Order to which any Acquiror Company, or any of the properties or assets owned or
used by any Acquiror Company, may be subject; or (d) contravene, conflict with, or result in a violation of, the terms or requirements
of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits,
authorizations, approvals, franchises or other rights held by any Acquiror Company or that otherwise relate to the business of,
or any of the properties or assets owned or used by, any Acquiror Company, except, in the case of clause (b), (c), or (d), for
any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect.
6.6 Binding Obligations. Assuming this Agreement and the Transaction
Documents have been duly and validly authorized, executed and delivered by the parties thereto other than the Acquiror, this Agreement
has been, and as of the Closing each of the Transaction Documents to which the Acquiror is a party will be, duly authorized, executed
and delivered by the Acquiror and constitutes or will constitute, as the case may be, the legal, valid and binding obligations
of the Acquiror, enforceable against the Acquiror in accordance with their respective terms, except as such enforcement is limited
by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights
generally.
6.7 Securities Laws. Assuming the accuracy of the representations
and warranties of the Shareholders contained in Section 4 and Exhibits E and F, the issuance of the Acquiror Shares pursuant to
this Agreement are and will be (a) exempt from the registration and prospectus delivery requirements of the Securities Act, and
(b) accomplished in conformity with all applicable federal securities laws.
6.8 Capitalization and Related Matters.
6.8.1 Capitalization. The authorized capital
stock of the Acquiror consists of 250,000,000 shares of the Acquiror's Common Stock, of which 75,133,132 shares are issued and
outstanding as of August 31, 2014, and 1,000,000 shares of preferred stock, none of which are issued and outstanding and 29,866,668
Stock Purchase Warrants exercisable at $0.15 per share which retire on September 30, 2017. All issued and outstanding shares of
the Acquiror's Common Stock are duly authorized, validly issued, fully paid and nonassessable, and have not been issued in violation
of any preemptive or similar rights. On the Closing Date, the Acquiror will have sufficient authorized and unissued Acquiror's
Common Stock to consummate the transactions contemplated hereby. Except as disclosed herein or in Schedule 6.8.1 or the SEC Documents,
there are no outstanding options, purchase agreements, participation agreements, subscription rights, conversion rights, exchange
rights or other securities or contracts that could require the Acquiror to issue, sell or otherwise cause to become outstanding
any of its authorized but unissued shares of capital stock or any securities convertible into, exchangeable for or carrying a right
or option to purchase shares of capital stock or to create, authorize, issue, sell or otherwise cause to become outstanding any
new class of capital stock. There are no outstanding stockholders' agreements, voting trusts or arrangements, registration rights
agreements, rights of first refusal or other contracts pertaining to the capital stock of the Acquiror. The issuance of all of
the shares of Acquiror's Common Stock described in this Section 6.8.1 have been in compliance with U.S. federal securities laws.
6.8.2 No Redemption Requirements. Except as
set forth in Schedule 6.8.2 or in the SEC Documents, there are no outstanding contractual obligations (contingent or otherwise)
of the Acquiror to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership
interests in, the Acquiror or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise)
in any other Person.
6.8.3 Duly Authorized. The issuance of the Acquiror
Shares has been duly authorized and, upon delivery to the Shareholders of certificates therefore in accordance with the terms of
this Agreement, the Acquiror Shares will have been validly issued and fully paid, and will be nonassessable, have the rights, preferences
and privileges specified, will be free of preemptive rights and will be free and clear of all Liens and restrictions, other than
Liens created by the Shareholders and restrictions on transfer imposed by this Agreement and the Securities Act or any lock-up
agreements.
6.8.4 Subsidiaries. The capitalization of each
Acquiror Subsidiary, if any, is as set forth on Schedule 6.8.4. The issued and outstanding shares of capital stock of each Acquiror
Subsidiary set forth on such schedule have been duly authorized and are validly issued and outstanding, fully paid and non-assessable,
and constitute all of the issued and outstanding capital stock of such Acquiror Subsidiary. The owners of the shares of each of
the Acquiror Subsidiaries set forth on Schedule 6.8.4 own, and have good, valid and marketable title to, all shares of capital
stock of such Subsidiaries. There are no outstanding or authorized options, warrants, purchase agreements, participation agreements,
subscription rights, conversion rights, exchange rights or other securities or contracts that could require any of the Acquiror
Subsidiaries to issue, sell or otherwise cause to become outstanding any of its respective authorized but unissued shares of capital
stock or any securities convertible into, exchangeable for or carrying a right or option to purchase shares of capital stock or
to create, authorize, issue, sell or otherwise cause to become outstanding any new class of capital stock. There are no outstanding
stockholders' agreements, voting trusts or arrangements, registration rights agreements, rights of first refusal or other contracts
pertaining to the capital stock of any of the Acquiror Subsidiaries. None of the outstanding shares of capital stock of any of
the Acquiror Subsidiaries has been issued in violation of any rights of any Person or in violation of any Law.
6.9 Compliance with Laws. Except as would not have a Material Adverse
Effect, the business and operations of each Acquiror Company have been and are being conducted in accordance with all applicable
Laws and Orders. Except as would not have a Material Adverse Effect, no Acquiror Company has received notice of any violation (or
any Proceeding involving an allegation of any violation) of any applicable Law or Order by or affecting such Acquiror Company and,
to the knowledge of the Acquiror, no Proceeding involving an allegation of violation of any applicable Law or Order is threatened
or contemplated. Except as would not have a Material Adverse Effect, no Acquiror Company is subject to any obligation or restriction
of any kind or character, nor is there, to the knowledge of the Acquiror, any event or circumstance relating to any Acquiror Company
that materially and adversely affects in any way its business, properties, assets or prospects or that prohibits the Acquiror from
entering into this Agreement or would prevent or make burdensome its performance of or compliance with all or any part of this
Agreement or the consummation of the transactions contemplated hereby.
6.10 Certain Proceedings. There is no pending Proceeding that has
been commenced against the Acquiror and that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated by this Agreement. To the knowledge of the Acquiror, no such Proceeding
has been threatened.
6.11 No Brokers or Finders. Except as disclosed in Schedule 6.11,
no Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against any Acquiror
Company for any commission, fee or other compensation as a finder or broker, or in any similar capacity, and the Acquiror will
indemnify and hold the Company harmless against any liability or expense arising out of, or in connection with, any such claim.
6.12 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 6.12 or in the SEC Documents, no Acquiror Company has any debt, obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due, whether or not known to such Acquiror Company) arising out of any transaction
entered into at or prior to the Closing or any act or omission at or prior to the Closing, except to the extent set forth on or
reserved against on the Acquiror Balance Sheet. Except as set forth on Schedule 6.12 or in the SEC Documents, no Acquiror Company
has incurred any liabilities or obligations under agreements entered into, in the usual and ordinary course of business since March
31, 2009. Notwithstanding the foregoing, all liabilities will be discharged prior to or at the Closing so that, at the Closing,
the Acquiror will have no direct, contingent or other obligations of any kind or any commitment or contractual obligations of any
kind and description.
6.13 Changes. Except as set forth on Schedule 6.13 or in the SEC
Documents, no Acquiror Company has, since July 15, 2014:
6.13.1 Ordinary Course of Business. Conducted
its business or entered into any transaction other than in the usual and ordinary course of business, except for this Agreement.
6.13.2 Adverse Changes. Suffered or experienced
any change in, or affecting, its condition (financial or otherwise), properties, assets, liabilities, business, operations, results
of operations or prospects other than changes, events or conditions in the usual and ordinary course of its business, none of which
would have a Material Adverse Effect;
6.13.3 Loans. Made any loans or advances to
any Person other than travel advances and reimbursement of expenses made to employees, officers and directors in the ordinary course
of business;
6.13.4 Liens. Created or permitted to exist
any Lien on any material property or asset of the Acquiror Companies, other than Permitted Liens;
6.13.5 Capital Stock. Issued, sold, disposed
of or encumbered, or authorized the issuance, sale, disposition or encumbrance of, or granted or issued any option to acquire any
shares of its capital stock or any other of its securities or any Equity Security, or altered the term of any of its outstanding
securities or made any change in its outstanding shares of capital stock or its capitalization (except by way of amended Certificate
of Incorporation) whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of
shares, stock dividend or otherwise;
6.13.6 Dividends. Declared, set aside, made
or paid any dividend or other distribution to any of its stockholders;
6.13.7 Material Acquiror Contracts. Terminated
or modified any Material Acquiror Contract, except for termination upon expiration in accordance with the terms thereof;
6.13.8 Claims. Released, waived or cancelled
any claims or rights relating to or affecting such Acquiror Company in excess of $10,000 in the aggregate or instituted or settled
any Proceeding involving in excess of $10,000 in the aggregate;
6.13.9 Discharged Liabilities. Paid, discharged
or satisfied any claim, obligation or liability in excess of $10,000 in the aggregate, except for liabilities incurred prior to
the date of this Agreement in the ordinary course of business;
6.13.10 Indebtedness. Created, incurred, assumed
or otherwise become liable for any Indebtedness in excess of $10,000 in the aggregate, other than professional fees (as indicated
in Schedule 6.13.10);
6.13.11 Guarantees. Guaranteed or endorsed in
a material amount any obligation or net worth of any Person;
6.13.12 Acquisitions. Acquired the capital stock
or other securities or any ownership interest in, or substantially all of the assets of, any other Person;
6.13.13 Accounting. Changed its method of accounting
or the accounting principles or practices utilized in the preparation of its financial statements, other than as required by GAAP;
6.13.14 Agreements. Except as set forth on Schedule
6.13.14 or in the SEC Documents, entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
6.14 Material Acquiror Contracts. Except to the extent already filed
with the SEC Documents, (and available on its “Edgar” database) the Acquiror has made available to the Company, prior
to the date of this Agreement, true, correct and complete copies of each written Material Acquiror Contract, including each amendment,
supplement and modification thereto.
6.14.1 No Defaults. Each Material Acquiror Contract
is a valid and binding agreement of the Acquiror Company that is party thereto, and is in full force and effect. Except as would
not have a Material Adverse Effect, no Acquiror Company is in breach or default of any Material Acquiror Contract to which it is
a party and, to the knowledge of the Acquiror, no other party to any Material Acquiror Contract is in breach or default thereof.
Except as would not have a Material Adverse Effect, no event has occurred or circumstance exists that (with or without notice or
lapse of time) would (a) contravene, conflict with or result in a violation or breach of, or become a default or event of default
under, any provision of any Material Acquiror Contract or (b) permit any Acquiror Company or any other Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any
Material Acquiror Contract. No Acquiror Company has received notice of the pending or threatened cancellation, revocation or termination
of any Material Acquiror Contract to which it is a party. There are no renegotiations of, or attempts to renegotiate, or outstanding
rights to renegotiate any material terms of any Material Acquiror Contract.
6.15 Employees.
6.15.1 Except as set forth on Schedule 6.15.1
or in the SEC Documents, the Acquiror Companies have no employees, independent contractors or other Persons providing research
or other services to them. Except as would not have a Material Adverse Effect, each Acquiror Company is in full compliance with
all Laws regarding employment, wages, hours, benefits, equal opportunity, collective bargaining, the payment of Social Security
and other taxes, occupational safety and health and plant closing. No Acquiror Company is liable for the payment of any compensation,
damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Laws.
6.15.2 No director, officer or employee of any
Acquiror Company is a party to, or is otherwise bound by, any contract (including any confidentiality, noncompetition or proprietary
rights agreement) with any other Person that in any way adversely affects or will materially affect (a) the performance of his
or her duties as a director, officer or employee of such Acquiror Company or (b) the ability of such Acquiror Company to conduct
its business. Except as set forth on Schedule 6.15.2, each employee of each Acquiror Company is employed on an at-will basis and
no Acquiror Company has any contract with any of its employees which would interfere with such Acquiror Company's ability to discharge
its employees.
6.16 Tax Returns and Audits.
6.16.1 Tax Returns. The Acquiror Companies have
filed all material Tax Returns required to be filed by or on behalf of the Acquiror Companies and have paid all material Taxes
of each Acquiror Company required to have been paid (whether or not reflected on any Tax Return). Except as set forth on Schedule
6.16.1, (a) no Governmental Authority in a jurisdiction where an Acquiror Company does not file Tax Returns has made a claim, assertion
or threat to such Acquiror Company that such Acquiror Company is or may be subject to taxation by such jurisdiction; (b) there
are no Liens with respect to Taxes on any Acquiror Company's property or assets other than Permitted Liens; and (c) there are no
Tax rulings, requests for rulings, or closing agreements relating to any Acquiror Company for any period (or portion of a period)
that would affect any period after the date hereof. Acquiror has suffered losses and no taxes are due
6.16.2 No Adjustments, Changes. No Acquiror
Company nor any other Person on behalf of any Acquiror Company (a) has executed or entered into a closing agreement pursuant to
Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law; or (b) has
agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law.
6.16.3 No Disputes. There is no pending audit,
examination, investigation, dispute, proceeding or claim with respect to any Taxes of the Acquiror Companies, nor is any such claim
or dispute pending or contemplated. The Acquiror has delivered to the Company true, correct and complete copies of all Tax Returns,
if any, examination reports and statements of deficiencies assessed or asserted against or agreed to by the Acquiror Companies
since their inception and any and all correspondence with respect to the foregoing.
6.16.4 Not a U.S. Real Property Holding Corporation.
The Acquiror is not and has not been a United States real property holding corporation within the meaning of Section 897(c)(2)
of the Code at any time during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
6.16.5 No Tax Allocation, Sharing. The Acquiror
is not a party to any Tax allocation or sharing agreement. No Acquiror Company (a) has been a member of a Tax Group filing a consolidated
income Tax Return under Section 1501 of the Code (or any similar provision of state, local or foreign law), and (b) has any liability
for Taxes for any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law)
as a transferee or successor, by contract or otherwise.
6.16.6 No Other Arrangements. No Acquiror Company
is a party to any agreement, contract or arrangement for services that would result, individually or in the aggregate, in the payment
of any amount that would not be deductible by reason of Section 162(m), 280G or 404 of the Code. The Acquiror Companies are not
"consenting corporations" within the meaning of Section 341(f) of the Code. The Acquiror Companies do not have any "tax-exempt
bond financed property" or "tax-exempt use property" within the meaning of Section 168(g) or (h), respectively of
the Code. No Acquiror Company has any outstanding closing agreement, ruling request, request for consent to change a method of
accounting, subpoena or request for information to or from a Governmental Authority in connection with any Tax matter. During the
last two years, none of the Acquiror Companies has engaged in any exchange with a related party (within the meaning of Section
1031(f) of the Code) under which gain realized was not recognized by reason of Section 1031 of the Code. The Company is not a party
to any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4.
6.17 Material Assets. The financial statements of the Acquiror set
forth in the SEC Documents reflect the material properties and assets (real and personal) owned or leased by each Acquiror Company.
6.18 Deliberately Deleted
6.19 Litigation; Orders. Except as set forth on Schedule 6.19, there
is no Proceeding (whether federal, state, local or foreign) pending or, to the knowledge of the Acquiror, threatened against or
affecting any Acquiror Company or any Acquiror Company's properties, assets, business or employees. To the knowledge of the Acquiror,
there is no fact that might result in or form the basis for any such Proceeding. No Acquiror Company is subject to any Orders.
6.20 Licenses. Except as would not have a Material Adverse Effect,
each Acquiror Company possesses from the appropriate Governmental Authority all licenses, permits, authorizations, approvals, franchises
and rights that are necessary for such Acquiror Company to engage in its business as currently conducted and to permit such Acquiror
Company to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets (collectively,
"Acquiror Permits"). No Acquiror Company has received notice from any Governmental Authority or other Person that there
is lacking any license, permit, authorization, approval, franchise or right necessary for such Acquiror Company to engage in its
business as currently conducted and to permit such Acquiror Company to own and use its properties and assets in the manner in which
it currently owns and uses such properties and assets. Except as would not have a Material Adverse Effect, the Acquiror Permits
are valid and in full force and effect. Except as would not have a Material Adverse Effect, no event has occurred or circumstance
exists that may (with or without notice or lapse of time): (a) constitute or result, directly or indirectly, in a violation of
or a failure to comply with any Acquiror Permit; or (b) result, directly or indirectly, in the revocation, withdrawal, suspension,
cancellation or termination of, or any modification to, any Acquiror Permit. No Acquiror Company has received notice from any Governmental
Authority or any other Person regarding: (a) any actual, alleged, possible or potential contravention of any Acquiror Permit; or
(b) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of, or modification
to, any Acquiror Permit. All applications required to have been filed for the renewal of such Company Permits have been duly filed
on a timely basis with the appropriate Persons, and all other filings required to have been made with respect to such Acquiror
Permits have been duly made on a timely basis with the appropriate Persons. All Acquiror Permits are renewable by their terms or
in the ordinary course of business without the need to comply with any special qualification procedures or to pay any amounts other
than routine fees or similar charges, all of which have, to the extent due, been duly paid.
6.21 Interested Party Transactions. Except as disclosed in Schedule
6.21 or in SEC Documents, no officer, director or stockholder of any Acquiror Company or any Affiliate or "associate"
(as such term is defined in Rule 405 of the Commission under the Securities Act) of any such Person, has or has had, either directly
or indirectly, (1) an interest in any Person which (a) furnishes or sells services or products which are furnished or sold or are
proposed to be furnished or sold by any Acquiror Company, or (b) purchases from or sells or furnishes to, or proposes to purchase
from, sell to or furnish any Acquiror Company any goods or services; or (2) a beneficial interest in any contract or agreement
to which any Acquiror Company is a party or by which it may be bound or affected.
6.22 Governmental Inquiries. The Acquiror has provided to the Company
a copy of each material written inspection report, questionnaire, inquiry, demand or request for information received by any Acquiror
Company from any Governmental Authority, and the applicable Acquiror Company's response thereto, and each material written statement,
report or other document filed by any Acquiror Company with any Governmental Authority, except for those available on the Securities
and Exchange Commission EDGAR database.
6.23 Bank Accounts and Safe Deposit Boxes. Schedule 6.23 discloses
the title and number of each bank or other deposit or financial account, and each lock box and safety deposit box used by each
Acquiror Company, the financial institution at which that account or box is maintained and the names of the persons authorized
to draw against the account or otherwise have access to the account or box, as the case may be.
6.24 Intellectual Property. No Acquiror Company owns, uses or licenses
any Intellectual Property in its business as presently conducted, except as set forth in the SEC Documents.
6.25 Title to and Condition of Properties. Except as would not have
a Material Adverse Effect, each Acquiror Company owns (with good and marketable title in the case of real property) or holds under
valid leases or other rights to use all real property, plants, machinery, equipment and other personal property necessary for the
conduct of its business as presently conducted, free and clear of all Liens, except Permitted Liens. The material buildings, plants,
machinery and equipment necessary for the conduct of the business of each Acquiror Company as presently conducted are structurally
sound, are in good operating condition and repair and are adequate for the uses to which they are being put, and none of such buildings,
plants, machinery or equipment is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that
are not material in nature or cost.
6.26 SEC Documents; Financial Statements. Except as set forth on
Schedule 6.26, the Acquiror has filed all reports required to be filed by it under the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the three years preceding the date hereof (or such shorter period as the Acquiror was required by law
to file such material) (the foregoing materials being collectively referred to herein as the "SEC Documents") and, while
not having filed all such SEC Documents prior to the expiration of any extension(s), is nevertheless current with respect to its
Exchange Act filing requirements. As of their respective dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of
the SEC Documents, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statement therein, in light of the circumstances under which they were made,
not misleading. All material agreements to which the Acquiror is a party or to which the property or assets of the Acquiror are
subject have been appropriately filed as exhibits to the SEC Documents as and to the extent required under the Exchange Act. The
financial statements of the Acquiror included in the SEC Documents comply in all material respects with applicable accounting requirement
and the rules and regulations of the Commission with respect thereto as in effect at the time of filing, were prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the
case of unaudited statements as permitted by Form 10-Q of the Commission), and fairly present in all material respects (subject
in the case of unaudited statements, to normal, recurring audit adjustments) the financial position of the Acquiror as at the dates
thereof and the results of its operations and cash flows for the periods then ended. The Acquiror's Common Stock is listed on the
OTC Bulletin Board or the OTC Markets, under the symbol PRKI and the Acquiror is not aware of any facts which would make the Acquiror's
Common Stock ineligible for continued quotation on the OTC Bulletin Board or the OTC Markets.
6.27 Stock Option Plans; Employee Benefits.
6.27.1 Set forth on Schedule 6.27.1 is a complete
list of all stock option plans providing for the grant by the Acquiror of stock options to directors, officers or employees. Except
as disclosed on Schedule 6.27.1, all such stock option plans are Approved Plans.
6.27.2 None of the Acquiror Companies has any
employee benefit plans or arrangements covering their present and former employees or providing benefits to such persons in respect
of services provided such Acquiror Company.
