UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
Form 1-SA
x
SEMI-ANNUAL REPORT PURSUANT TO REGULATION A
or
¨
SPECIAL FINANCIAL REPORT PURSUANT TO REGULATION A
For the fiscal semiannual period ended June 30,
2024
XY Labs, Inc.
(Exact name of issuer as specified in its charter)
| Delaware |
|
46-1078182 |
(State
or other jurisdiction
of incorporation or organization) |
|
(I.R.S.
employer
identification number) |
740 13th Street #224,
San Diego, California 92101
(Full mailing address of principal executive
offices)
+1 866-200-5685
(Issuer’s telephone number, including
area code)
Class A Common Stock
(Title of each class of securities issued pursuant
to Regulation A)
Unless otherwise noted or the context indicates
otherwise, as used in this Semi-Annual Report on Form 1-SA, the terms “we,”
“us,” “our” and the “Company” refer to XY Labs, Inc., a Delaware corporation, and its subsidiaries
taken as a whole.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This Semi-Annual
Report on Form 1-SA includes forward-looking statements, which reflect the Company’s current expectations and projections
about future events and financial trends that we believe may affect our business, financial condition and results of operations. These
forward-looking statements speak only as of the date of this Semi-Annual Report on Form 1-SA and are subject to a number of risks,
uncertainties and assumptions described under the sections in this Semi-Annual Report on Form 1-SA entitled “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Semi-Annual
Report on Form 1-SA. Forward-looking statements may be identified by terms such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “could,” “intend,” “target,”
“project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential”
or “continue” or the negative of these terms or other similar expressions. Readers are cautioned not to place undue reliance
on these forward-looking statements, which are based on the information available to management and which speak only as of the date of
this Semi-Annual Report on Form 1-SA.
In addition, statements
that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based
upon information available to us as of the date of this Semi-Annual Report on Form 1-SA, and while we believe such information
forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to
indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements
are inherently uncertain and readers are cautioned not to unduly rely upon these statements.
Forward-looking statements are inherently subject
to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, and you should
not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking
statements in this Semi-Annual Report on Form 1-SA may not be achieved or occur and actual results could differ materially from
those projected in the forward-looking statements.
Moreover, we operate in an evolving environment.
Projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily
subject to a high degree of uncertainty and risk. New risk factors and uncertainties may emerge from time to time, and it is not possible
for management to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update
or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances
or otherwise.
Item 1. Management’s Discussion and Analysis of Financial
Condition and Results of Operations
The
following discussion summarizes the significant factors affecting the operating results, financial condition and liquidity and cash flows
of the Company for the six months ended June 30, 2024. You should read this discussion together with the financial statements, related
notes and other financial information included in this Semi-Annual Report on Form 1-SA. Except for historical information, the matters
discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are forward looking statements
that involve risks and uncertainties, including those discussed elsewhere in this Semi-Annual Report on Form 1-SA and in the Company’s
other filings with the Securities and Exchange Commission (the “SEC”), and are based upon judgments concerning various factors
that are beyond the Company’s control. These risks could cause the Company’s actual results to differ materially from any
future performance suggested below. This
discussion includes Non-GAAP financial measures. For information about these measures, see the disclosure under the caption “Non-GAAP
Financial Measures".
General Overview
XY Labs, Inc. is a corporation organized
under the laws of the State of Delaware. The Company was originally organized as a Delaware limited liability company in June 2012
under the name Ength Degree LLC. On May 27, 2016, the Company converted to a Delaware corporation and changed its name to XY –
the Findables Company. On November 9, 2018, the Company changed its name to XY – The Persistent Company. On May 4, 2021,
the Company changed its name to XY Labs, Inc.
The Company was originally formed for building
geolocation hardware and software along with online platforms to manage and integrate data from its technology. Today, the Company develops,
designs, and sells consumer products and applications, enterprise software and data integration services solutions and blockchain and
cryptographic technologies and services.
XYO Foundation is a California corporation and
a wholly owned subsidiary of the Company. The primary objectives of XYO Foundation include: (i) providing software and technical
documentation for public benefit, (ii) offering services and support to various like-minded software project communities consisting