6.27.3 Neither the consummation of the transactions
contemplated hereby alone, nor in combination with another event, with respect to each director, officer, employee and consultant
of the Acquiror, will result in (a) any payment (including, without limitation, severance, unemployment compensation or bonus payments)
becoming due from the Acquiror, (b) any increase in the amount of compensation or benefits payable to any such individual or (c)
any acceleration of the vesting or timing of payment of compensation payable to any such individual. No agreement, arrangement
or other contract of the Acquiror provides benefits or payments contingent upon, triggered by, or increased as a result of a change
in the ownership or effective control of the Acquiror.
6.28 Environmental and Safety Matters. Except as set forth on Schedule
6.28 or in the SEC Documents and except as would not have a Material Adverse Effect:
6.28.1 Each Acquiror Company has at all time
been and is in compliance with all Environmental Laws applicable to such Acquiror Company.
6.28.2 There are no Proceedings pending or threatened
against any Acquiror Company alleging the violation of any Environmental Law or Environmental Permit applicable to such Acquiror
Company or alleging that the Acquiror is a potentially responsible party for any environmental site contamination.
6.28.3 Neither this Agreement nor the consummation
of the transactions contemplated by this Agreement shall impose any obligations to notify or obtain the consent of any Governmental
Authority or third Persons under any Environmental Laws applicable to any Acquiror Company.
6.29 Money Laundering Laws. The operations of the Acquiror Companies
are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the
Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all U.S. and non-U.S. jurisdictions,
the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced
by any Governmental Authority (collectively, the "Money Laundering Laws") and no Proceeding involving any Acquiror Company
with respect to the Money Laundering Laws is pending or, to the knowledge of the Acquiror, threatened.
6.30 Board Recommendation. The Acquiror Board, at a meeting duly
called and held, has determined that this Agreement and the transactions contemplated by this Agreement are advisable and in the
best interests of the Acquiror's stockholders and has duly authorized this Agreement and the transactions contemplated by this
Agreement.
SECTION VII
COVENANTS OF THE COMPANY AND THE SHAREHOLDERS
7.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, the Company will, and will cause each Company Subsidiary to, (a) afford the Acquiror and its agents, advisors
and attorneys during normal business hours, full and free access to Company's personnel, properties, contracts, books and records,
and other documents and data, (b) furnish the Acquiror and its agents, advisors and attorneys with copies of all such contracts,
books and records, and other existing documents and data as the Acquiror may reasonably request, and (c) furnish the Acquiror and
its agents, advisors and attorneys with such additional financial, operating, and other data and information as the Acquiror may
reasonably request and as may be required to consummate the transactions contemplated herein pursuant to SEC rules and regulations,
which includes audited financial statements of the Company and each Company Subsidiary.
7.2 Operation of the Business of the Company.
7.2.1 Between the date of this Agreement and
the Closing Date, the Company will, and will cause each Company Subsidiary to:
(a) conduct its business only in the ordinary
course of business;
(b) use its best efforts to preserve intact its
current business organization and business relationships, including, without limitation, relationships with suppliers, customers,
landlords, creditors, officers, employees and agents; and
(c) otherwise report periodically to the Acquiror
concerning the status of its business, operations, and finances.
7.3 No Transfers of Capital Stock.
7.3.1 Between the date of this Agreement and
the Closing Date, the Shareholders shall not assign, transfer, mortgage, pledge or otherwise dispose of any or all of the Shares
(or any interest therein) or grant any Person the option or right to acquire such Shares (or any interest therein).
7.3.2 Between the date of this Agreement and
the Closing Date, the Company shall not, and shall cause each Company Subsidiary not to, issue, assign, transfer, mortgage, pledge
or otherwise dispose of any or all of the capital stock of any Acquired Company (or any interest therein) or grant any Person the
option or right to acquire the capital stock of any Acquired Company (or any interest therein).
7.4 Required Filings and Approvals.
7.4.1 As promptly as practicable after the date
of this Agreement, the Company will, and will cause each Company Subsidiary to, make all filings required to be made by it in order
to consummate the transactions contemplated by this Agreement, if applicable. Between the date of this Agreement and the Closing
Date, the Company will, and will cause each Company Subsidiary to, (a) cooperate with the Acquiror with respect to all filings
that the Acquiror elects to make or is required to make in connection with the transactions contemplated by this Agreement, and
(b) cooperate with the Acquiror in obtaining any consents or approvals required to be obtained by the Acquiror in connection herewith.
7.5 Notification. Between the date of this Agreement and the Closing
Date, the Company and the Shareholders will promptly notify the Acquiror in writing if the Company, the Shareholders or any Company
Subsidiary becomes aware of any fact or condition that causes or constitutes a breach of any of the representations and warranties
of the Company or the Shareholders, as the case may be, as of the date of this Agreement, or if the Company, any Shareholder or
any Company Subsidiary becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except
as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require
any change in the Schedules to this Agreement if the Schedules to the Agreement were dated the date of the occurrence or discovery
of any such fact or condition, the Company or the Shareholders, as the case may be, will promptly deliver to the Acquiror a supplement
to the Schedules to the Agreement specifying such change; provided, however, that such delivery shall not materially adversely
affect any rights of the Acquiror set forth herein, including the right of the Acquiror to seek a remedy in damages for losses
incurred as a result of such supplemented disclosure. During the same period, the Company and the Shareholders will, and will cause
each Company Subsidiary to, promptly notify the Acquiror of the occurrence of any breach of any covenant of the Company or the
Shareholders in this Section 7 or of the occurrence of any event that may make the satisfaction of the conditions in Section 9
impossible or unlikely.
7.6 Closing Conditions. Between the date of this Agreement and the
Closing Date, each of the Company and the Shareholders will use its commercially reasonable efforts to cause the conditions in
Section 9 to be satisfied.
SECTION VIII
COVENANTS OF THE ACQUIROR
8.1 Access and Investigation. Between the date of this Agreement
and the Closing Date, the Acquiror will, and will cause each of the Acquiror Subsidiaries to, (a) afford the Company and its agents,
advisors and attorneys during normal business hours full and free access to each Acquiror Company's personnel, properties, contracts,
books and records, and other documents and data, (b) furnish the Company and its agents, advisors and attorneys with copies of
all such contracts, books and records, and other existing documents and data as the Company may reasonably request, and (c) furnish
the Company and its agents, advisors and attorneys with such additional financial, operating, and other data and information as
the Company may reasonably request.
8.2 Operation of the Business of the Acquiror. Between the date
of this Agreement and the Closing Date, the Acquiror will, and will cause each of the Acquiror Subsidiaries to:
8.2.1 conduct its business only in the ordinary
course of business;
8.2.2 use its best efforts to preserve intact
the current business organization and business relationships, including, without limitation, relationships with suppliers, customers,
landlords, creditors, officers, employees and agents;
8.2.3 obtain the prior written consent of the
Company prior to taking any action of the type specified in Section 6.13 or entering into any Material Acquiror Contract;
8.2.4 confer with the Company concerning operational
matters of a material nature; and
8.2.5 otherwise report periodically to the Company
concerning the status of its business, operations, and finances.
8.3 Required Filings and Approvals.
8.3.1 As promptly as practicable after the date
of this Agreement, the Acquiror will, and will cause each of the Acquiror Subsidiaries to, make all filings legally required to
be made by it to consummate the transactions contemplated by this Agreement. Between the date of this Agreement and the Closing
Date, the Acquiror will cooperate with the Company with respect to all filings that the Company is legally required to make in
connection with the transactions contemplated hereby.
8.4 Notification. Between the date of this Agreement and the Closing
Date, the Acquiror will promptly notify the Company and the Shareholders in writing if the Acquiror becomes aware of any fact or
condition that causes or constitutes a breach of any of the representations and warranties of the Acquiror, as of the date of this
Agreement, or if the Acquiror becomes aware of the occurrence after the date of this Agreement of any fact or condition that would
(except as expressly contemplated by this Agreement) cause or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact
or condition require any change in the Schedules to this Agreement if the Schedules to the Agreement were dated the date of the
occurrence or discovery of any such fact or condition, the Acquiror will promptly deliver to the Company and the Shareholders a
supplement to the Schedules to the Agreement specifying such change; provided, however, that such delivery shall not materially
adversely affect any rights of the Shareholders set forth herein, including the right of the Shareholders to seek a remedy in damages
for losses incurred as a result of such supplemented disclosure. During the same period, the Acquiror will promptly notify the
Company and the Shareholders of the occurrence of any breach of any covenant of the Acquiror in this Section 8 or of the occurrence
of any event that may make the satisfaction of the conditions in Section 10 impossible or unlikely.
8.5 Closing Conditions. Between the date of this Agreement and the
Closing Date, the Acquiror will use commercially reasonable efforts to cause the conditions in Section 10 to be satisfied.
8.6 Indemnification and Insurance.
8.6.1 The Acquiror shall to the fullest extent
permitted under applicable Law or its Organizational Documents, indemnify and hold harmless, each present and former director,
officer or employee of the Acquiror or any Acquiror Subsidiary (collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement
in connection with any Proceeding (x) arising out of or pertaining to the transactions contemplated by this Agreement or (y) otherwise
with respect to any acts or omissions occurring at or prior to the Closing Date, to the same extent as provided in the Acquiror's
Organizational Documents or any applicable contract or agreement as in effect on the date hereof, in each case for a period of
six years after the Closing Date. In the event of any such Proceeding (whether arising before or after the Closing Date), (i) any
counsel retained by the Indemnified Parties for any period after the Closing Date shall be reasonably satisfactory to the Acquiror,
(ii) after the Closing Date, the Acquiror shall pay the reasonable fees and expenses of such counsel, promptly after statements
therefore are received, provided that the Indemnified Parties shall be required to reimburse the Acquiror for such payments in
the circumstances and to the extent required by the Acquiror's Organizational Documents, any applicable contract or agreement or
applicable Law, and (iii) the Acquiror will cooperate in the defense of any such matter; provided, however, that the Acquiror shall
not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and provided,
further, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all
rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims.
The Indemnified Parties as a group may retain only one law firm to represent them in each applicable jurisdiction with respect
to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between
the positions of any two or more Indemnified Parties, in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such conflict) may retain one separate law firm in each applicable
jurisdiction.
8.6.2 This Section 8.6 shall survive the consummation
of the transactions contemplated by this Agreement at the Closing Date, is intended to benefit the Indemnified Parties and the
Covered Persons, shall be binding on all successors and assigns of the Acquiror and shall be enforceable by the Indemnified Parties
and the Covered Persons.
8.7 Rule 144 Reporting. With a view to making available to the Acquiror's
stockholders the benefit of certain rules and regulations of the Commission which may permit the sale of the Acquiror Common Stock
to the public without registration, from and after the Closing Date, the Acquiror agrees to:
8.7.1 Make and keep public information available,
as those terms are understood and defined in Rule 144; and
8.7.2 File with the Commission, in a timely
manner, all reports and other documents required of the Acquiror under the Exchange Act.
8.8 SEC Documents. From and after the Closing Date, in the event
the Commission notifies the Acquiror of its intent to review any SEC Document filed prior to Closing or the Acquiror receives any
oral or written comments from the Commission with respect to any SEC Document filed prior to Closing, the Acquiror shall promptly
notify the Acquiror Shareholders and the Acquiror Shareholders shall fully cooperate with the Acquiror.
SECTION IX
CONDITIONS PRECEDENT TO THE ACQUIROR'S
OBLIGATION TO CLOSE
The Acquiror's obligation to acquire the Shares and to take the
other actions required to be taken by the Acquiror at the Closing is subject to the satisfaction, at or prior to the Closing, of
each of the following conditions (any of which may be waived by the Acquiror, in whole or in part):
9.1 Accuracy of Representations. The representations and warranties
of the Company and the Shareholders set forth in this Agreement or in any Schedule or certificate delivered pursuant hereto that
are not qualified as to materiality shall be true and correct in all material respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in all material respects, except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving effect to any supplemental Schedule. The representations
and warranties of the Company and the Shareholders set forth in this Agreement or in any Schedule or certificate delivered pursuant
hereto that are qualified as to materiality shall be true and correct in all respects as of the date of this Agreement, and shall
be deemed repeated as of the Closing Date and shall then be true and correct in all respects, except to the extent a representation
or warranty is expressly limited by its terms to another date and without giving effect to any supplemental Schedule.
9.2 Performance by the Company and Shareholders.
9.2.1 All of the covenants and obligations that
the Company and Shareholders are required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied
with in all material respects.
9.2.2 Each document required to be delivered
by the Company and the Shareholders pursuant to this Agreement at or prior to Closing must have been delivered.
9.3 No Force Majeur Event. Since July 15, 2014, there shall not
have been any delay, error, failure or interruption in the conduct of the business of any Acquired Company, or any loss, injury,
delay, damage, distress, or other casualty, due to force majeur including but not limited to (a) acts of God; (b) fire or explosion;
(c) war, acts of terrorism or other civil unrest; or (d) national emergency.
9.4 Certificate of Officer. The Company will have delivered to the
Acquiror a certificate, dated the Closing Date, executed by an officer of the Company, certifying the satisfaction of the conditions
specified in Sections 9.1, 9.2 and 9.3.
9.5 Certificate of Shareholders. Each Shareholder will have delivered
to the Acquiror a certificate, dated the Closing Date, executed by such Shareholder, if a natural person, or an authorized officer
of the Shareholder, if an entity, certifying the satisfaction of the conditions specified in Sections 9.1 and 9.2.
9.6 Consents.
9.6.1 All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be made, by the Company and/or the Shareholders for
the authorization, execution and delivery of this Agreement and the consummation by them of the transactions contemplated by this
Agreement, shall have been obtained and made by the Company or the Shareholders, as the case may be, except where the failure to
receive such consents, waivers, approvals, authorizations or orders or to make such filings would not have a Material Adverse Effect
on the Company or the Acquiror.
9.7 Documents. The Company and the Shareholders must have caused
the following documents to be delivered to the Acquiror:
9.7.1 share certificates evidencing the number
of Shares held by each Shareholder (as set forth on the signature page hereto), along with executed stock powers transferring such
Shares to the Acquiror;
9.7.2 a Secretary's Certificate of the Company,
dated the Closing Date, certifying attached copies of (A) the Organizational Documents of the Company and each Company Subsidiary,
(B) the resolutions of the Company Board and the Shareholders approving this Agreement and the transactions contemplated hereby;
and (C) the incumbency of each authorized officer of the Company signing this Agreement and any other agreement or instrument contemplated
hereby to which the Company is a party;
9.7.3 a certified certificate of good standing,
or equivalent thereof, of the Company;
9.7.4 each of the Transaction Documents to which
the Company and/or the Shareholders is a party, duly executed; and
9.7.5 such other documents as the Acquiror may
reasonably request for the purpose of (i) evidencing the accuracy of any of the representations and warranties of the Company and
the Shareholders pursuant to Section 9.1, (ii) evidencing the performance of, or compliance by the Company and the Shareholders
with, any covenant or obligation required to be performed or complied with by the Company or the Shareholders, as the case may
be, (iii) evidencing the satisfaction of any condition referred to in this Section 9, or (iv) otherwise facilitating the consummation
or performance of any of the transactions contemplated by this Agreement.
9.8 No Proceedings. Since the date of this Agreement, there must
not have been commenced or threatened against the Acquiror, the Company or any Shareholder, or against any Affiliate thereof, any
Proceeding (which Proceeding remains unresolved as of the Closing Date) (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated by this Agreement, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with any of the transactions contemplated by this Agreement.
9.9 No Claim Regarding Stock Ownership or Consideration. There must
not have been made or threatened by any Person any claim asserting that such Person (a) is the holder of, or has the right to acquire
or to obtain beneficial ownership of the Shares or any other stock, voting, equity, or ownership interest in, the Company, or (b)
is entitled to all or any portion of the Acquiror Shares.
SECTION X
CONDITIONS PRECEDENT TO THE OBLIGATION OF THE
COMPANY
AND THE SHAREHOLDERS TO THE CLOSING
The Shareholders' obligation to transfer the Shares and the obligations
of the Company to take the other actions required to be taken by the Company at the Closing are subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may be waived by the Company and the Shareholders, in
whole or in part):
10.1 Accuracy of Representations. The representations and warranties
of the Acquiror and Acquiror Shareholders set forth in this Agreement or in any Schedule or certificate delivered pursuant hereto
that are not qualified as to materiality shall be true and correct in all material respects as of the date of this Agreement, and
shall be deemed repeated as of the Closing Date and shall then be true and correct in all material respects, except to the extent
a representation or warranty is expressly limited by its terms to another date and without giving effect to any supplemental Schedule.
The representations and warranties of the Acquiror and Acquiror Shareholders set forth in this Agreement or in any Schedule or
certificate delivered pursuant hereto that are qualified as to materiality shall be true and correct in all respects as of the
date of this Agreement, and shall be deemed repeated as of the Closing Date and shall then be true and correct in all respects,
except to the extent a representation or warranty is expressly limited by its terms to another date and without giving effect to
any supplemental Schedule.
10.2 Performance by the Acquiror.
10.2.1 All of the covenants and obligations
that the Acquiror and Acquiror Shareholders are required to perform or to comply with pursuant to this Agreement at or prior to
the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed
and complied with in all respects.
10.2.2 Each document required to be delivered
by the Acquiror and Acquiror Shareholders pursuant to this Agreement must have been delivered.
10.3 No Force Majeur Event. Since July 15, 2014, there shall not
have been any delay, error, failure or interruption in the conduct of the business of any Acquiror Company, or any loss, injury,
delay, damage, distress, or other casualty, due to force majeur including but not limited to (a) acts of God; (b) fire or explosion;
(c) war, acts of terrorism or other civil unrest; or (d) national emergency.
10.4 Certificate of Officer. The Acquiror will have delivered to
the Company a certificate, dated the Closing Date, executed by an officer of the Acquiror, certifying the satisfaction of the conditions
specified in Sections 10.1, 10.2. and 10.3.
10.5 Certificate of Acquiror Shareholders. The Acquiror Shareholders
will have delivered to the Company a certificate, dated the Closing Date, executed by such Acquiror Shareholder, if a natural person
or an authorized officer of the Acquiror Shareholder, if an entity, certifying the satisfaction of the conditions specified in
Sections 10.1 and 10.2.
10.6 Consents.
10.6.1 All material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be made, by the Acquiror for the authorization, execution
and delivery of this Agreement and the consummation by it of the transactions contemplated by this Agreement, shall have been obtained
and made by the Acquiror, except where the failure to receive such consents, waivers, approvals, authorizations or orders or to
make such filings would not have a Material Adverse Effect on the Company or the Acquiror.
10.7 Documents. The Acquiror must have caused the following documents
to be delivered to the Company and/or the Shareholders:
10.7.1 share certificates evidencing each Shareholder's
pro rata share of the Closing Acquiror Shares (as set forth in Exhibit B);
10.7.2 a Secretary's Certificate, dated the
Closing Date certifying attached copies of (A) the Organizational Documents of the Acquiror and each Acquiror Subsidiary, (B) the
resolutions of the Acquiror Board approving this Agreement and the transactions contemplated hereby; and (C) the incumbency of
each authorized officer of the Acquiror signing this Agreement and any other agreement or instrument contemplated hereby to which
the Acquiror is a party;
10.7.3 a Certificate of Good Standing of the
Acquiror;
10.7.4 each of the Transaction Documents to
which the Acquiror is a party, duly executed; and
10.7.5 such other documents as the Company may
reasonably request for the purpose of (i) evidencing the accuracy of any representation or warranty of the Acquiror pursuant to
Section 10.1, (ii) evidencing the performance by the Acquiror of, or the compliance by the Acquiror with, any covenant or obligation
required to be performed or complied with by the Acquiror, (iii) evidencing the satisfaction of any condition referred to in this
Section 10, or (iv) otherwise facilitating the consummation of any of the transactions contemplated by this Agreement.
10.8 No Proceedings. Since the date of this Agreement, there must
not have been commenced or threatened against the Acquiror, the Company or any Shareholder, or against any Affiliate thereof, any
Proceeding (which Proceeding remains unresolved as of the Closing Date) (a) involving any challenge to, or seeking damages or other
relief in connection with, any of the transactions contemplated hereby, or (b) that may have the effect of preventing, delaying,
making illegal, or otherwise interfering with any of the transactions contemplated hereby.
10.9 The executed letter of the Auditors of Acquiror indicating
that nothing has come to their attention that would cause them to change or modify their opinion on the Acquiror’s most recent
audited financial statements.
10.10 The signed certifications from all of the directors of the
Acquiror confirming the absence of any hidden or contingent liabilities other than those as disclosed in the Form 10-K of the Acquiror
for the fiscal year ended May 31, 2014.
SECTION XI
TERMINATION
11.1 Termination Events. This Agreement may, by notice given prior
to or at the Closing, be terminated:
11.1.1 by mutual consent of the Acquiror and
the Shareholders (acting jointly);
11.1.2 by the Acquiror, if any of the conditions
in Section 9 have not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other
than through the failure of the Acquiror to comply with its obligations under this Agreement) and the Acquiror has not waived such
condition on or before the Closing Date; or (ii) by the Shareholders (acting jointly), if any of the conditions in Section 10 have
not been satisfied as of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the
failure of any Shareholder to comply with its obligations under this Agreement) and the Shareholders (acting jointly) have not
waived such condition on or before the Closing Date;
11.1.3 Deliberately Deleted;
11.1.4 by either the Acquiror or the Shareholders
(acting jointly), if there shall have been entered a final, non-appealable order or injunction of any Governmental Authority restraining
or prohibiting the consummation of the transactions contemplated hereby;
11.1.5 by the Acquiror, if, prior to the Closing
Date, the Company or any Shareholder is in material breach of any representation, warranty, covenant or agreement herein contained
and such breach shall not be cured within 10 days of the date of notice of default served by the Acquiror claiming such breach;
provided, however, that the right to terminate this Agreement pursuant to this Section 11.1.5 shall not be available to the Acquiror
if the Acquiror is in material breach of this Agreement at the time notice of termination is delivered;
11.1.6 by the Shareholders (acting jointly),
if, prior to the Closing Date, the Acquiror is in material breach of any representation, warranty, covenant or agreement herein
contained and such breach shall not be cured within 10 days of the date of notice of default served by the Shareholders claiming
such breach or, if such breach is not curable within such 10 day period, such longer period of time as is necessary to cure such
breach; provided, however, that the right to terminate this Agreement pursuant to this Section 11.1.6 shall not be available to
the Shareholders (acting jointly) if any Shareholder is in material breach of this Agreement at the time notice of termination
is delivered.
11.2 Effect of Termination.
11.2.1 If the Acquiror terminates this Agreement
pursuant to Section 11.1.5 or the Shareholders (acting jointly) terminate this Agreement pursuant to Section 11.1.6, then the non-terminating
party shall immediately pay to the terminating party a termination fee equal to $10,000 in cash (the "Termination Fee").
11.2.1 Each party's right of termination under
Section 11.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination
will not be an election of remedies. If this Agreement is terminated pursuant to Section 11.1, all further obligations of the parties
under this Agreement will terminate, except that the obligations in Sections 5.12, 6.11, 11.2, and 13 will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the Agreement by another party or because one or more
of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of another party's failure
to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such
termination unimpaired.
SECTION XII
INDEMNIFICATION; REMEDIES
12.1 Survival. All representations, warranties, covenants, and obligations
in this Agreement shall survive the Closing and expire on the sixth anniversary of the Closing (the "Survival Period").
The right to indemnification, payment of Damages or other remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at
any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based
on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will
not affect the right to indemnification, payment of Damages, or other remedy based on such representations, warranties, covenants,
and obligations.
12.2 Indemnification by the Acquiror Shareholders.
12.2.1 From and after the Closing until the expiration
of the Survival Period, each of the "Principal Acquiror Shareholders shall indemnify and hold harmless the Acquiror, Company
and the Shareholders (collectively, the "Company Indemnified Parties"), from and against any Damages arising, directly
or indirectly, from or in connection with:
(a) any breach of any representation or warranty
made by the Acquiror or the Acquiror Shareholders in this Agreement or in any certificate delivered by the Acquiror pursuant to
this Agreement; or
(b) any breach by the Acquiror or the Acquiror
Shareholders of any covenant or obligation of the Acquiror in this Agreement required to be performed by the Acquiror or the Acquiror
Shareholders on or prior to the Closing Date.
12.3 Limitations on Amount - the Acquiror. No Company Indemnified
Party shall be entitled to indemnification pursuant to Section 12.3, unless and until the aggregate amount of Damages to all Company
Indemnified Parties with respect to such matters under Section 12.3 exceeds $50,000, at which time, the Company Indemnified Parties
shall be entitled to indemnification for the total amount of such Damages in excess of $50,000.
12.4 Determining Damages. Materiality qualifications to the representations
and warranties of the Company and the Acquiror shall not be taken into account in determining the amount of Damages occasioned
by a breach of any such representation and warranty for purposes of determining whether the baskets set forth in Section 12.3 has
been met.
12.5 Breach by Shareholders. Nothing in this Section 12 shall limit
the Acquiror's right to pursue any appropriate legal or equitable remedy against any Shareholder with respect to any Damages arising,
directly or indirectly, from or in connection with: (a) any breach by such Shareholder of any representation or warranty made by
such Shareholder in this Agreement or in any certificate delivered by such Shareholder pursuant to this Agreement or (b) any breach
by such Shareholder of its covenants or obligations in this Agreement. All claims of the Acquiror pursuant to this Section 12.1
shall be brought by the Acquiror Shareholders on behalf of the Acquiror and those Persons who were stockholders of the Acquiror
immediately prior to the Closing.
SECTION XIII
OBLIGATIONS OF THE SHAREHOLDER AND THE COMPANY
GOING FORWARD
13.1 Deposit of Common stock. Management of the Acquiror, as provided
in Section 2.2 of this Agreement or any successor management (“New Management”) guarantees that it will provide (or
its attorney) any and all opinion letters, brokerage firm deposit letters, waivers for medallion signature guarantee (providing
shareholder provides proof of he/she is via passport or driver’s license) or any document a brokerage firm requires for purposes
of depositing shares into a brokerage firm. A violation of this covenant will be deemed to have transpired if New Management does
not provide necessary documentation within 5 days of written notification. Each violation will result in a mandatory $10,000 payment
to the shareholder per occurrence to be paid within 3 days of each event.
13.2 New Management will be prohibited from doing the following
for 18 months from the date the SEA is executed:
| a. |
Sell common stock or any instrument converting into common stock (Convertible Debt or Convertible Preferred, Warrants, etc.) below $0.15 per share. |
| b. |
Reverse split the common stock. |
| c. |
Issue any instruments that have voting rights superior than
the company’s common stock. |
| d. |
No cashless exercise for warrants. |
| e. |
No S-8 options exercisable below $0.15. |
| f |
Implement Section 9 (Redemption of Warrants) of Investor Warrants dated Jan 8, 2014 providing that at least 25% of the warrants
have not been exercised. |
A violation of anyone of these covenants will
trigger standard Anti-dilution provisions for all shareholders so that shareholders are brought back to their ownership percentage
level prior to such violation occurring.
13.3 Registration of underlying common stock of stock purchase warrants.
Acquiror currently has an S-1 registration statement outstanding which covers the underlying common stock of the warrants. This
Registration Statement went effective September 30, 2013. Within 10 business days from the signing of the this Agreement, New Management
will immediately file a post effective registration statement at Acquiror’s cost to register the underlying common stock
of all unconverted warrants and will keep a registration statement effective until the expiration of the warrants or as long as
at least 25% of the warrants are still outstanding.
13.4 New Management agrees to cancel all accrued salaries with the
Company before July 15, 2014. From July 15, 2014 and onward, New Management may accrue salary, which will be paid as soon as possible.
New Management shall enter into employment agreements at current levels of compensation and such compensation shall remain until
such time as Acquiror has net free cash flow.
13.5 New Management will agree to continue to be a current filer
with the Commission.
SECTION XIV
GENERAL PROVISIONS
14.1 Expenses. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives,
counsel, and accountants. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will
be subject to any rights of such party arising from a breach of this Agreement by another party.
14.2 Public Announcements. The Acquiror may, but no later than three
business days following the effective date of this Agreement, issue a press release disclosing the transactions contemplated hereby.
Between the date of this Agreement and the Closing Date, the Company and the Acquiror shall consult with each other in issuing
any other press releases or otherwise making public statements or filings and other communications with the Commission or any regulatory
agency or stock market or trading facility with respect to the transactions contemplated hereby and neither party shall issue any
such press release or otherwise make any such public statement, filings or other communications without the prior written consent
of the other, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which case the disclosing party shall provide the other party with prior notice of such public
statement, filing or other communication and shall incorporate into such public statement, filing or other communication the reasonable
comments of the other party.
14.3 Confidentiality.
14.3.1 Subsequent to the date of this Agreement,
the Acquiror, the Acquiror Shareholders the Shareholders and the Company will maintain in confidence, and will cause their respective
directors, officers, employees, agents, and advisors to maintain in confidence, any written, oral, or other information obtained
in confidence from another party in connection with this Agreement or the transactions contemplated by this Agreement, unless (a)
such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any required
filing with the Commission, or obtaining any consent or approval required for the consummation of the transactions contemplated
by this Agreement, or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with
legal proceedings.
14.3.2 In the event that any party is required
to disclose any information of another party pursuant to clause (b) or (c) of Section 13.3.1, the party requested or required to
make the disclosure (the "disclosing party") shall provide the party that provided such information (the "providing
party") with prompt notice of any such requirement so that the providing party may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section 13.3. If, in the absence of a protective order or other remedy
or the receipt of a waiver by the providing party, the disclosing party is nonetheless, in the opinion of counsel, legally compelled
to disclose the information of the providing party, the disclosing party may, without liability hereunder, disclose only that portion
of the providing party's information which such counsel advises is legally required to be disclosed, provided that the disclosing
party exercises its reasonable efforts to preserve the confidentiality of the providing party's information, including, without
limitation, by cooperating with the providing party to obtain an appropriate protective order or other relief assurance that confidential
treatment will be accorded the providing party's information.
14.3.3 If the transactions contemplated by this
Agreement are not consummated, each party will return or destroy as much of such written information as the other party may reasonably
request.
14.4
Notices. All notices, consents, waivers, and
other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by
written notice to the other parties):
| If to Acquiror: |
With a copy to: |
|
PERK INTERNATIONAL INC.
2470 East 16th Street
Brooklyn, NY 11235 |
The Doney Law Firm
4955 S. Durango Dr. Ste. 165
Las Vegas, NV, 89103
United States |
|
If to Company:
Robert J Oswald
1099 Mesa Crescent
Mississauga, ON L5H4B3
CANADA |
With a copy to: TECH 9 INC.
5401 Eglinton Ave West
Suite 205
Toronto, ON M9C5K6
CANADA |
14.5 Arbitration. Any dispute or controversy under this Agreement
shall be settled exclusively by arbitration in the City of Las Vegas, County of Clark in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the arbitration award in any court having jurisdiction.
14.6 Further Assurances. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other
acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and
the documents referred to in this Agreement.
14.7 Waiver. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege
under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law,
(a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver
that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or
demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice
or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.
14.8 Entire Agreement and Modification. This Agreement supersedes
all prior agreements between the parties with respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended except by a written agreement executed by the party against whom the enforcement
of such amendment is sought.
14.9 Assignments, Successors, and No Third-Party Rights. No party
may assign any of its rights under this Agreement without the prior consent of the other parties. Subject to the preceding sentence,
this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective
successors and permitted assigns of the parties. Except as set forth in Section 8.6 and Section 12.3, nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right,
remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions
and conditions are for the sole and exclusive benefit of the parties to this Agreement and their successors and assigns.
14.10 Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect.
Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
14.11 Section Headings, Construction. The headings of Sections in
this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section"
or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will
be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
14.12 Governing Law. This Agreement will be governed by the laws
of the State of Nevada without regard to conflicts of laws principles.
14.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will
be deemed to constitute one and the same agreement.
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have
executed and delivered this Share Exchange Agreement as of the date first written above.
| ACQUIROR: |
|
ACQUIROR SHAREHOLDER |
| |
|
|
| PERK INTERNATIONAL INC. |
|
Signed: _________________________ |
| |
|
_________________________ |
| |
|
|
| Signed: _____________________________ |
|
Printed Name: Andrew Gaudet |
| |
|
|
| Printed Name: Andrew Gaudet |
|
Title: Stockholder |
| |
|
Perk International shares owned: 22,500,000 |
| Title: President |
|
|
| |
|
|
| |
|
ACQUIROR SHAREHOLDER |
| |
|
|
| |
|
Signed: _____________________________ |
| |
|
Print Name: Leon Golden
Title: Shareholder
Perk International shares owned: 22,500,000
|
COMPANY:
TECH 9 INC.
Singed:___________________________
Print Name: Robert J Oswald
Title: President
Shareholder: Robert J Oswald
_______________________________
Title Shareholder (owns 100 shares of
Tech 9 Inc.)
Shareholder: Mathew J O’Brien
_______________________________
Title Shareholder (owns 100 Shares of
Tech 9 Inc.
COUNTERPART SIGNATURE PAGE
(FOR ISSUANCES PURSUANT TO REGULATION S)
IN WITNESS WHEREOF, the parties have
executed and delivered this Share Exchange Agreement as of the date first written above.
| |
ENTITY NAME: |
| |
|
| |
By: ________________________________ |
| |
Name: |
| |
Title: |
OFFSHORE DELIVERY INSTRUCTIONS:
PRINT EXACT NAME IN WHICH YOU WANT THE SECURITIES TO BE REGISTERED
Attention:
Address:
Telephone No.:
Facsimile No.:
EXHIBIT B
SHARES AND ACQUIROR SHARES TO BE EXCHANGED
Total Shares to be delivered by the Shareholders to Acquiror –
representing all of the issued and outstanding shares of the Company: 100
Total Acquiror Shares to be delivered by the Acquiror to the Shareholders:
70,000,000
Name & Address of
Each Shareholder |
|
No. of Shares
Owned |
|
Number of Common
Shares of Acquiror’s
Immediately After Closing |
| |
|
|
|
|
Robert J Oswald
1099 Mesa Crescent
Mississauga, ON L5H4B3
CANADA
|
|
100 |
|
35,000,000 |
| |
|
|
|
|
Matthew J O’Brien
244 Berry St.
Shelburne, ON L0N1S2
CANADA
|
|
100 |
|
35,000,000 |
EXHIBIT C
DEFINITION OF "ACCREDITED INVESTOR"
The term "accredited investor" means:
1.
A bank as defined in Section 3(a)(2) of the
Securities Act, or a savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act,
whether acting in its individual or fiduciary capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the Securities Act; an investment company registered
under the Investment Company Act of 1940 (the "Investment Company Act") or
a business development company as defined in
Section 2(a)(48) of the Investment Company Act; a Small Business Investment Company licensed by the U.S. Small Business Administration
under Section 301(c) or (d) of the Small Business Investment Act of 1958; a plan established and maintained by a state, its political
subdivisions or any agency or instrumentality of a state or its political subdivisions for the benefit of its employees, if such
plan has total assets in excess of $5,000,000; an employee benefit plan within the meaning of the Employee Retirement Income Security
Act of 1974 ("ERISA"), if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of ERISA,
which is either a bank, savings and loan association, insurance company, or registered investment advisor, or if the employee benefit
plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that
are accredited investors.
2.
A private business development company as defined
in Section 202(a)(22) of the Investment Advisers Act of 1940.
3.
An organization described in Section 501(c)(3)
of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets in excess of $5,000,000.
4.
A director or executive officer of the Acquiror.
5.
A natural person whose individual net worth,
or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1,000,000.
6.
A natural person who had an individual income
in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching the same income level in the current year.
7.
A trust, with total assets in excess of $5,000,000,
not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person as
described in Rule 506(b)(2)(ii) (i.e., a person who has such knowledge and experience in financial and business matters that he
is capable of evaluating the merits and risks of the prospective investment).
8.
An entity in which all of the equity owners
are accredited investors. (If this alternative is checked, the Shareholder must identify each equity owner and provide statements
signed by each demonstrating how each is qualified as an accredited investor.)
EXHIBIT D
DEFINITION OF "U.S. PERSON"
1.
"U.S. person" (as defined in Regulation
S) means:
i.
Any natural person resident in the United States;
ii.
any partnership or corporation organized or incorporated
under the laws of the United States;
iii
Any estate of which any executor or administrator
is a U.S. person;
iv.
Any trust of which any trustee is a U.S. person;
v.
Any agency or branch of a foreign entity located
in the United States;
vi.
Any non-discretionary account or similar account
(other than an estate or trust) held by a dealer or other fiduciaryfor the benefit or account of a U.S. person;
vii.
Any discretionary account or similar account (other
than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United
States; and
viii.
Any partnership or corporation if: (A) organized
or incorporated under the laws of any foreign jurisdiction; and (B) formed by a U.S. person principally for the purpose of investing
in securities not registered under the Securities Act, unless it is organized or incorporated, and owned, by accredited investors
(as defined in Rule 501(a)) who are not natural persons, estates or trusts.
2.
Notwithstanding paragraph (1) above, any discretionary
account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or
other professional fiduciary organized, incorporated, or (if an individual) resident in the United States shall not be deemed a
"U.S. person."
3.
Notwithstanding paragraph (1), any estate of
which any professional fiduciary acting as executor or administrator is a U.S. person shall not be deemed a U.S. person if:
i.
An executor or administrator of the estate who
is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and
ii.
The estate is governed by foreign law.
4.
Notwithstanding paragraph (1), any trust of
which any professional fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person if a trustee who is not a
U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no
settlor if the trust is revocable) is a U.S. person.
5.
Notwithstanding paragraph (1), an employee benefit
plan established and administered in accordance with the law of a country other than the United States and customary practices
and documentation of such country shall not be deemed a U.S. person.
6.
Notwithstanding paragraph (1), any agency or
branch of a U.S. person located outside the United States shall not be deemed a "U.S. person" if:
i.
The agency or branch operates for valid business
reasons; and
ii.
The agency or branch is engaged in the business
of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where
located.
7.
The International Monetary Fund, the International
Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development
Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations,
their agencies, affiliates and pension plans shall not be deemed "U.S. persons."
EXHIBIT E
ACCREDITED INVESTOR REPRESENTATIONS
Each Shareholder indicating that it is an Accredited Investor, severally
and not jointly, further represents and warrants to the Acquiror as follows:
1.
Such Shareholder qualifies as an Accredited
Investor on the basis set forth on its signature page to this Agreement.
2.
Such Shareholder has sufficient knowledge and
experience in finance, securities, investments and other business matters to be able to protect such Shareholder's interests in
connection with the transactions contemplated by this Agreement.
3.
Such Shareholder has consulted, to the extent
that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Acquiror
Shares.
4.
Such Shareholder understands the various risks
of an investment in the Acquiror Shares and can afford to bear such risks for an indefinite period of time, including, without
limitation, the risk of losing its entire investment in the Acquiror Shares.
5.
Such Shareholder has had access to the Acquiror's
publicly filed reports with the SEC.
6.
Such Shareholder has been furnished during the
course of the transactions contemplated by this Agreement with all other public information regarding the Acquiror that such Shareholder
has requested and all such public information is sufficient for such Shareholder to evaluate the risks of investing in the Acquiror
Shares.
7.
Such Shareholder has been afforded the opportunity
to ask questions of and receive answers concerning the Acquiror and the terms and conditions of the issuance of the Acquiror Shares.
8.
Such Shareholder is not relying on any representations
and warranties concerning the Acquiror made by the Acquiror or any officer, employee or agent of the Acquiror, other than those
contained in this Agreement.
9.
Such Shareholder is acquiring the Acquiror Shares
for such Shareholder's own account, for investment and not for distribution or resale to others.
10.
Such Shareholder will not sell or otherwise
transfer the Acquiror Shares, unless either (A) the transfer of such securities is registered under the Securities Act or (B) an
exemption from registration of such securities is available.
11.
Such Shareholder understands and acknowledges
that the Acquiror is under no obligation to register the Acquiror Shares for sale under the Securities Act.
12.
Such Shareholder consents to the placement of
a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in Section 4.2.5(a).
13.
Such Shareholder represents that the address
furnished by such Shareholder on its signature page to this Agreement is such Shareholder's principal residence if he is an individual
or its principal business address if it is a corporation or other entity.
14.
Such Shareholder understands and acknowledges
that the Acquiror Shares have not been recommended by any federal or state securities commission or regulatory authority, that
the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Acquiror
that has been supplied to such Shareholder and that any representation to the contrary is a criminal offense.
15.
Such Shareholder acknowledges that the representations,
warranties and agreements made by such Shareholder herein shall survive the execution and delivery of this Agreement and the purchase
of the Acquiror Shares.
EXHIBIT F
NON U.S. PERSON REPRESENTATIONS
Each Shareholder indicating that it is not a U.S. person, severally
and not jointly, further represents and warrants to the Acquiror as follows:
1.
At the time of (a) the offer by the Acquiror
and (b) the acceptance of the offer by such Shareholder, of the Acquiror Shares, such Shareholder was outside the United States.
2.
No offer to acquire the Acquiror Shares or otherwise
to participate in the transactions contemplated by this Agreement was made to such Shareholder or its representatives inside the
United States.
3.
Such Shareholder is not purchasing the Acquiror
Shares for the account or benefit of any U.S. person, or with a view towards distribution to any U.S. person, in violation of the
registration requirements of the Securities Act.
4.
Such Shareholder will make all subsequent offers
and sales of the Acquiror Shares either (x) outside of the United States in compliance with Regulation S; (y) pursuant to a registration
under the Securities Act; or (z) pursuant to an available exemption from registration under the Securities Act. Specifically, such
Shareholder will not resell the Acquiror Shares to any U.S. person or within the United States prior to the expiration of a period
commencing on the Closing Date and ending on the date that is one year thereafter (the "Distribution Compliance Period"),
except pursuant to registration under the Securities Act or an exemption from registration under the Securities Act.
5.
Such Shareholder is acquiring the Acquiror Shares
for such Shareholder's own account, for investment and not for distribution or resale to others.
6.
Such Shareholder has no present plan or intention
to sell the Acquiror Shares in the United States or to a U.S. person at any predetermined time, has made no predetermined arrangements
to sell the Acquiror Shares and is not acting as a Distributor of such securities.
7.
Neither such Shareholder, its Affiliates nor
any Person acting on such Shareholder's behalf, has entered into, has the intention of entering into, or will enter into any put
option, short position or other similar instrument or position in the U.S. with respect to the Acquiror Shares at any time after
the Closing Date through the Distribution Compliance Period except in compliance with the Securities Act.
8.
Such Shareholder consents to the placement of
a legend on any certificate or other document evidencing the Acquiror Shares substantially in the form set forth in Section 4.2.5(b).
9.
Such Shareholder is not acquiring the Acquiror
Shares in a transaction (or an element of a series of transactions) that is part of any plan or scheme to evade the registration
provisions of the Securities Act.
10.
Such Shareholder has sufficient knowledge and
experience in finance, securities, investments and other business matters to be able to protect such Shareholder's interests in
connection with the transactions contemplated by this Agreement.
11.
Such Shareholder has consulted, to the extent
that it has deemed necessary, with its tax, legal, accounting and financial advisors concerning its investment in the Acquiror
Shares.
12.
Such Shareholder understands the various risks
of an investment in the Acquiror Shares and can afford to bear such risks for an indefinite period of time, including, without
limitation, the risk of losing its entire investment in the Acquiror Shares.
13.
Such Shareholder has had access to the Acquiror's
publicly filed reports with the SEC.
14.
Such Shareholder has been furnished during the
course of the transactions contemplated by this Agreement with all other public information regarding the Acquiror that such Shareholder
has requested and all such public information is sufficient for such Shareholder to evaluate the risks of investing in the Acquiror
Shares.
15.
Such Shareholder has been afforded the opportunity
to ask questions of and receive answers concerning the Acquiror and the terms and conditions of the issuance of the Acquiror Shares.
16.
Such Shareholder is not relying on any representations
and warranties concerning the Acquiror made by the Acquiror or any officer, employee or agent of the Acquiror, other than those
contained in this Agreement.
17.
Such Shareholder will not sell or otherwise
transfer the Acquiror Shares, unless either (A) the transfer of such securities is registered under the Securities Act or (B) an
exemption from registration of such securities is available.
18.
Such Shareholder understands and acknowledges
that the Acquiror is under no obligation to register the Acquiror Shares for sale under the Securities Act.
19.
Such Shareholder represents that the address
furnished by such Shareholder on its signature page to this Agreement is such Shareholder's principal residence if he is an individual
or its principal business address if it is a corporation or other entity.
20.
Such Shareholder understands and acknowledges
that the Acquiror Shares have not been recommended by any federal or state securities commission or regulatory authority, that
the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning the Acquiror
that has been supplied to such Shareholder and that any representation to the contrary is a criminal offense.
21.
Such Shareholder acknowledges that the representations,
warranties and agreements made by such Shareholder herein shall survive the execution and delivery of this Agreement and the purchase
of the Acquiror Shares.
SCHEDULES
TO
SHARE EXCHANGE AGREEMENT
All capitalized terms used but not defined herein shall have the
meaning described to them in the Share Exchange Agreement, dated as of ________, 2015, by and among PERK INTERNATIONAL INC., a
Nevada corporation, the persons listed on the signature page thereto, TECH 9 INC.an Ontario company, and the persons listed on
Exhibit B thereto.
SCHEDULE 4.1.5
BROKERS OR FINDERS
None.
SCHEDULE 5.1
COMPANY JURISDICTIONS
(jurisdiction of organization)
Ontario
SCHEDULE 5.2
SUBSIDIARIES
The Company has no wholly-owned subsidiaries:
SCHEDULE 5.7.1
None
SCHEDULE 5.7.2
REDEMPTION REQUIREMENTS
None.
SCHEDULE 5.7.3
LIENS ON SHARES
None.
SCHEDULE 5.10
LEGAL PROCEEDINGS
No material legal proceedings.
SCHEDULE 5.11
BROKERS OR FINDERS
None
SCHEDULE 6.1
JURISDICTIONS
Incorporated in the State of Nevada
Conducts business in New Jersey
SCHEDULE 6.2
OWNERSHIP INTEREST
None
SCHEDULE 6.8.1
CAPITALIZATION AND RELATED MATTERS
None in SEC documents or otherwise.
SCHEDULE 6.8.2
NO REDEMPTION REQUIREMENTS
None
SCHEDULE 6.8.4
SUBSIDIARIES
The Acquiror has no subsidiaries
SCHEDULE 6.10
LEGAL PROCEEDINGS
None.
SCHEDULE 6.11
BROKERS OR FINDERS
None.
SCHEDULE 6.12
ABSENCE OF UNDISCLOSED LIABILITIES
None.
SCHEDULE 6.13
CHANGES
None.
SCHEDULE 6.13.5
CAPITAL STOCK
None
SCHEDULE 6.13.9
DISCHARGED LIABILITIES
None
SCHEDULE 6.13.10
INDEBTEDNESS
SCHEDULE 6.13.14
AGREEMENTS
None, other than those set forth in Share Exchange Agreement dated
August 7, 2009 to which this Schedule is annexed.
SCHEDULE 6.15.1
AGREEMENTS
SCHEDULE 6.15.2
None
SCHEDULE 6.16.1
Tax Returns
None
SCHEDULE 6.19
LITIGATION
None.
SCHEDULE 6.21
INTERESTED PARTY TRANSACTIONS
None, except as may be disclosed in SEC filings.
SCHEDULE 6.23
BANK ACCOUNTS AND SAFE DEPOSIT BOXES
Acquiror has a checking account.
Acquiror has no safe deposit box(es)
SCHEDULE 6.24
INTELLECTUAL PROPERTY
None
SCHEDULE 6.27.1
APPROVED PLANS
None
SCHEDULE 6.28
ENVIRONMENTAL MATTERS
Not applicable
Exhibit 10.1
This Consulting
AGREEMENT is entered into as of the 1st (first) day of May 2013, by and between Tech9 Inc., a corporation incorporated under the
laws of Ontario, Canada ("Employer") and Matthew J O'Brien ("Executive").
WHEREAS,
the Executive is a Partner of Tech9 Inc. and effective from the date of this contract will be employed as consultant by the Employer
as the CTO and Partner of Tech9 Inc.
WHEREAS,
the Employer wishes to engage of the Executive's services in connection with the operation of the business carried on by the Employer
(the "Business");
AND
WHEREAS, the Employer and the Executive wish to set out the terms of the Executive's employment:
NOW,
THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows:
1.
AGREEMENT TO EMPLOY
The
Employer agrees to employ the Executive in connection with the Business on the terms and conditions set out herein, and the Executive
agrees to this employment on such terms.
2.
TERM
(a) This
Agreement shall be in effect for a five year period, commencing May 1st, 2013, and terminated only as described in subparagraphs
(b) and (c) below:
(b) The
Employer may terminate this Agreement at any time as set out in paragraph 7 hereof.
(c) The
Executive may terminate this Agreement at any time upon three (3) months' written notice to the Employer, or as set out in Paragraph
8 hereof.
3.
DUTIES AND RESPONSIBILITIES
The
Executive shall be the CTO and Partner, and shall have the authority, and perform the duties, assigned to him from time to time
by the Partners. It is acknowledged and agreed that such authority and duties may change from time to time at the sole discretion
of the Employer; however, any such change will be in keeping with the general nature of authority and duties performed by a CTO.
4.
CONFLICT OF INTEREST/DUTY OF LOYALTY
(a) The
Executive agrees to devote his full business time and energy to the business affairs and interests of the Employer and shall use
his best efforts and abilities to promote the Employer's interests. The Executive agrees to devote his working time exclusively
to the Business and shall not engage in any other enterprise, occupation or profession, directly or indirectly, or become a principal,
agent, director, officer or employee of another company or firm, without the prior consent of the CEO and or the Partner. In particular,
the Executive agrees not to be directly or indirectly engaged in any business, whether as a principal, agent, director, officer,
employee or otherwise, which competes with the Employer or which employment would constitute a conflict of interest with the Business.
The Executive may make and manage personal business investments of his choice and serve in any capacity with any civic, educational,
recreational or charitable organization, or any governmental entity or trade association, without seeking or obtaining approval
by the CEO and or the Partner, provided such activities and services do not materially interfere or conflict with the performance
of his duties hereunder.
(b) The
Executive confirms that he has completely and accurately disclosed to the CEO of the Employer all of his personal business interests
which may represent a conflict of interest with the business of the Employer existing as of the date of this Agreement, and agrees
to disclose any changes thereto during its term. The Executive shall divest himself of any interests which the CEO and or the
Partner determines conflicts with those of the Employer.
(c) The
Executive shall not use information concerning the Business of the Employer, directly or indirectly, for his own or any other
interests, whether or not such interests conflict with those of the Business, during or after his employment by the Employer.
5. REMUNERATION
The
Executive shall be compensated as follows during the term of this Agreement: During the first calendar year, 2013, the executive
shall be compensated as follows:
1. The
executive shall receive $144,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the rate of 1.5%.
3. The
executive shall receive 100 shares in Tech9 Inc.. This number of shares is based on 50 percent of the outstanding or issued shares
of Tech9 Inc.,
In
the second year of this contract (2014), the Executive shall be compensated as follows:
1. The
executive shall receive $188,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the rate of 1.5%.
In
the Third year of this contract (2015), the Executive shall be compensated as follows:
1. The
executive shall receive $225,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the
7.
TERM NATION BY EMPLOYER
(a)
This Agreement and, thereby, the employment of the Executive, may be terminated by the Employer summarily and without notice or
payment in lieu of notice, severance payment, benefits, or damages, on the occurrence of any one or more of the following events:
i. for
cause at common law resulting from, without limiting the generality of the foregoing, fraud, dishonesty, willful or deliberate
breach of statute or regulation;
ii. for
willful or deliberate failure of the Executive to disclose any material facts concerning his business interests or employment
outside of the Employer
iii. for
refusal by the Executive to follow the lawful and reasonable instructions of the CEO and or Partner of the Employer; or
iv. the
death of the Executive only that on such occurrence, the Executive's beneficiary or his estate, as applicable, shall receive any
Employer Benefits to which they are entitled as a consequence of such event (for example; life insurance benefit payment).
(b)
This Agreement may be terminated by the Employer on notice to the Executive, other than for the reasons described in subparagraphs
7 (a) hereof, upon:
i.
payment to the Executive of all remuneration elements as described in paragraphs 5 and 6 hereof including pension, stock, stock
options and Performance Based Bonus entitlements accrued during the Statutory Notice period required under the Ontario Employment
Standards Act or such longer period of notice that the Employer chooses to provide, whether or not the Executive is required to
provide services during such notice period; plus
ii. If
termination occurs in the first 4 years of this contract, payment to the Executive of a lump sum equivalent to 24 months' base
salary in lieu of notice, severance, damages, or any other payments whatsoever, including payments under the Ontario Employment
Standards Act, other than payments for statutory requirements detailed in 7(b)i, above, and except for any due and accrued regular
vacation pay.
iii
If termination occurs in the fifth or subsequent years of this contract, payment to the Executive of a lump sum equivalent to
18 months' base salary in lieu of notice, severance, damages, or any other payments whatsoever, including payments under the Ontario
Employment Standards Act, other than payments for statutory requirements detailed in 7(b)i, above, and except for any due and
accrued regular vacation pay.
iii.
Continuation of insured health and dental benefits only, excluding life insurance, short and long term disability
benefits, for a period of not more than 18 months from the date of termination. These benefits will cease immediately upon
re-employment of the executive elsewhere.
Any
payments and benefits described under this paragraph 7(b) shall be provided to the Executive after the due execution of a release
and indemnity form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment
with the Employer pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including
payments under any applicable statutory obligations.
(c)
In the event that the Executive is:
i. disabled
for more than 17 weeks; and
ii. fails
to qualify for long term disability benefits under the long term disability plan sponsored by the Employer; and
iii. fails
to immediately return to active employment with the Employer,
The
Executive will be deemed to have terminated his employment with the Employer. In such event, notwithstanding the preceding, the
Executive will:
i. continue
to receive salary payable in the form of salary continuance for a period that is 18 months less seventeen (17) weeks;
ii. continue
to participate in life insurance, accidental death and dismemberment, and extended medial and dental benefits, and specifically
excludes benefits provided under sub-paragraph (v) of this paragraph 7 (c), for a period of 6 months from the onset of the disability;
iii. immediately
cease to accrue Performance Based Bonus and stock options; and
v.
immediately cease to participate in the short term and long term disability benefit plan referred to in Section 6 (a) and all
other benefits described under Section 6.
8.
TERMINATION BY THE EXECUTIVE
If
there is a change in control of the Employer, as defined below, during the term of this Agreement, and if within a period of twelve
(12) months subsequent to such change in control there is a material change in the terms and conditions of employment of the Executive,
the Executive may, within this twelve (12) month period, terminate this Agreement by notice in writing to the CEO of the Employer.
The Agreement shall terminate thirty (30) days from receipt of such notice and the Employer shall pay to the Executive Twenty
four (24) months' base salary in lieu of notice, severance, damages or any other payments whatsoever, should this occur within
the first four years of this contract; and eighteen (18) months' base salary in lieu of notice, severance, damages or any other
payments whatsoever,
For
purposes of this Agreement a "change in control" of the Employer shall mean the occurrence of any one of the following
events:
(a) The
sale of Tech9 Inc. or;
(b) A
change in majority ownership of Tech9 Inc. other than the normal reduction of majority ownership caused by an increase in ownership
by employees of the company.
(c)
A material change in the governance structure of the organization (eg; the nature of and/or mandate of the Partners); or
(d)
A material change on the corporate structure and/or operating nature of the organization (ie: change in reporting relationships).
Any
payments described under this paragraph 8 shall be provided to the Executive after the due execution of a release and indemnity
form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment with the Employer
pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including payments under
any applicable statutory obligations.
9.
RECOURSE ON BREACH
The
Executive acknowledges that damages would not be a sufficient remedy for any breach, or threatened breach, of this Agreement by
the Executive, in particular any breach of paragraph 10 concerning confidentiality or non-competition. The Executive agrees that
the Employer may apply for and obtain any relief available to it in a court of law, including injunctive relief. This relief is
in addition to such rights the Employer may have to damages arising from any breach, or threatened breach, of this Agreement by
the Executive.
8.
TERMINATION BY THE EXECUTIVE
If
there is a change in control of the Employer, as defined below, during the term of this Agreement, and if within a period of twelve
(12) months subsequent to such change in control there is a material change in the terms and conditions of employment of the Executive,
the Executive may, within this twelve (12) month period, terminate this Agreement by notice in writing to the CEO of the Employer.
The Agreement shall terminate thirty (30) days from receipt of such notice and the Employer shall pay to the Executive Twenty
four (24) months' base salary in lieu of notice, severance, damages or any other payments whatsoever, should this occur within
the first four years of this contract; and eighteen (18) months' base salary in lieu of notice, severance, damages or any other
payments whatsoever,
For
purposes of this Agreement a "change in control" of the Employer shall mean the occurrence of any one of the following
events:
(a) The
sale of Tech9 Inc. or;
(b) A
change in majority ownership of Tech9 Inc. other than the normal reduction of majority ownership caused by an increase in ownership
by employees of the company.
(c)
A material change in the governance structure of the organization (eg; the nature of and/or mandate of the Partners); or
(d)
A material change on the corporate structure and/or operating nature of the organization (ie: change in reporting relationships).
Any
payments described under this paragraph 8 shall be provided to the Executive after the due execution of a release and indemnity
form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment with the Employer
pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including payments under
any applicable statutory obligations.
9.
RECOURSE ON BREACH
The
Executive acknowledges that damages would not be a sufficient remedy for any breach, or threatened breach, of this Agreement by
the Executive, in particular any breach of paragraph 10 concerning confidentiality or non-competition. The Executive agrees that
the Employer may apply for and obtain any relief available to it in a court of law, including injunctive relief. This relief is
in addition to such rights the Employer may have to damages arising from any breach, or threatened breach, of this Agreement by
the Executive.
10. CONFIDENTIALITY
OF AGREEMENT
The
parties agree that this Agreement and its contents are confidential and may only be divulged with the written consent of the other
party, except only for disclosure to personal advisors retained by either party to advise on the contents of the same. Each party's
personal advisors will enter into comparable agreements of confidentiality at the request of the other party.
11. CONFIDENTIALITY
AND NON-COMPETITION
Unless
required by law, both during and after the date of this Agreement, the Executive shall not disclose any confidential information
concerning the Employer or any of the corporations or other entities with which the Employer deals either directly or indirectly
to any person, partnership or corporation, or to assist in such disclosure, without the written consent of the CEO.
12. SEVERABILITY
The
invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other
provision, and any invalid provision will be severable from this Agreement.
13. GOVERNING
LAW
This
Agreement is governed by and is to be construed, interpreted and enforced solely in accordance with the laws of the Province of
Ontario and the federal laws of Canada, as applicable.
14. SUCCESSORS
This
Agreement ensures to the benefit of and is binding upon the parties and their respective heirs, administrators, executors, successors
and assigns.
15.
ASSIGNMENT
This
Agreement may be assigned by the Employer to its successors and assigns, without the consent of the Executive. The Executive may
not assign this Agreement to any other party.
16. INDEPENDENT
LEGAL ADVICE
The
Executive acknowledges having been advised by the Employer that he may wish to obtain independent legal advice concerning the
contents hereof. The Executive further acknowledges having read and understood this Agreement in its entirety and has executed
the same voluntarily, without duress or undue influence.
17. NOTICE
Any
notice required or permitted under this Agreement shall be in writing and delivered personally or sent by prepaid registered mail
to the recipient at:
i. To
the Employer:
Tech9
Inc.
Attention:
Mr. Louis Isabella, CFO.
ii. To
the Executive:
Matthew
J O'Brien
244
Berry Street Shelburne, Ontario LON 1S2
Or
to such other address as the other party may advise in writing. Any notice delivered personally shall be deemed to have been received
on the day it was delivered and if by prepaid registered mail, on the fifth business day following the date of mailing.
18.
AMENDMENT
This
Agreement may only be amended by a document in writing signed by the respective parties.
19. HEADINGS
The
headings of this Agreement are for convenience only and shall not be used for its interpretation.
20. ENTIRE
AGREEMENT
This
Agreement constitutes the entire agreement between the parties in regard it its subject matter, and supercedes all previous or
collateral understandings, representations, undertakings, statements or other agreements with respect to the same.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement under their own hand or the respective seal and hand of their
authorized representative as of the date first above written.
Tech9
Inc..
Mr.
Robert J Oswald
Title:
CEO and President
Date:
May 1, 2014.
EXECUTIVE:
| /s/
Matthew .l O'Brien |
|
| Matthew
.l O'Brien |
Date:
May 1, 2013. |
Title:
Partner and CTO
11
Exhibit 10.2
This Consulting AGREEMENT is entered into
as of the 1st (first) day of May 2013, by and between Tech9 Inc., a corporation incorporated under the laws of Ontario, Canada
("Employer") and Robert J. Oswald ("Executive").
WHEREAS, the Executive is a Partner of Tech9
Inc. and effective from the date of this contract will be employed as a consultant by the Employer as the CEO and Partner of Tech9
Inc.
WHEREAS,
the Employer wishes to engage of the Executive's services in connection with the operation of the business carried on by the Employer
(the "Business");
AND
WHEREAS, the Employer and the Executive wish to set out the terms of the Executive's employment:
NOW,
THEREFORE, in consideration of the mutual promises and covenants herein contained, the parties hereto agree as follows:
1.
AGREEMENT TO EMPLOY
The
Employer agrees to employ the Executive in connection with the Business on the terms and conditions set out herein, and the Executive
agrees to this employment on such terms.
2.
TERM
(a) This
Agreement shall be in effect for a five year period, commencing May 1st, 2013, and terminated only as described in subparagraphs
(b) and (c) below:
(b) The
Employer may terminate this Agreement at any time as set out in paragraph 7 hereof.
(c) The
Executive may terminate this Agreement at any time upon three (3) months' written notice to the Employer, or as set out in Paragraph
8 hereof.
3.
DUTIES AND RESPONSIBILITIES
The Executive shall be the CEO and Partner,
and shall have the authority, and perform the duties, assigned to him from time to time by the Partners. It is acknowledged and
agreed that such authority and duties may change from time to time at the sole discretion of the Employer; however, any such change
will be in keeping with the general nature of authority and duties performed by a CEO.
4.
CONFLICT OF INTEREST/DUTY OF LOYALTY
(a) The Executive agrees to devote his full business
time and energy to the business affairs and interests of the Employer and shall use his best efforts and abilities to promote the
Employer's interests. The Executive agrees to devote his working time exclusively to the Business and shall not engage in any other
enterprise, occupation or profession, directly or indirectly, or become a principal, agent, director, officer or employee of another
company or firm, without the prior consent of the CTO and or the Partner. In particular, the Executive agrees not to be directly
or indirectly engaged in any business, whether as a principal, agent, director, officer, employee or otherwise, which competes
with the Employer or which employment would constitute a conflict of interest with the Business. The Executive may make and manage
personal business investments of his choice and serve in any capacity with any civic, educational, recreational or charitable organization,
or any governmental entity or trade association, without seeking or obtaining approval by the CTO and or the Partner, provided
such activities and services do not materially interfere or conflict with the performance of his duties hereunder.
(b) The Executive confirms that he has completely
and accurately disclosed to the CTO of the Employer all of his personal business interests which may represent a conflict of interest
with the business of the Employer existing as of the date of this Agreement, and agrees to disclose any changes thereto during
its term. The Executive shall divest himself of any interests which the CTO and or the Partner determines conflicts with those
of the Employer.
(c) The
Executive shall not use information concerning the Business of the Employer, directly or indirectly, for his own or any other
interests, whether or not such interests conflict with those of the Business, during or after his employment by the Employer.
5. REMUNERATION
The
Executive shall be compensated as follows during the term of this Agreement: During the first calendar year, 2013, the executive
shall be compensated as follows:
1. The
executive shall receive $144,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the rate of 1.5%.
3. The
executive shall receive 100 shares in Tech9 Inc.. This number of shares is based on 50 percent of the outstanding or issued shares
of Tech9 Inc.,
In
the second year of this contract (2014), the Executive shall be compensated as follows:
1. The
executive shall receive $188,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the rate of 1.5%.
In
the Third year of this contract (2015), the Executive shall be compensated as follows:
1. The
executive shall receive $225,000 in base salary.
2. The
executive shall receive a sales bonus based on annual net sales for Tech9 Inc. at the
7.
TERMINATION BY EMPLOYER
(a)
This Agreement and, thereby, the employment of the Executive, may be terminated by the Employer summarily and without notice or
payment in lieu of notice, severance payment, benefits, or damages, on the occurrence of any one or more of the following events:
i. for
cause at common law resulting from, without limiting the generality of the foregoing, fraud, dishonesty, willful or deliberate
breach of statute or regulation;
ii. for
willful or deliberate failure of the Executive to disclose any material facts concerning his business interests or employment
outside of the Employer
iii. for
refusal by the Executive to follow the lawful and reasonable instructions of the CTO and or Partner of the Employer; or
iv. the
death of the Executive only that on such occurrence, the Executive's beneficiary or his estate, as applicable, shall receive any
Employer Benefits to which they are entitled as a consequence of such event (for example; life insurance benefit payment).
(b)
This Agreement may be terminated by the Employer on notice to the Executive, other than for the reasons described in subparagraphs
7 (a) hereof, upon:
i.
payment to the Executive of all remuneration elements as described in paragraphs 5 and 6 hereof including pension, stock, stock
options and Performance Based Bonus entitlements accrued during the Statutory Notice period required under the Ontario Employment
Standards Act or such longer period of notice that the Employer chooses to provide, whether or not the Executive is required to
provide services during such notice period; plus
ii. If
termination occurs in the first 4 years of this contract, payment to the Executive of a lump sum equivalent to 24 months' base
salary in lieu of notice, severance, damages, or any other payments whatsoever, including payments under the Ontario Employment
Standards Act, other than payments for statutory requirements detailed in 7(b)i, above, and except for any due and accrued regular
vacation pay.
iii.
If termination occurs in the fifth or subsequent years of this contract, payment to the Executive of a lump sum equivalent to
18 months' base salary in lieu of notice, severance, damages, or any other payments whatsoever, including payments under the Ontario
Employment Standards Act, other than payments for statutory requirements detailed in 7(b)i, above, and except for any due and
accrued regular vacation pay.
iv.
Continuation of insured health and dental benefits only, excluding life insurance, short and long term disability benefits,
for a period of not more than 18 months from the date of termination. These benefits will cease immediately upon re-employment
of the executive elsewhere.
Any
payments and benefits described under this paragraph 7(b) shall be provided to the Executive after the due execution of a release
and indemnity form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment
with the Employer pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including
payments under any applicable statutory obligations.
(c)
In the event that the Executive is:
i. disabled
for more than 17 weeks; and
ii. fails
to qualify for long term disability benefits under the long term disability plan sponsored by the Employer; and
iii. fails
to immediately return to active employment with the Employer,
The
Executive will be deemed to have terminated his employment with the Employer. In such event, notwithstanding the preceding, the
Executive will:
i. continue
to receive salary payable in the form of salary continuance for a period that is 18 months less seventeen (17) weeks;
ii. continue
to participate in life insurance, accidental death and dismemberment, and extended medial and dental benefits, and specifically
excludes benefits provided under sub-paragraph (v) of this paragraph 7 (c), for a period of 6 months from the onset of the disability;
iii. immediately
cease to accrue Performance Based Bonus and stock options; and
v.
immediately cease to participate in the short term and long term disability benefit plan referred to in Section 6 (a) and all
other benefits described under Section 6.
8.
TERMINATION BY THE EXECUTIVE
If there is a change in control of the Employer,
as defined below, during the term of this Agreement, and if within a period of twelve (12) months subsequent to such change in
control there is a material change in the terms and conditions of employment of the Executive, the Executive may, within this
twelve (12) month period, terminate this Agreement by notice in writing to the CTO of the Employer. The Agreement shall terminate
thirty (30) days from receipt of such notice and the Employer shall pay to the Executive Twenty four (24) months' base salary
in lieu of notice, severance, damages or any other payments whatsoever, should this occur within the first four years of this
contract; and eighteen (18) months' base salary in lieu of notice, severance, damages or any other payments whatsoever,
For
purposes of this Agreement a "change in control" of the Employer shall mean the occurrence of any one of the following
events:
(a) The
sale of Tech9 Inc. or;
(b) A
change in majority ownership of Tech9 Inc. other than the normal reduction of majority ownership caused by an increase in ownership
by employees of the company.
(c)
A material change in the governance structure of the organization (eg; the nature of and/or mandate of the Partners); or
(d)
A material change on the corporate structure and/or operating nature of the organization (ie: change in reporting relationships).
Any
payments described under this paragraph 8 shall be provided to the Executive after the due execution of a release and indemnity
form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment with the Employer
pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including payments under
any applicable statutory obligations.
9.
RECOURSE ON BREACH
The
Executive acknowledges that damages would not be a sufficient remedy for any breach, or threatened breach, of this Agreement by
the Executive, in particular any breach of paragraph 10 concerning confidentiality or non-competition. The Executive agrees that
the Employer may apply for and obtain any relief available to it in a court of law, including injunctive relief. This relief is
in addition to such rights the Employer may have to damages arising from any breach, or threatened breach, of this Agreement by
the Executive.
8.
TERMINATION BY THE EXECUTIVE
If there is a change in control of the Employer,
as defined below, during the term of this Agreement, and if within a period of twelve (12) months subsequent to such change in
control there is a material change in the terms and conditions of employment of the Executive, the Executive may, within this
twelve (12) month period, terminate this Agreement by notice in writing to the CTO of the Employer. The Agreement shall terminate
thirty (30) days from receipt of such notice and the Employer shall pay to the Executive Twenty four (24) months' base salary
in lieu of notice, severance, damages or any other payments whatsoever, should this occur within the first four years of this
contract; and eighteen (18) months' base salary in lieu of notice, severance, damages or any other payments whatsoever,
For
purposes of this Agreement a "change in control" of the Employer shall mean the occurrence of any one of the following
events:
(a) The
sale of Tech9 Inc. or;
(b) A
change in majority ownership of Tech9 Inc. other than the normal reduction of majority ownership caused by an increase in ownership
by employees of the company.
(c)
A material change in the governance structure of the organization (eg; the nature of and/or mandate of the Partners); or
(d)
A material change on the corporate structure and/or operating nature of the organization (ie: change in reporting relationships).
Any
payments described under this paragraph 8 shall be provided to the Executive after the due execution of a release and indemnity
form, releasing and indemnifying the Employer with respect to any liability arising from the Executive's employment with the Employer
pertaining to any liability for notice, severance, damages, benefits, or any other payments whatsoever including payments under
any applicable statutory obligations.
9.
RECOURSE ON BREACH
The
Executive acknowledges that damages would not be a sufficient remedy for any breach, or threatened breach, of this Agreement by
the Executive, in particular any breach of paragraph 10 concerning confidentiality or non-competition. The Executive agrees that
the Employer may apply for and obtain any relief available to it in a court of law, including injunctive relief. This relief is
in addition to such rights the Employer may have to damages arising from any breach, or threatened breach, of this Agreement by
the Executive.
10. CONFIDENTIALITY
OF AGREEMENT
The
parties agree that this Agreement and its contents are confidential and may only be divulged with the written consent of the other
party, except only for disclosure to personal advisors retained by either party to advise on the contents of the same. Each party's
personal advisors will enter into comparable agreements of confidentiality at the request of the other party.
11. CONFIDENTIALITY
AND NON-COMPETITION
Unless
required by law, both during and after the date of this Agreement, the Executive shall not disclose any confidential information
concerning the Employer or any of the corporations or other entities with which the Employer deals either directly or indirectly
to any person, partnership or corporation, or to assist in such disclosure, without the written consent of the CTO.
12. SEVERABILITY
The
invalidity or unenforceability of any provision of this Agreement will not affect the validity or enforceability of any other
provision, and any invalid provision will be severable from this Agreement.
13. GOVERNING
LAW
This
Agreement is governed by and is to be construed, interpreted and enforced solely in accordance with the laws of the Province of
Ontario and the federal laws of Canada, as applicable.
14. SUCCESSORS
This
Agreement ensures to the benefit of and is binding upon the parties and their respective heirs, administrators, executors, successors
and assigns.
15.
ASSIGNMENT
This
Agreement may be assigned by the Employer to its successors and assigns, without the consent of the Executive. The Executive may
not assign this Agreement to any other party.
16. INDEPENDENT
LEGAL ADVICE
The
Executive acknowledges having been advised by the Employer that he may wish to obtain independent legal advice concerning the
contents hereof. The Executive further acknowledges having read and understood this Agreement in its entirety and has executed
the same voluntarily, without duress or undue influence.
17. NOTICE
Any
notice required or permitted under this Agreement shall be in writing and delivered personally or sent by prepaid registered mail
to the recipient at:
i. To
the Employer:
Tech9
Inc.
Attention:
Mr. Louis Isabella, CFO.
ii. To
the Executive:
Robert J. Oswald
1099 Mesa Crescent Mississauga, Ontario
L5H 4B3
Or
to such other address as the other party may advise in writing. Any notice delivered personally shall be deemed to have been received
on the day it was delivered and if by prepaid registered mail, on the fifth business day following the date of mailing.
18.
AMENDMENT
This
Agreement may only be amended by a document in writing signed by the respective parties.
19. HEADINGS
The
headings of this Agreement are for convenience only and shall not be used for its interpretation.
20. ENTIRE
AGREEMENT
This
Agreement constitutes the entire agreement between the parties in regard it its subject matter, and supercedes all previous or
collateral understandings, representations, undertakings, statements or other agreements with respect to the same.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement under their own hand or the respective seal and hand of their
authorized representative as of the date first above written.
Tech9
Inc..
Matthew
J O'Brien
Title:
Partner and CTO
Date:
May 1, 2013.
EXECUTIVE:
| Mr.
Robert J Oswald |
|
| Title:
Partner and CEO |
|
| /s/ Robert
J Oswald |
|
Date:
May 1, 2013.
11
Exhibit
99.1
| TECH
9 INC. |
| |
| FINANCIAL
STATEMENTS |
| |
| As
of May 31, 2014 and 2013 |
| |
| (Amounts
expressed in US Dollars) |
Index
| |
Page
|
| Report of Independent
Registered Public Accounting Firm |
2
|
| Balance Sheets
as at May 31, 2014 and 2013 |
3
|
| Statements of
Operations and Comprehensive Income (Loss) for the year ended May 31, 2014 and period from Inception (January 11, 2013) to
May 31, 2013 |
4
|
| Statements of
Cash flows for the year ended May 31, 2014 and period from Inception (January 11, 2013) to May 31, 2013 |
5
|
| Statement of Changes
in Stockholders’ Equity (Deficiency) for the year ended May 31, 2014 and period from Inception (January 11, 2013) to
May 31, 2013 |
6
|
| Notes to Financial
Statements |
7-15
|
Schwartz
Levitsky Feldman llp
CHARTERED ACCOUNTANTS
LICENSED PUBLIC ACCOUNTANTS
TORONTO ● MONTREAL
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders
of Tech 9 Inc.
We
have audited the accompanying balance sheets of Tech 9 Inc. as at May 31, 2014 and 2013 and the related statements of operations,
comprehensive income (loss), statement of changes in stockholders' equity (deficiency) and cash flows for the years then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We
conducted our audits 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 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 controls 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. An audit also includes
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 financial statements referred to above present fairly, in all material respects, the financial position of Tech
9 Inc. as at May 31, 2014 and 2013 and the results of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
The
accompanying financial statements have been prepared assuming that the company will continue as a going concern. As discussed
in Note 1 to the financial statements, the continuance of the Company is dependent upon its ability to obtain financing and upon
future profitable operations. This raises substantial doubt about it ability to continue as a going concern. Management’s
plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
| |
/s/ Schwartz Levitsky Feldman llp
|
| |
|
| Toronto, Ontario, Canada |
Chartered Accountants |
| December 4, 2014 |
Licensed Public Accountants |
| |
2300
Yonge Street , Suite 1500, Box 2434 |
|
| |
Toronto,
Ontario M4P 1E4 |
|
| |
Tel
: 416 785 5353 |
|
| |
Fax:
416 785 5663 |
|
TECH 9 INC. |
| BALANCE
SHEETS AS AT MAY 31, |
| (Amounts
expressed in U.S. Dollars) |
| | |
2014 | | |
2013 | |
| | |
| | |
| |
| ASSETS | |
| | |
| |
| Current Assets | |
| | |
| |
| Cash | |
$ | 34,089 | | |
$ | 12,873 | |
| Deferred costs (Note 12) | |
| - | | |
| 8,070 | |
| Accounts Receivable | |
| 155,141 | | |
| 185,041 | |
| | |
| | | |
| | |
| Total Current Assets | |
| 189,230 | | |
| 205,984 | |
| EQUIPMENT (Note 3) | |
| - | | |
| 37,015 | |
| | |
| | | |
| | |
| Total Assets | |
$ | 189,230 | | |
$ | 242,999 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 202,889 | | |
$ | 139,896 | |
| Income Tax Payable (Note 8) | |
| - | | |
| 5,833 | |
| Current portion of Obligation under capital lease | |
| - | | |
| 7,516 | |
| Customer deposit | |
| 92,234 | | |
| - | |
| Current portion of term loan | |
| 3,202 | | |
| - | |
| Due to related party (Note 4) | |
| 21,181 | | |
| 15,798 | |
| | |
| | | |
| | |
| Total Current liabilities | |
| 319,506 | | |
| 169,043 | |
| TERM LOAN (Note 10) | |
| 11,597 | | |
| | |
| OBLIGATION UNDER CAPITAL LEASE | |
| - | | |
| 42,989 | |
| | |
| | | |
| | |
| Total Liabilities | |
| 331,103 | | |
| 212,032 | |
| | |
| | | |
| | |
| Stockholders’ Equity (Deficiency) | |
| | | |
| | |
| Capital stock (Note 5) | |
| 200 | | |
| 200 | |
| Accumulated other comprehensive income (loss) | |
| 499 | | |
| (1,031 | ) |
| Retained earnings (accumulated deficit) | |
| (142,572 | ) | |
| 31,798 | |
| | |
| | | |
| | |
| | |
| (141,873 | ) | |
| 30,967 | |
| | |
| | | |
| | |
| Total liabilities and stockholders’ equity | |
$ | 189,230 | | |
$ | 242,999 | |
Going Concern
(Note 1)
Related Party Transactions (Note 4)
Commitment
and Contingencies (Note 13)
Subsequent
Events (Note 14)
Economic
Dependence (Note 11)
The
accompanying notes are an integral part of the financial statements.
| TECH
9 INC. |
| STATEMENT
OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
| FOR
THE YEAR ENDED MAY 31, 2014 AND PERIOD FROM INCEPTION (JANUARY 11, 2013) TO MAY 31, 2013 |
| (Amounts
expressed in U.S. Dollars) |
| | |
2014 | | |
2013 | |
| Sales | |
| | |
| |
| Products | |
$ | 151,311 | | |
$ | 280,700 | |
| Services | |
| 165,740 | | |
| 88,297 | |
| | |
| 317,051 | | |
| 368,997 | |
| Cost of sales | |
| | | |
| | |
| Products | |
| 128,507 | | |
| 225,735 | |
| Services | |
| 86,974 | | |
| 42,277 | |
| | |
| 215,481 | | |
| 268,012 | |
| | |
| | | |
| | |
| Gross profit | |
| 101,570 | | |
| 100,985 | |
| Operating expenses: | |
| | | |
| | |
| Consulting and professional | |
$ | 208,549 | | |
$ | 50,580 | |
| General and administrative | |
| 99,653 | | |
| 5,660 | |
| Depreciation | |
| 4,308 | | |
| 7,114 | |
| | |
| 312,510 | | |
| 63,354 | |
| | |
| | | |
| | |
| Operating profit (loss) | |
| (210,940 | ) | |
| 37,631 | |
| | |
| | | |
| | |
| Miscellaneous revenue | |
| 17,510 | | |
| - | |
| Gain on disposition of equipment (Note 3) | |
| 13,227 | | |
| - | |
| | |
| | | |
| | |
| Net income (loss) before taxes | |
| (180,203 | ) | |
| 37,631 | |
| Income tax recovery (expense) (Note 8) | |
| 5,833 | | |
| (5,833 | ) |
| Net income (loss) | |
| (174,370 | ) | |
| 31,798 | |
| Foreign exchange translation adjustment | |
| 1,530 | | |
| (1,031 | ) |
| Comprehensive income (loss) | |
$ | (172,840 | ) | |
$ | 30,767 | |
| | |
| | | |
| | |
| Weighted average number of common shares outstanding-basic and diluted | |
| 200 | | |
| 144 | |
| Earnings (Loss) per share – basic and diluted | |
$ | (871.85 | ) | |
$ | 220.82 | |
The
accompanying notes are an integral part of the financial statements.
| TECH
9 INC. |
| STATEMENT
OF CASH FLOWS |
| FOR
THE YEAR ENDED MAY 31, 2014 AND PERIOD FROM INCEPTION (JANUARY 11, 2013) TO MAY 31, 2013 |
| (Amounts
expressed in U.S. Dollars) |
| | |
2014 | | |
2013 | |
| Cash Flows from Operating Activities: | |
| | |
| |
| Net income (loss) | |
$ | (174,370 | ) | |
$ | 31,798 | |
| Gain on disposition of equipment (Note 3) | |
| (13,227 | ) | |
| - | |
| Depreciation | |
| 4,308 | | |
| 7,114 | |
| Changes in non-cash working capital: | |
| | | |
| | |
| Decrease (Increase) in accounts receivables | |
| 22,178 | | |
| (185,041 | ) |
| Increase in accounts payable and accrued liabilities | |
| 72,618 | | |
| 139,896 | |
| Increase in customer deposit | |
| 92,234 | | |
| - | |
| Increase (decrease) in income tax payable | |
| (5,833 | ) | |
| 5,833 | |
| Net Cash used in Operating Activities | |
| (2,092 | ) | |
| (400 | ) |
| | |
| | | |
| | |
| Cash Flows from Investing Activities: | |
| | | |
| | |
| Insurance proceeds on write off of equipment | |
| 45,934 | | |
| - | |
| Repayment of lease for purchase of vehicle | |
| (42,435 | ) | |
| (419 | ) |
| Net Cash provided by (used in) Investing Activities | |
| 3,499 | | |
| (419 | ) |
| | |
| | | |
| | |
| Cash Flows from Financing Activities: | |
| | | |
| | |
| Proceeds from issuance of shares | |
| - | | |
| 200 | |
| Term loan from bank, net | |
| 15,048 | | |
| | |
| Advances from related party, net | |
| 5,048 | | |
| 14,544 | |
| Net Cash Provided by Financing Activities | |
| 20,096 | | |
| 14,744 | |
| | |
| | | |
| | |
| Effects of foreign currency exchange rate changes | |
| (287 | ) | |
| (1,052 | ) |
| | |
| | | |
| | |
| Net Increase in Cash | |
| 21,216 | | |
| 12,873 | |
| Cash at beginning of the year | |
| 12,873 | | |
| - | |
| Cash at end of the year | |
$ | 34,089 | | |
$ | 12,873 | |
| | |
| | | |
| | |
| Supplemental information: | |
| | | |
| | |
| Income tax paid | |
| Nil | | |
| Nil | |
| Interest paid | |
| 1,150 | | |
| 175 | |
The
accompanying notes are an integral part of the financial statements.
| TECH
9 INC. |
| STATEMENTS
OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) |
| FOR
THE YEAR ENDED MAY 31, 2014 AND PERIOD FROM INCEPTION (JANUARY 11, 2013) TO MAY 31, 2013 |
| (Amounts
expressed in U.S. Dollars) |
| | |
| | |
| | |
| | |
Accumulated | | |
| |
| | |
Number | | |
| | |
Retained | | |
Other | | |
Total | |
| | |
of | | |
| | |
Earnings | | |
Comprehensive | | |
Stockholders’ | |
| | |
Common
shares | | |
Capital
Stock | | |
(Accumulated
Deficit) | | |
Income
(Loss) | | |
Equity
(Deficiency) | |
| | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Issue of shares for cash | |
| 100 | | |
| 100 | | |
| - | | |
| - | | |
| 100 | |
| Issue of shares for cash | |
| 100 | | |
| 100 | | |
| - | | |
| - | | |
| 100 | |
Net income
| |
| | | |
| | | |
| 31,798 | | |
| | | |
| 31,798 | |
| Foreign currency translation | |
| | | |
| | | |
| | | |
| (1,031 | ) | |
| (1,031 | ) |
| Balance as at May 31, 2013 | |
| 200 | | |
| 200 | | |
| 31,798 | | |
| (1,031 | ) | |
| 30,967 | |
Net loss
| |
| | | |
| | | |
| (174,370 | ) | |
| | | |
| (174,370 | ) |
| Foreign currency translation | |
| | | |
| | | |
| | | |
| 1,530 | | |
| 1,530 | |
| Balance as at May 31, 2014 | |
| 200 | | |
| 200 | | |
| (142,572 | ) | |
| 499 | | |
| (141,873 | ) |
The
accompanying notes are an integral part of the financial statements.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
Basis
of Presentation
The financial
statements of Tech 9 Inc. (the “Company” or “Tech 9”) were prepared in accordance with generally accepted
accounting principles of United States of America (“US GAAP”)
Nature
of Operations
The Company
was incorporated on January 11, 2013 in Ontario, Canada under the Business Corporation Act. The Company is engaged in the business
of digital signage network, implementation, services and solutions. The Company’s sales and services include hardware and
software sales, project management, installation, implementation and monitoring services.
Going
Concern
The accompanying
financial statements have been prepared assuming the Company will continue as a going concern. This contemplates that assets will
be realized and liabilities and commitments satisfied in the normal course of business.
The
Company was incorporated on January 11, 2013, has limited operating history and used cash of $2,092 in its operations during the
year ended May 31, 2014. This raises substantial doubt as to the Company’s continuance as a going concern, which is dependent
upon its ability to obtain adequate financing and to reach profitable cash flow from operations.
The Company
has working capital deficit of $130,276 and retained loss of $142,572 as at May 31, 2014. The Company has cash in hand of $34,089
as at May 31, 2014.The future of the Company is dependent upon its ability to obtain financing and upon future profitable operations.
Management has plans to seek additional capital through private placements and public offering of its capital stock. These conditions
raise substantial doubt about the Company's ability to continue as a going concern. Although there are no assurances that management's
plans will be realized, management believes that the Company will be able to continue operations in the future. The financial
statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts
of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES |
As precise
determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period
involves the use of estimates which have been made using significant judgment.
The financial
statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the
framework of the significant accounting policies summarized below:
Use of
Estimates
The preparation
of financial statements in conformity with US GAAP requires management to make estimates and assumptions of future events that
affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements,
such as accrued liabilities and recovery value of equipment, and the reported amounts of revenues and expenses for the reporting
period. Actual results may differ from those reported.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Foreign
Currency Translation
The Company’s
functional currency is the Canadian Dollar and its presentation currency is the United States (“U.S.”) Dollar. The
Company uses the “Current rate method” to translate its financial statements from Canadian Dollar into U.S. Dollars.
The assets and liabilities of the Company, except for the capital, are translated into U.S. Dollars using the rate of exchange
prevailing at the balance sheet date. The capital is translated at the historical rate. Adjustments resulting from the translation
of the balance sheet of the Company into U.S. Dollars are recorded in stockholders' equity as part of other comprehensive income.
The statement of operations is translated at average rates during the reporting period. Gains or losses resulting from transactions
in currencies other than the functional currencies are reflected in the statement of operations for the reporting periods.
Equipment
Equipment
is recorded at cost and is stated net of accumulated depreciation. Gains or losses on disposals are reflected as gain or loss
in the year of disposal. The costs of improvements that extend the life of equipment are capitalized. These capitalized costs
may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.
Equipment
are recorded at cost less accumulated depreciation. Depreciation is provided using the following annual rate and method.
| Truck
|
30%
|
declining
balance method |
Additions
during the year are amortized on half year rule.
Revenue
Recognition
The
Company’s revenue recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when
it is realized, or realizable and earned. The Company considers revenue to be realized, or realizable and earned, when the following
revenue recognition requirements are met: persuasive evidence of an arrangement exists, the products have been delivered and /or
installed or services have been performed; the sales price is fixed or determinable within the contract; and collectability is
reasonably assured. For product sales, the Company determines that the earnings process is complete when title, risk of loss and
the right to use equipment has transferred to the customer. Where the Company is contractually responsible for installation, revenue
recognition occurs upon completion of the installation of equipment at a job site. Where the Company is not contractually responsible
for installation, revenue recognition of these items is upon shipment or delivery to a customer location depending on the terms
in the contract.
The
application of ASC 605 to the Company's customer contracts requires judgment, including the determination of whether an arrangement
includes multiple deliverables such as hardware, maintenance and/or other services. For contracts that contain multiple deliverables,
total arrangement consideration is allocated at the inception of the arrangement to each deliverable based on the relative selling
price method. The relative selling price method is based on a hierarchy consisting of vendor specific objective evidence (VSOE)
(price when sold on a stand-alone basis), if available, or third-party evidence (TPE), if VSOE is not available, or estimated
selling price (ESP) if neither VSOE nor TPE is available.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Comprehensive
income or loss
The Company
reports comprehensive income or loss in the statements of changes in stockholders’ equity. In addition to items included
in net income or loss, comprehensive income or loss includes items currently charged or credited directly to stockholders’
equity such as foreign currency translation adjustment.
Income
Taxes
The Company
recognizes a liability or asset for deferred tax consequences of all temporary differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future
years when the reported amounts of the assets and liabilities are recovered or settled. These deferred tax assets or liabilities
are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred
tax assets are reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not
that some or all of the deferred tax assets may not be realized.
Impairment
and Disposal of Long-Lived Assets
The carrying
values of long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.
For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted future cash flows associated
with the asset or group of assets is less than their carrying value. 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.
Financial
Instruments
The Company’s
financial instruments consist of account receivables, accounts payable and accrued liabilities and amounts due to related party.
Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, or credit risks
arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due
to the relatively short period to maturity for these instruments. The Company’s financial assets and liabilities are generally
classified and measured as follows;
| Assets/Liabilities
|
|
Classification
|
|
Measurement
|
| Accounts Receivable
|
|
Loans and
receivables |
|
Amortized
cost |
| Accounts
payable and accrued liabilities |
|
Other liabilities
|
|
Amortized cost
|
| Customer deposit |
|
Other liabilities |
|
Amortized cost |
| Due to related
party |
|
Other liabilities
|
|
Amortized cost
|
| |
|
|
|
|
The
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
| | Level
1 — Unadjusted quoted prices in active markets for identical assets or liabilities. |
Level
2 — Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical
or similar assets or liabilities in markets that are not active or inputs, other than quoted prices in active markets, that are
observable either directly or indirectly.
Level
3 — Unobservable inputs for which there is little or no market data.
Earnings
(Loss) Per Share
The Company
computes net loss of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period
using the treasury stock method. In computing diluted EPS, the average stock price for the period is used in determining the number
of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Recently
Issued Accounting Standards
ASU
2014-15 “Presentation of Financial Statements” – Going Concern (subtopic 205-40) disclosure of uncertainties
about an entity’s ability to continue as a going concern. The amendment are intended to define management’s responsibility
to evaluate whether there is substantial doubt about its ability to continue as a going concern and to provide related disclosures.
The amendment is effective for annual periods ending after December 15, 2016. The Company has not evaluated the impact of this
amendment.
ASU
2014-13 “Consolidation (Topic 810) - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized
Financing Entity”. The amendments in ASU 2014-13 provide an alternative to Topic 820, Fair Value Measurement, for measuring
the financial assets and the financial liabilities of a consolidated collateralized financing entity to eliminate the difference
in the fair value of the financial assets of a collateralized financing entity, as determined under GAAP, when they differ from
the fair value of its financial liabilities even when the financial liabilities have recourse only to the financial assets. When
the measurement alternative is elected, both the financial assets and the financial liabilities of the collateralized financing
entity should be measured using the more observable of the fair value of the financial assets or the fair value of the financial
liabilities. The amendments clarify that when the measurement alternative is elected, a reporting entity’s consolidated
net income (loss) should reflect the reporting entity’s own economic interests in the collateralized financing entity, including:
(1) changes in the fair value of the beneficial interests retained by the reporting entity, and (2) beneficial interests that
represent compensation for services. The amendment is effective for the annual periods beginning after December 15, 2015. The
Company has not evaluated the impact if this amendment on its financial statements.
ASU
2014-12 “Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in ASU 2014-12
require that a performance target that affects vesting and that could be achieved after the requisite service period be treated
as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation,
as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should
not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable
to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being
achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively
over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service
period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately
vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award
if the performance target is achieved. The amendment is effective for periods beginning after December 15, 2015
ASU
2014-11 “Transfers and Servicing (Topic 860) - Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures'-
The amendments in ASU 2014-11 align the accounting for repurchase-to-maturity transactions and repurchase agreements executed
as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would
all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and
supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted
for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. ASU
2014-11 also brings U.S. GAAP into greater alignment with IFRS for repurchase-to-maturity transactions.
The
amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor
retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the
transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase
agreements and similar transactions accounted for as secured borrowings. The amendment is effective for the annual periods beginning
after December 15, 2014. The Company has not evaluated the impact on its financial statements.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Recently
Issued Accounting Standards- (Cont’d)
ASU
2014-09 “Revenue from Contracts with Customers”. The amendments in ASU 2014-09 affects any entity that either enters
into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless
those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede
the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic
606 Revenue from Contracts with Customers. The amendment is effective for the periods beginning after December 15, 2016. The Company
has not evaluated the impact of this amendment.
| |
| |
May 31, 2014 | | |
May 31, 2013 | |
| |
| |
| | |
Accumulated | | |
| | |
Accumulated | |
| |
| |
Cost | | |
Depreciation | | |
Cost | | |
Depreciation | |
| |
| |
$ | | |
$ | | |
$ | | |
$ | |
| |
| |
| | |
| | |
| | |
| |
| |
Truck | |
| - | | |
| - | | |
| 44,129 | | |
| 7,114 | |
| |
| |
| | | |
| | | |
| | | |
| | |
| |
| |
| - | | |
| - | | |
| 44,129 | | |
| 7,114 | |
| |
| |
| | | |
| | | |
| | | |
| | |
| |
Net carrying amount | |
| | | |
$ | - | | |
| | | |
$ | 37,015 | |
| |
| |
| | | |
| | | |
| | | |
| | |
| |
Depreciation expense | |
$ | 4,308 | | |
| | | |
$ | 7,114 | | |
| | |
Depreciation
expense amounted to be $4,308 (2013: $7,114)
Equipment
was written off after an accident during the year ended May 31, 2014 and the Company recorded a gain on disposition of equipment
for $13,227 (2013: $nil) after settlement of lease obligations from insurance proceeds.
| 4.
|
RELATED PARTY
TRANSACTIONS |
May 31,
2014
The
transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties under common control.
i) As of
May 31, 2014, the Company has a loan payable to a related party of $21,181 from a company owned by a director and shareholder
and is unsecured, free of interest and due on demand.
ii)
During the year, the Company expensed management fees for $103,559 (CAD $110,425) to two directors of the Company of which $nil
was owed as of May 31, 2014 and included in accounts payable and accrued liabilities.
iii)
The Company recorded revenue of $28,359 (CAD $30,239) being sales to an entity in which a director had an interest. As of May
31, 2014, the receivable of $28,359 (CAD $30,239) from this entity was written off as bad debts.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 4.
|
RELATED PARTY
TRANSACTIONS (cont’d) |
May 31,
2013
i) As of
May 31, 2013, the Company has loans payable to related parties for $15,798. Included in the amount is loan for $14,737 from a
company owned by a director and shareholder and is unsecured, free of interest and due on demand. The balance loan of $1,061 is
due to a director and shareholder and is unsecured, free of interest and due on demand.
ii)
During the year, the Company expensed management fees for $23,691 (CAD $24,000) to two directors of the Company of which $11,845
was owed as of May 31, 2013 and included in accounts payable and accrued liabilities.
Authorized:
Common Stock:
An unlimited number of common shares, without nominal or par value
Issued and
outstanding:
Common Stock:
200 common shares
On
January 11, 2013, the Company issued 100 common shares for $100.
On
March 31, 2013, the Company issued 100 common shares for $100.
As
at May 31, 2014 the Company operated only in one reportable segment. All assets of the business are located in Canada.
The
Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to maintain
its daily operations. The Board of Directors does not establish quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain the future development of the business.
The
Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying assets. In order to procure materials and pay for administrative costs, the Company will generate sales, spend
its existing working capital on need basis and raise additional unsecured loan amounts as needed.
Management
reviews its capital management approach on an ongoing basis and believes that this approach, given the foregoing paragraph and
the relative size of the Company, is reasonable.
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
(a) Current
income tax
| | |
2014 | | |
2013 | |
| Net income (loss) before taxes | |
$ | (180,203 | ) | |
$ | 37,631 | |
| Corporate income tax rate | |
| 15.5 | % | |
| 15.5 | % |
| Income tax expense (recovery) | |
| (27,931 | ) | |
| 5,833 | |
| Non-capital loss carried forward | |
| 22,098 | | |
| - | |
| Income tax recovery (provision) | |
$ | 5,833 | | |
$ | (5,833 | ) |
(b)
Unrecognized deferred income tax assets
The
significant component of the Company’s unrecognized deferred income tax asset is as follows:
| | |
2014 | | |
2013 | |
| | |
$ | | |
$ | |
| Deductible temporary difference: | |
| - | | |
| - | |
| Non-capital loss carried forward | |
| 142,572 | | |
| - | |
| Unrecognized deferred tax asset | |
| 22,098 | | |
| - | |
The
Company has non-capital losses of approximately $142,572 available to apply against future taxable income. If not utilized, the
non-capital losses expire as follows:
| 9.
|
FAIR VALUE
OF FINANCIAL INSTRUMENTS AND RISK FACTORS |
The
fair value of a financial instrument is the estimated amount that the Company would receive or pay to settle the financial assets
and financial liabilities as at the balance sheet date. The book value of accounts receivable, accounts payable and accrued liabilities,
and due to related party approximate fair values at the balance sheet dates.
All
financial instruments except for cash are classified as level 3. Cash is classified as level 1.
| | |
May 31, 2014 | |
| Assets/Liabilities | |
Carrying Value | | |
Fair Value | |
| Cash | |
$ | 34,089 | | |
$ | 34,089 | |
| Accounts Receivable | |
$ | 155,141 | | |
$ | 155,141 | |
| Accounts payable and accrued liabilities | |
$ | 202,889 | | |
$ | 202,889 | |
| Income tax payable | |
$ | - | | |
$ | - | |
| Customer deposit | |
$ | 92,234 | | |
$ | 92,234 | |
| Due to related parties | |
$ | 21,181 | | |
$ | 21,181 | |
| | |
May 31, 2013 | |
| Assets/Liabilities | |
Carrying Value | | |
Fair Value | |
| Cash | |
$ | 12,873 | | |
$ | 12,873 | |
| Accounts Receivable | |
$ | 185,041 | | |
$ | 185,041 | |
| Accounts payable and accrued liabilities | |
$ | 139,896 | | |
$ | 139,896 | |
| Income tax payable | |
$ | 5,833 | | |
$ | 5,833 | |
| Due to related parties | |
$ | 15,798 | | |
$ | 15,798 | |
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 9.
|
FAIR VALUE
OF FINANCIAL INSTRUMENTS AND RISK FACTORS (cont’d) |
Interest
rate risk
The
Company’s exposure to interest rate fluctuations is not significant.
Credit
risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable.
The Company is not exposed to material losses on its accounts receivable and future revenues. The Company mitigates its credit
risk by performing credit checks on new customers before extending credit.
Liquidity
risk
The
Company’s exposure to liquidity risk is dependent on the collection of accounts receivable and the ability to raise funds
to meet purchase commitments and to sustain operations. The company controls its liquidity risk by managing working capital and
cash flows.
Foreign
currency risk
The
Company is exposed to foreign currency risk as substantially all of the Company’s cash is denominated in Canadian Dollars
being the Company’s functional currency. This risk is partially mitigated by the fact that all costs associated with running
of the Company are incurred in Canadian Dollars.
On
July 24, 2013 the Company obtained a term loan for an amount of CAD $18,800 repayable in 59 monthly installments of CAD $367.63
including interest and principal and bears interest at 6.5% per annum (prime plus 3.5% per annum). The loan is secured by a personal
guarantee of a director. The interest paid for the year is $1,120 and the minimum principal payments for the next 5 years are
as follows:
| 2015 | |
$ | 3,470 | |
| 2016 | |
| 3,704 | |
| 2017 | |
| 3,952 | |
| 2018 | |
| 3,673 | |
| | |
$ | 14,799 | |
| Long term portion | |
| (11,597 | ) |
| Short term portion | |
$ | 3,202 | |
The Company
did not have an economic dependence during the year ended May, 31, 2014 (2013 – 76% sales to one customer).
As of May
31, 2013, deferred costs include sales taxes relating to purchase of vehicle which will be amortized on payment of capital lease
obligation and vehicle maintenance deferred costs which will be amortized over a period of 6 years. In 2014, the amount was adjusted
on disposition of equipment (Note 3).
TECH
9 INC.
NOTES
TO FINANCIAL STATEMENTS
MAY
31, 2014 and 2013
(Amounts
expressed in U.S. Dollars)
| 13. |
COMMITMENTS
AND CONTINGENCIES |
Effective
May 1, 2013, the Company executed agreements with its two directors to pay each director annual compensation as follows:
CAD$144,000
in the first year along with bonus at the rate of 1.5% of net sales and 100 common shares in the Company;
CAD $188,000
in the second year along with bonus at the rate of 1.5% of net sales;
CAD $225,000
in the third year along with bonus at the rate of 1.5% of net sales;
CAD $275,000
in the fourth year along with bonus at the rate of 1.5% of net sales;
CAD $315,000
in the fifth year along with bonus at the rate of 1.5% of net sales
The agreements
provide for compensatory damages for early termination without cause.
On November
14, 2014, the Company entered into an agreement to purchase digital installed equipment with an approximate fair value of $97,000.
This equipment was taken into inventory subsequent to the year end.
15
Exhibit
99.2
| TECH
9 INC. |
| |
| INTERIM
FINANCIAL STATEMENTS |
| |
| August
31, 2014 |
| (Unaudited) |
| (Prepared
by management) |
| (Amounts
expressed in US Dollars) |
| |
Index
| |
Page
|
| |
|
| Interim Balance
Sheets as at August 31, 2014 (unaudited) and May 31, 2014 (audited) |
2 |
| Interim Statement
of Operations and Comprehensive Loss for the three months ended August 31, 2014 and August 31, 2013 |
3 |
| Interim Statement
of Cash flows for the three months ended August 31, 2014 and August 31, 2013 |
4
|
| Interim Statement
of Changes in Stockholders’ Equity for the three months ended August 31, 2014 (unaudited) and year ended May 31, 2014
(audited) |
5
|
| Notes to Interim
Financial Statements |
6-14
|
TECH 9 INC. |
| INTERIM
BALANCE SHEETS AS AT AUGUST 31, 2014 AND MAY 31, 2014 |
| (Unaudited) |
| (Prepared
by management) |
| (Amounts
expressed in U.S. Dollars) |
| | |
August 31,
2014 | | |
May 31,
2014 | |
| | |
(unaudited) | | |
(audited) | |
| ASSETS | |
| | |
| |
| | |
| | |
| |
| Current Assets | |
| | | |
| | |
| Cash | |
$ | - | | |
$ | 34,089 | |
| Accounts Receivable | |
| 133,172 | | |
| 155,141 | |
| Due from related party (Note 3) | |
| 570 | | |
| - | |
| | |
| | | |
| | |
| Total Assets | |
$ | 133,742 | | |
$ | 189,230 | |
| | |
| | | |
| | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 219,124 | | |
$ | 202,889 | |
| Bank Indebtedness | |
| 3,471 | | |
| | |
| Customer deposit | |
| - | | |
| 92,234 | |
| Current portion of term loan (Note 9) | |
| 3,197 | | |
| 3,202 | |
| Due to related party (Note 3) | |
| - | | |
| 21,181 | |
| | |
| | | |
| | |
| Total Current
liabilities | |
| 225,792 | | |
| 319,506 | |
| TERM LOAN (Note 9) | |
| 10,802 | | |
| 11,597 | |
| | |
| | | |
| | |
| | |
| | | |
| | |
| Total Liabilities | |
| 236,594 | | |
| 331,103 | |
| | |
| | | |
| | |
| Stockholders’ Deficiency | |
| | | |
| | |
| Capital stock (Note 4) | |
| 200 | | |
| 200 | |
| Accumulated other comprehensive income | |
| 615 | | |
| 499 | |
| Deficit | |
| (103,667 | ) | |
| (142,572 | ) |
| | |
| | | |
| | |
| | |
| (102,852 | ) | |
| (141,873 | ) |
| | |
| | | |
| | |
| Total liabilities and stockholders’ Deficiency | |
$ | 133,742 | | |
$ | 189,230 | |
Going Concern
(Note 1)
Related Party Transactions (Note 3)
Commitment
and Contingencies (Note 11)
Subsequent
Events (Note 12)
The
accompanying notes are an integral part of the interim financial statements.
| TECH
9 INC. |
| INTERIM
STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) |
| FOR
THE THREE MONTHS ENDED AUGUST 31, 2014 and AUGUST 31, 2013 |
| (Unaudited) |
| (Prepared
by management) |
| (Amounts
expressed in U.S. Dollars) |
| | |
2014 | | |
2013 | |
| Sales | |
| | |
| |
| Products | |
$ | 96,909 | | |
$ | 56,071 | |
| Services | |
| 60,752 | | |
| 38,092 | |
| | |
| 157,661 | | |
| 94,163 | |
| Cost of sales | |
| | | |
| | |
| Products | |
| 35,162 | | |
| 56,309 | |
| Services | |
| 23,913 | | |
| 26,324 | |
| | |
| 59,075 | | |
| 82,633 | |
| | |
| | | |
| | |
| Gross profit | |
| 98,586 | | |
| 11,530 | |
| Operating expenses: | |
| | | |
| | |
| Consulting and professional | |
$ | 39,244 | | |
$ | 107,904 | |
| General and administrative | |
| 20,437 | | |
| 24,577 | |
| Depreciation | |
| - | | |
| 2,952 | |
| | |
| 59,681 | | |
| 135,433 | |
| | |
| | | |
| | |
| Operating profit (loss) | |
| 38,905 | | |
| (123,903 | ) |
| | |
| | | |
| | |
| Net income (loss) before taxes | |
| 38,905 | | |
| (123,903 | ) |
| Income tax | |
| - | | |
| - | |
| Net income (loss) | |
| 38,905 | | |
| (123,903 | ) |
| Foreign exchange translation adjustment | |
| 116 | | |
| 1,706 | |
| Comprehensive income (loss) | |
$ | 39,021 | | |
$ | (122,197 | ) |
| | |
| | | |
| | |
| Weighted average number of common shares outstanding-basic and diluted | |
| 200 | | |
| 200 | |
| Earnings (Loss) per share – basic and diluted | |
$ | 194.53 | | |
$ | (619.52 | ) |
The
accompanying notes are an integral part of the interim financial statements.
| TECH
9 INC. |
| INTERIM
STATEMENT OF CASH FLOWS |
| FOR
THE THREE MONTHS ENDED AUGUST 31, 2014 and AUGUST 31, 2013 |
| (Unaudited) |
| (Prepared
by management) |
| (Amounts
expressed in U.S. Dollars) |
| | |
2014 | | |
2013 | |
| Cash Flows from Operating Activities: | |
| | |
| |
| Net income (loss) | |
$ | 38,905 | | |
$ | (123,903 | ) |
| Depreciation | |
| - | | |
| 2,952 | |
| Changes in non-cash working capital: | |
| | | |
| | |
| Decrease in accounts receivables | |
| 21,791 | | |
| 71,876 | |
| Increase in accounts payable and accrued liabilities | |
| 16,571 | | |
| 39,062 | |
| Decrease in customer deposit | |
| (92,316 | ) | |
| - | |
| Net Cash used in Operating Activities | |
| (15,049 | ) | |
| (10,013 | ) |
| | |
| | | |
| | |
| Cash Flows from Investing Activities: | |
| | | |
| | |
| Repayment of lease for purchase of vehicle* | |
| - | | |
| (2,030 | ) |
| Net Cash provided by (used in) Investing Activities | |
| - | | |
| (2,030 | ) |
| | |
| | | |
| | |
| Cash Flows from Financing Activities: | |
| | | |
| | |
| Increase in bank indebtness | |
| 3,479 | | |
| - | |
| Term loan from bank, net | |
| (780 | ) | |
| 17,836 | |
| Advances from related party, net | |
| (21,771 | ) | |
| 17,166 | |
| Net Cash Provided (Used) by Financing Activities | |
| (19,072 | ) | |
| 35,002 | |
| | |
| | | |
| | |
| Effects of foreign currency exchange rate changes | |
| 32 | | |
| (1,097 | ) |
| | |
| | | |
| | |
| Net Increase (Decrease) in Cash | |
| (34,089 | ) | |
| 21,862 | |
| Cash at beginning of the period | |
| 34,089 | | |
| 12,873 | |
| Cash at end of the period | |
$ | - | | |
$ | 34,735 | |
| | |
| | | |
| | |
| Supplemental information: | |
| | | |
| | |
| Income tax paid | |
| Nil | | |
| Nil | |
| Interest paid | |
| 238 | | |
| 759 | |
* August
31, 2013-Excludes the purchase of vehicle and obligation under capital lease being non- cash transactions. Also excludes deferred
costs relating to sales taxes, vehicle maintenance, and vehicle trade-in by a related party being non- cash transactions.
The
accompanying notes are an integral part of the interim financial statements.
| TECH
9 INC. |
| INTERIM
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) |
| FOR
THE THREE MONTH PERIOD ENDED AUGUST 31, 2014 AND YEAR ENDED MAY 31, 2014 |
| (Unaudited) |
| (Prepared
by management) |
| (Amounts
expressed in U.S. Dollars) |
| | |
| | |
| | |
| | |
Accumulated | | |
| |
| | |
Number | | |
| | |
Retained | | |
Other | | |
Total | |
| | |
of
Common
shares | | |
Capital
Stock | | |
Earnings
(Accumulated
Deficit) | | |
Comprehensive
Income
(Loss) | | |
Stockholders’
Equity
(Deficiency) | |
| | |
| | |
$ | | |
$ | | |
$ | | |
$ | |
| Balance as at May 31, 2013 | |
| 200 | | |
| 200 | | |
| 31,798 | | |
| (1,031 | ) | |
| 30,967 | |
Net loss for the year
| |
| | | |
| | | |
| (174,370 | ) | |
| | | |
| (174,370 | ) |
| Foreign currency translation | |
| | | |
| | | |
| | | |
| 1,530 | | |
| 1,530 | |
| Balance as at May 31, 2014 (audited) | |
| 200 | | |
| 200 | | |
| (142,572 | ) | |
| 499 | | |
| (141,873 | ) |
Net income (loss) for the period
| |
| | | |
| | | |
| 38,905 | | |
| | | |
| 38,905 | |
| Foreign currency translation | |
| | | |
| | | |
| | | |
| 116 | | |
| 116 | |
| Balance as at August 31, 2014 (unaudited) | |
| 200 | | |
| 200 | | |
| (103,667 | ) | |
| 615 | | |
| (102,852 | ) |
The
accompanying notes are an integral part of the interim financial statements.
TECH 9 INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2014
(Unaudited)
(Prepared by management)
(Amounts expressed in U.S. Dollars)
Basis
of Presentation
The accompanying
unaudited interim financial statements do not include all information and footnotes necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles; however, such
information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management,
necessary for a fair statement of the results for the interim periods.
The unaudited
interim financial statements should be read in conjunction with the audited financial statements and Notes thereto for the year
ended May 31, 2014. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments
of a normal recurring nature considered necessary to fairly state the financial position of the Company at August 31, 2014 and
May 31, 2014, the results of its operations for the three month period ended August 31, 2014 and August 31, 2013, and its cash
flows for the three-month period ended August 31, 2014 and August 31, 2013. The results of operations for the three-month period
ended August 31, 2014 are not necessarily indicative of results to be expected for the full year.
The interim
financial statements include the accounts of Tech 9 Inc. (the “Company” or “Tech 9”) prepared in accordance
with generally accepted accounting principles of United States of America (“US GAAP”).
Nature
of Operations
The Company
was incorporated on January 11, 2013 in Ontario, Canada under the Business Corporation Act. The Company is engaged in the business
of digital signage network, implementation, services and solutions. The Company’s sales and services include hardware and
software sales, project management, installation, implementation and monitoring services.
Going
Concern
The accompanying
financial statements have been prepared assuming the Company will continue as a going concern. This contemplates that assets will
be realized and liabilities and commitments satisfied in the normal course of business.
The
Company was incorporated on January 11, 2013, has limited operating history and used cash of $15,049 in its operations during
the period ended August 31, 2014. This raises substantial doubt as to the Company’s continuance as a going concern, which
is dependent upon its ability to obtain adequate financing and to reach profitable cash flow from operations.
The Company
has working capital deficit of $92,050 and deficit of $103,667 as at August 31, 2014. The Company has bank indebtness of $3,471
as at August 31, 2014. The future of the Company is dependent upon its ability to obtain financing and upon future profitable
operations. Management has plans to seek additional capital through private placements and public offering of its capital stock.
These conditions raise substantial doubt about the Company's ability to continue as a going concern. Although there are no assurances
that management's plans will be realized, management believes that the Company will be able to continue operations in the future.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets,
or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
TECH 9 INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2014
(Unaudited)
(Prepared by management)
(Amounts expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES |
The interim
financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within
the framework of the significant accounting policies summarized below:
Use of
Estimates
The preparation
of the interim financial statements in conformity with US GAAP requires management to make estimates and assumptions of future
events that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the
financial statements, such as accrued liabilities and recovery value of equipment, and the reported amounts of revenues and expenses
for the reporting period. Actual results may differ from those reported.
Foreign
Currency Translation
The Company’s
functional currency is the Canadian Dollar and its presentation currency is the United States (“U.S.”) Dollar. The
Company uses the “Current rate method” to translate its financial statements from Canadian Dollar into U.S. Dollars.
The assets and liabilities of the Company, except for the capital, are translated into U.S. Dollars using the rate of exchange
prevailing at the balance sheet date. The capital is translated at the historical rate. Adjustments resulting from the translation
of the balance sheet of the Company into U.S. Dollars are recorded in stockholders' equity as part of other comprehensive income.
The statement of operations is translated at average rates during the reporting period. Gains or losses resulting from transactions
in currencies other than the functional currencies are reflected in the statement of operations for the reporting periods.
Revenue
Recognition
The
Company’s revenue recognition policy is consistent with the requirements of Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605). In general, the Company records revenue when
it is realized, or realizable and earned. The Company considers revenue to be realized, or realizable and earned, when the following
revenue recognition requirements are met: persuasive evidence of an arrangement exists, the products have been delivered and /or
installed or services have been performed; the sales price is fixed or determinable within the contract; and collectability is
reasonably assured. For product sales, the Company determines that the earnings process is complete when title, risk of loss and
the right to use equipment has transferred to the customer. Where the Company is contractually responsible for installation, revenue
recognition occurs upon completion of the installation of equipment at a job site. Where the Company is not contractually responsible
for installation, revenue recognition of these items is upon shipment or delivery to a customer location depending on the terms
in the contract.
The
application of ASC 605 to the Company's customer contracts requires judgment, including the determination of whether an arrangement
includes multiple deliverables such as hardware, maintenance and/or other services. For contracts that contain multiple deliverables,
total arrangement consideration is allocated at the inception of the arrangement to each deliverable based on the relative selling
price method. The relative selling price method is based on a hierarchy consisting of vendor specific objective evidence (VSOE)
(price when sold on a stand-alone basis), if available, or third-party evidence (TPE), if VSOE is not available, or estimated
selling price (ESP) if neither VSOE nor TPE is available.
TECH 9 INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2014
(Unaudited)
(Prepared by management)
(Amounts expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Comprehensive
income or loss
The Company
reports comprehensive income or loss in the statements of changes in stockholders’ equity. In addition to items included
in net income or loss, comprehensive income or loss includes items currently charged or credited directly to stockholders’
equity such as foreign currency translation adjustment.
Income
Taxes
The Company
recognizes a liability or asset for deferred tax consequences of all temporary differences between the tax bases of assets and
liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future
years when the reported amounts of the assets and liabilities are recovered or settled. These deferred tax assets or liabilities
are measured using the enacted tax rates that will be in effect when the differences are expected to reverse. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred
tax assets are reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not
that some or all of the deferred tax assets may not be realized.
Impairment
and Disposal of Long-Lived Assets
The carrying
values of long-lived assets are reviewed on a regular basis for the existence of facts or circumstances that may suggest impairment.
For assets that are to be held and used, an impairment loss is recognized when the estimated undiscounted future cash flows associated
with the asset or group of assets is less than their carrying value. 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.
Financial
Instruments
The Company’s
financial instruments consist of account receivables, accounts payable and accrued liabilities and amounts due to related party.
Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, or credit risks
arising from these financial instruments. The fair values of these financial instruments approximate their carrying values due
to the relatively short period to maturity for these instruments. The Company’s financial assets and liabilities are generally
classified and measured as follows;
| Assets/Liabilities
|
|
Classification
|
|
Measurement
|
| Accounts Receivable
|
|
Loans and
receivables |
|
Amortized
cost |
| Accounts
payable and accrued liabilities |
|
Other liabilities
|
|
Amortized cost
|
| Customer deposit |
|
Other liabilities |
|
Amortized cost |
| Due to (from)
related party |
|
Other liabilities
|
|
Amortized cost
|
The
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 —
Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar
assets or liabilities in markets that are not active or inputs, other than quoted prices in active markets, that are observable
either directly or indirectly.
Level 3 —
Unobservable inputs for which there is little or no market data.
TECH 9 INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
AUGUST 31, 2014
(Unaudited)
(Prepared by management)
(Amounts expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Earnings
(Loss) Per Share
The Company
computes net loss of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic
EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares
outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period
using the treasury stock method. In computing diluted EPS, the average stock price for the period is used in determining the number
of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential
shares if their effect is anti-dilutive.
Recently
Issued Accounting Standards
ASU
2014-15 “Presentation of Financial Statements” – Going Concern (subtopic 205-40) disclosure of uncertainties
about an entity’s ability to continue as a going concern. The amendment are intended to define management’s responsibility
to evaluate whether there is substantial doubt about its ability to continue as a going concern and to provide related disclosures.
The amendment is effective for annual periods ending after December 15, 2016. The Company has not evaluated the impact of this
amendment.
ASU
2014-13 “Consolidation (Topic 810) - Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized
Financing Entity”. The amendments in ASU 2014-13 provide an alternative to Topic 820, Fair Value Measurement, for measuring
the financial assets and the financial liabilities of a consolidated collateralized financing entity to eliminate the difference
in the fair value of the financial assets of a collateralized financing entity, as determined under GAAP, when they differ from
the fair value of its financial liabilities even when the financial liabilities have recourse only to the financial assets. When
the measurement alternative is elected, both the financial assets and the financial liabilities of the collateralized financing
entity should be measured using the more observable of the fair value of the financial assets or the fair value of the financial
liabilities. The amendments clarify that when the measurement alternative is elected, a reporting entity’s consolidated
net income (loss) should reflect the reporting entity’s own economic interests in the collateralized financing entity, including:
(1) changes in the fair value of the beneficial interests retained by the reporting entity, and (2) beneficial interests that
represent compensation for services. The amendment is effective for the annual periods beginning after December 15, 2015. The
Company has not evaluated the impact if this amendment on its financial statements.
ASU
2014-12 “Compensation – Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an
Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”. The amendments in ASU 2014-12
require that a performance target that affects vesting and that could be achieved after the requisite service period be treated
as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation,
as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should
not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in
which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable
to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being
achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively
over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service
period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately
vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award
if the performance target is achieved. The amendment is effective for periods beginning after December 15, 2015
TECH
9 INC.
NOTES
TO INTERIM FINANCIAL STATEMENTS
AUGUST
31, 2014
(Unaudited)
(Prepared
by management)
(Amounts
expressed in U.S. Dollars)
| 2. |
SIGNIFICANT
ACCOUNTING POLICIES – (Cont’d) |
Recently
Issued Accounting Standards- (Cont’d)
ASU
2014-11 “Transfers and Servicing (Topic 860) - Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures'-
The amendments in ASU 2014-11 align the accounting for repurchase-to-maturity transactions and repurchase agreements executed
as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would
all be accounted for as secured borrowings. The guidance eliminates sale accounting for repurchase-to-maturity transactions and
supersedes the guidance under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted
for on a combined basis as a forward agreement, which has resulted in outcomes referred to as off-balance-sheet accounting. ASU
2014-11 also brings U.S. GAAP into greater alignment with IFRS for repurchase-to-maturity transactions.
The
amendments in the ASU require a new disclosure for transactions economically similar to repurchase agreements in which the transferor
retains substantially all of the exposure to the economic return on the transferred financial assets throughout the term of the
transaction. The amendments in the ASU also require expanded disclosures about the nature of collateral pledged in repurchase
agreements and similar transactions accounted for as secured borrowings. The amendment is effective for the annual periods beginning
after December 15, 2014. The Company has not evaluated the impact on its financial statements.
ASU
2014-09 “Revenue from Contracts with Customers”. The amendments in ASU 2014-09 affects any entity that either enters
into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless
those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). This ASU will supersede
the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance, and creates a Topic
606 Revenue from Contracts with Customers. The amendment is effective for the periods beginning after December 15, 2016. The Company
has not evaluated the impact of this amendment.
| 3.
|
RELATED PARTY
TRANSACTIONS |
August
31, 2014
The
transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties under common control.
i) As of
August 31, 2014, the Company has a receivable from a related party of $570 and is due on demand.
ii)
During the three month period, the Company expensed management fees for $45,992 (CAD $49,820) to two directors of the Company.
TECH
9 INC.
NOTES
TO INTERIM FINANCIAL STATEMENTS
AUGUST
31, 2014
(Unaudited)
(Prepared
by management)
(Amounts
expressed in U.S. Dollars)
| 3.
|
RELATED PARTY
TRANSACTIONS (cont’d) |
August
31, 2013
i) As of
August 31, 2013, the Company has loans payable to related parties for $31,235 (May 31, 2013: $15,798). The loan is due to a director
and shareholder and is unsecured, free of interest and due on demand.
ii)
During the quarter, the Company expensed management fee of $69,394 (CAD $72,000) to two directors of the Company of which $53,656
(CAD $56,500) was owed as of August 31, 2013 and included in accounts payable and accrued liabilities.
iii)
During the quarter, the Company expensed fee of $19,277 (CAD $20,000) as consulting fees to a partnership in which an officer
of the Company is a partner. As of August 31, 2013, the entire amount expensed was payable and included in accounts payable and
accrued liabilities.
iv)
During the quarter, the Company paid lease rent of $7,229 (CAD $7,500) for use of office space in Toronto, Canada, to a partnership
in which an officer of the Company is a partner.
Authorized:
Common Stock:
An unlimited number of common shares, without nominal or par value
Issued and
outstanding:
Common Stock:
200 common shares
On
January 11, 2013, the Company issued 100 common shares for $100.
On
March 31, 2013, the Company issued 100 common shares for $100.
As
at August 31, 2014 the Company operated only in one reportable segment. All assets of the business are located in Canada.
The
Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to maintain
its daily operations. The Board of Directors does not establish quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain the future development of the business.
The
Company manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics
of the underlying assets. In order to procure materials and pay for administrative costs, the Company will generate sales, spend
its existing working capital on need basis and raise additional unsecured loan amounts as needed.
Management
reviews its capital management approach on an ongoing basis and believes that this approach, given the foregoing paragraph and
the relative size of the Company, is reasonable.
TECH
9 INC.
NOTES
TO INTERIM FINANCIAL STATEMENTS
AUGUST
31, 2014
(Unaudited)
(Prepared
by management)
(Amounts
expressed in U.S. Dollars)
(a) Current
income tax
| | |
Quarter ended
August 31, 2014 | | |
Year ended
May 31,
2014 | |
| Net income (loss) before taxes | |
$ | 38,905 | | |
$ | (180,203 | ) |
| Corporate income tax rate | |
| 15.5 | % | |
| 15.5 | % |
| Income tax expense (recovery) | |
| 6,030 | | |
| (27,931 | ) |
| Non-capital loss carried forward | |
| 6,030 | | |
| 22,098 | |
| Income tax recovery (provision) | |
$ | - | | |
$ | 5,833 | |
(b)
Unrecognized deferred income tax assets
The
significant component of the Company’s unrecognized deferred income tax asset is as follows:
| | |
Quarter ended
August 31, 2014 | | |
Year ended
May 31,
2014 | |
| | |
$ | | |
$ | |
| Deductible temporary difference: | |
| - | | |
| - | |
| Non-capital loss carried forward | |
| 136,542 | | |
| 142,572 | |
| Unrecognized deferred tax asset | |
| 21,164 | | |
| 22,098 | |
The
Company has non-capital losses of approximately $136,542 available to apply against future taxable income. If not utilized, the
non-capital losses expire as follows:
| 8.
|
FAIR VALUE
OF FINANCIAL INSTRUMENTS AND RISK FACTORS |
The
fair value of a financial instrument is the estimated amount that the Company would receive or pay to settle the financial assets
and financial liabilities as at the balance sheet date. The book value of accounts receivable, accounts payable and accrued liabilities,
and due to related party approximate fair values at the balance sheet dates.
All
financial instruments except for cash are classified as level 3. Cash is classified as level 1.
| | |
August 31, 2014 | |
| Assets/Liabilities | |
Carrying Value | | |
Fair Value | |
| Cash | |
$ | - | | |
$ | - | |
| Accounts Receivable | |
$ | 133,172 | | |
$ | 133,172 | |
| Due from related party | |
$ | 570 | | |
$ | 570 | |
| Accounts payable and accrued liabilities | |
$ | 219,124 | | |
$ | 219,124 | |
| Bank indebtness | |
$ | 3,471 | | |
$ | 3,471 | |
TECH
9 INC.
NOTES
TO INTERIM FINANCIAL STATEMENTS
AUGUST
31, 2014
(Unaudited)
(Prepared
by management)
(Amounts
expressed in U.S. Dollars)
| 8.
|
FAIR VALUE
OF FINANCIAL INSTRUMENTS AND RISK FACTORS (cont’d) |
| | |
May 31, 2014 | |
| Assets/Liabilities | |
Carrying Value | | |
Fair Value | |
| Cash | |
$ | 34,089 | | |
$ | 34,089 | |
| Accounts Receivable | |
$ | 155,141 | | |
$ | 155,141 | |
| Accounts payable and accrued liabilities | |
$ | 202,889 | | |
$ | 202,889 | |
| Income tax payable | |
$ | - | | |
$ | - | |
| Customer deposit | |
| 92,234 | | |
| 92,234 | |
| Due to related parties | |
$ | 21,181 | | |
$ | 21,181 | |
Interest
rate risk
The
Company’s exposure to interest rate fluctuations is not significant.
Credit
risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of accounts receivable.
The Company is not exposed to material losses on its accounts receivable and future revenues. The Company mitigates its credit
risk by performing credit checks on new customers before extending credit.
Liquidity
risk
The
Company’s exposure to liquidity risk is dependent on the collection of accounts receivable and the ability to raise funds
to meet purchase commitments and to sustain operations. The company controls its liquidity risk by managing working capital and
cash flows.
Foreign
currency risk
The
Company is exposed to foreign currency risk as substantially all of the Company’s cash is denominated in Canadian Dollars
being the Company’s functional currency. This risk is partially mitigated by the fact that all costs associated with running
of the Company are incurred in Canadian Dollars.
On
July 24, 2013 the Company obtained a term loan for an amount of CAD $18,800 repayable in 59 monthly installments of CAD $367.63
including interest and principal and bears interest at 6.5% per annum (prime plus 3.5% per annum). The loan is secured by a personal
guarantee of a director. The interest paid for the three month period is $238 and the minimum principal payments for the next
5 years are as follows:
| 2015 | |
$ | 3,197 | |
| 2016 | |
| 3,528 | |
| 2017 | |
| 3,776 | |
| 2018 | |
| 3,498 | |
| | |
$ | 13,999 | |
| Long term portion | |
| (10,802 | ) |
| Short term portion | |
$ | 3,197 | |
TECH
9 INC.
NOTES
TO INTERIM FINANCIAL STATEMENTS
AUGUST
31, 2014
(Unaudited)
(Prepared
by management)
(Amounts
expressed in U.S. Dollars)
The Company
did not have an economic dependence during the three month period ended August 31, 2014 (Three month period ended August, 31,
2013– 24% of its total revenue and 46% of its accounts receivable to one customer).
| 11. |
COMMITMENTS
AND CONTINGENCIES |
Effective
May 1, 2013, the Company executed agreements with its two directors to pay each director annual compensation as follows:
CAD$144,000
in the first year along with bonus at the rate of 1.5% of net sales and 100 common shares in the Company;
CAD $188,000
in the second year along with bonus at the rate of 1.5% of net sales;
CAD $225,000
in the third year along with bonus at the rate of 1.5% of net sales;
CAD $275,000
in the fourth year along with bonus at the rate of 1.5% of net sales;
CAD $315,000
in the fifth year along with bonus at the rate of 1.5% of net sales
The agreements
provide for compensatory damages for early termination without cause.
On November
14, 2014, the Company entered into an agreement to purchase digital installed equipment with an approximate fair value of $97,000.
This equipment was taken into inventory subsequent to the year end.
14
Exhibit 99.3
Unaudited Pro Forma Condensed Financial Statements
As of August 31,
2014 and
For the Year Ended
May 31, 2014 & the Three Months Ended August 31, 2014
On January 8,
2015 PERK INTERNATIONAL INC., a Nevada corporation ( “Perk” or the “Company” or the
“Registrant”) entered into a Share Exchange Agreement with TECH 9 INC., a corporation existing under the laws of
Ontario (“Tech9”). Pursuant to the share exchange, the Registrant acquired all of the outstanding common shares
of Tech9 through the issuance of common shares of the Registrant to the shareholders of Tech9.
As a result of the
share exchange, Tech9 has become a wholly-owned subsidiary of the Registrant and the Registrant issued shares of its common stock
to shareholders of Tech9 at rate of 350,000 shares of the Registrant’s common stock for each Tech9 common share resulting
in issue of a total of 70,000,000 common shares. Immediately prior to the share exchange, the Registrant had 75,133,132 shares
of common stock outstanding.
Following the share
exchange and the issuance of 70,000,000 common shares to the shareholders of Tech9, the Registrant has 145,133,132 shares of common
stock outstanding.
At closing, the Registrant
cancelled 45,000,000 common shares of the Registrant in accordance with the Transfer and Assumption Agreement between the Registrant
and shareholders of the Registrant. Following the share exchange and the Transfer and Assumption Agreement, the Registrant has
100,133,132 shares of common stock outstanding.
The accompanying
unaudited pro forma condensed financial statements have been prepared to present the balance sheet and statements of operations
of the Registrant to indicate how the consolidated financial statements of the Registrant might have looked like if the share
exchange with Tech9 and transactions related to the share exchange had occurred as of the beginning of the periods presented.
The transaction has
been accounted for as a reverse merger, with Tech9 shareholders acquiring approximately 70% of the issued and outstanding shares
of Registrant’s common stock immediately after the closing of the transactions contemplated herein, and also on the basis
that Tech9’s senior management became the senior management of the merged entity and there is a change of control of the
Company. In accordance with Accounting Standards Codification (“ASC”) 805-10-40, Business Combinations; Reverse
Acquisitions, Tech9 was the acquiring entity for accounting purposes. While the transaction is accounted for using the purchase
method of accounting, in substance the transaction was a recapitalization of the Tech9’s capital structure.
PERK INTERNATIONAL
INC.
Unaudited Pro Forma
Condensed Balance Sheet
August 31, 2014
| | |
Historical | | |
Pro
Forma | |
| | |
Tech
9 Inc. | | |
Perk
International Inc. | | |
Adjustments | | |
Notes | | |
Combined | |
| Assets | |
| | |
| | |
| | |
| | |
| |
| Current assets: | |
| | |
| | |
| | |
| | |
| |
| | |
| | |
| | |
| | |
| | |
| |
| Accounts Receivable | |
$ | 133,172 | | |
$ | - | | |
$ | - | | |
| | | |
$ | 133,172 | |
| Due from related party | |
| 570 | | |
| - | | |
| - | | |
| | | |
| 570 | |
| Website development, net | |
| | | |
| 5,625 | | |
| (5,625 | ) | |
| e | | |
| 0 | |
| Total assets | |
| 133,742 | | |
| 5,625 | | |
| (5,625 | ) | |
| | | |
| 133,742 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
| Current liabilities | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accounts payable and accrued
liabilities | |
$ | 219,124 | | |
$ | 17,085 | | |
$ | (17,085 | ) | |
| e | | |
$ | 219,124 | |
| Bank Indebtedness | |
| 3,471 | | |
| 25 | | |
| (25 | ) | |
| e | | |
| 3,471 | |
| Shareholders loans | |
| - | | |
| 3,949 | | |
| (3,949 | ) | |
| e | | |
| 0 | |
| Current portion of term
loan | |
| 3,197 | | |
| - | | |
| | | |
| | | |
| 3,197 | |
| Total Current Liabilities | |
| 225,792 | | |
| 21,059 | | |
| (21,059 | ) | |
| | | |
| 225,792 | |
| Term Loan | |
| 10,802 | | |
| | | |
| | | |
| | | |
| 10,802 | |
| Total liabilities | |
| 236,594 | | |
| 21,059 | | |
| (21,059 | ) | |
| | | |
| 236,594 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Stockholders’
Deficiency | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Common stock, $0.0001 par value, | |
| | | |
| | | |
| 7,000 | | |
| a | | |
| | |
| 250,000,000 shares authorized; | |
| | | |
| | | |
| (200 | ) | |
| a | | |
| | |
| 100,133,132 shares issued
and outstanding | |
| 200 | | |
| 7,513 | | |
| (4,500 | ) | |
| b | | |
| 10,013 | |
| | |
| | | |
| | | |
| (7,000 | ) | |
| a | | |
| | |
| | |
| | | |
| | | |
| 200 | | |
| a | | |
| | |
| | |
| | | |
| | | |
| 4,500 | | |
| b | | |
| | |
| | |
| | | |
| | | |
| 6,115 | | |
| d | | |
| | |
| | |
| | | |
| | | |
| 25,247 | | |
| | | |
| | |
| Additional paid-in capital | |
| - | | |
| 48,672 | | |
| (77,734 | ) | |
| c | | |
| - | |
| Stock warrants | |
| - | | |
| 6,115 | | |
| (6,115 | ) | |
| d | | |
| | |
| | |
| | | |
| | | |
| 15,434 | | |
| e | | |
| | |
| | |
| | | |
| | | |
| (25,247 | ) | |
| | | |
| | |
| Accumulated deficit | |
| (103,667 | ) | |
| (77,734 | ) | |
| 77,734 | | |
| c | | |
| (113,480 | ) |
| Accumulated other comprehensive
income | |
| 615 | | |
| | | |
| - | | |
| | | |
| 615 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total stockholders’
deficiency | |
| (102,852 | ) | |
| (15,434 | ) | |
| 15,434 | | |
| | | |
| (102,852 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total liabilities
and stockholders’ deficiency | |
$ | 133,742 | | |
$ | 5,625 | | |
$ | (5,625 | ) | |
| | | |
$ | 133,742 | |
PERK INTERNATIONAL
INC.
Unaudited Pro Forma Condensed Statement
of Operations
For the Three Months Ended August 31, 2014
| | |
Historical | | |
Pro
Forma | |
| | |
Tech
9 Inc. | | |
Perk
International Inc. | | |
Adjustments | | |
Notes | | |
Combined | |
| | |
| | |
| | |
| | |
| | |
| |
| Sales | |
$ | - | | |
$ | - | | |
$ | - | | |
| | | |
$ | - | |
| Products | |
| 96,909 | | |
| - | | |
| - | | |
| | | |
| 96,909 | |
| Services | |
| 60,752 | | |
| - | | |
| - | | |
| | | |
| 60,752 | |
| | |
| 157,661 | | |
| - | | |
| - | | |
| | | |
| 157,661 | |
| Cost of sales | |
| | | |
| | | |
| | | |
| | | |
| | |
| Products | |
| 35,162 | | |
| - | | |
| - | | |
| | | |
| 35,162 | |
| Services | |
| 23,913 | | |
| - | | |
| - | | |
| | | |
| 23,913 | |
| | |
| 59,075 | | |
| - | | |
| - | | |
| | | |
| 59,075 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| 98,586 | | |
| - | | |
| - | | |
| | | |
| 98,586 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| Consulting and professional | |
| 39,244 | | |
| 6,030 | | |
| - | | |
| | | |
| 45,274 | |
| General and administrative | |
| 20,437 | | |
| (1,055 | ) | |
| | | |
| | | |
| 19,382 | |
| Amortization | |
| - | | |
| 375 | | |
| - | | |
| | | |
| 375 | |
| Total operating expenses | |
| 59,681 | | |
| 5,350 | | |
| - | | |
| | | |
| 65,031 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating profit (Loss) | |
| 38,905 | | |
| (5,350 | ) | |
| - | | |
| | | |
| 33,555 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other income (expenses) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Miscellaneous | |
| - | | |
| - | | |
| 15,434 | | |
| e | | |
| 15,434 | |
| Net (loss) before income taxes | |
| 38,905 | | |
| (5,350 | ) | |
| 15,434 | | |
| | | |
| 48,989 | |
| Income tax | |
| - | | |
| - | | |
| - | | |
| | | |
| - | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) | |
$ | 38,905 | | |
$ | (5,350 | ) | |
$ | 15,434 | | |
| | | |
$ | 48,989 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign exchange translation adjustment | |
| 116 | | |
| - | | |
| - | | |
| | | |
| 116 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Comprehensive income (loss) | |
$ | 39,021 | | |
$ | (5,350 | ) | |
$ | 15,434 | | |
| | | |
$ | 49,105 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Earnings per share-basic and
diluted | |
| | | |
| | | |
| | | |
| | | |
$ | 0.0005 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of shares
outstanding | |
| | | |
| | | |
| | | |
| | | |
| 100,133,132 | |
PERK INTERNATIONAL INC.
Unaudited Pro Forma Condensed Statement
of Operations
For the Year Ended May 31, 2014
| | |
Historical | | |
Pro
Forma | |
| | |
Tech
9 Inc. | | |
Perk
International Inc. | | |
Adjustments | | |
Notes | | |
Combined | |
| | |
| | |
| | |
| | |
| | |
| |
| Sales | |
$ | - | | |
$ | - | | |
$ | - | | |
| | | |
$ | - | |
| Products | |
| 151,311 | | |
| - | | |
| - | | |
| | | |
| 151,311 | |
| Services | |
| 165,740 | | |
| - | | |
| - | | |
| | | |
| 165,740 | |
| | |
| 317,051 | | |
| - | | |
| - | | |
| | | |
| 317,051 | |
| Cost of sales | |
| | | |
| | | |
| | | |
| | | |
| | |
| Products | |
| 128,507 | | |
| - | | |
| - | | |
| | | |
| 128,507 | |
| Services | |
| 86,974 | | |
| - | | |
| - | | |
| | | |
| 86,974 | |
| | |
| 215,481 | | |
| - | | |
| - | | |
| | | |
| 215,481 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Gross profit | |
| 101,570 | | |
| - | | |
| - | | |
| | | |
| 101,570 | |
| Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | |
| Consulting and professional | |
| 208,549 | | |
| 37,588 | | |
| - | | |
| | | |
| 246,137 | |
| General and administrative | |
| 99,653 | | |
| 22,217 | | |
| | | |
| | | |
| 121,870 | |
| Amortization | |
| 4,308 | | |
| 1500 | | |
| - | | |
| | | |
| 5,808 | |
| Total operating expenses | |
| 312,510 | | |
| 61,305 | | |
| - | | |
| | | |
| 373,815 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Operating profit (Loss) | |
| (210,940 | ) | |
| (61,305 | ) | |
| - | | |
| | | |
| (272,245 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Other income (expenses) | |
| | | |
| | | |
| | | |
| | | |
| | |
| Miscellaneous revenue | |
| 17,510 | | |
| - | | |
| 20,084 | | |
| e | | |
| 37,594 | |
| gain on disposition of equipment | |
| 13,227 | | |
| - | | |
| - | | |
| | | |
| 13,227 | |
| Net (loss) before income taxes | |
| (180,203 | ) | |
| (61,305 | ) | |
| 20,084 | | |
| | | |
| (221,424 | ) |
| Income tax recovery | |
| 5,833 | | |
| - | | |
| - | | |
| | | |
| 5,833 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net income (loss) | |
$ | (174,370 | ) | |
$ | (61,305 | ) | |
$ | 20,084 | | |
| | | |
$ | (215,591 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Foreign exchange translation adjustment | |
| 1,530 | | |
| - | | |
| - | | |
| | | |
| 1,530 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Comprehensive income (loss) | |
$ | (172,840 | ) | |
$ | (61,305 | ) | |
$ | 20,084 | | |
| | | |
$ | (214,061 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Loss per share-basic and diluted | |
| | | |
| | | |
| | | |
| | | |
$ | (0.0022 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Weighted average number of shares outstanding | |
| | | |
| | | |
| | | |
| | | |
| 100,066,666 | |
PERK INTERNATIONAL
INC.
Notes to Unaudited
Condensed Combined Pro Forma Financial Statements
1. Basis of Presentation.
These unaudited condensed
combined pro forma financial Statements have been prepared in order to present combined financial position and results of operations
of the Registrant and Tech9 as if the acquisition had occurred as of the beginning of the periods presented.
The unaudited pro
forma condensed balance sheet has been prepared using the unaudited consolidated balance sheet of the Registrant and unaudited
consolidated balance sheet of Tech9 as of August 31, 2014. The unaudited pro forma condensed statements of operations dated August
31, 2014, have been prepared using the unaudited historical statements of operations of the Registrant for the three month period
ended August 31, 2014 and unaudited statements of operations of Tech9 for the three month period ended August 31, 2014. The unaudited
pro forma condensed statements of operations dated May 31, 2014 have been prepared using the audited historical statements of
operations of the Registrant for the year ended May 31, 2014 and audited statements of operations of Tech9 for the year ended
May 31, 2014
The pro forma condensed
financial statements should be read in conjunction with the financial statements of the Registrant as previously filed and the
financial statements of Tech9 which can be found as attachments to the Form 8-K. These pro forma condensed financial statements
are presented for illustrative purposes only and are not intended to be indicative of actual consolidated financial condition
and consolidated results of operations had the share exchange been in effect during the periods presented, or of consolidated
financial condition or consolidated results of operations that may be reported in the future.
2. Adjustments
The following pro
forma adjustments are incorporated into the condensed combined pro forma balance sheet as of August 31, 2014 and the condensed
combined pro forma statement of operations for the periods ended August 31, 2014 and May 31, 2014.
| a) |
To adjust the 70,000,000 shares issuance to Tech 9 share capital
from having no par value to having a par value of $0.0001. |
| |
|
| b) |
To record the cancellation of 45,000,000 shares on close of
the merger and transfer and assumption agreement. |
| |
|
| c) |
To eliminate the Registrant’s accumulated deficit of $77,734. |
| |
|
| d) |
To transfer $6,115 from stock warrants to additional paid in
capital. |
| |
|
| e) |
To record the cancellation of assets and liabilities of registrant
on close of the transfer and assumption agreement. |
5
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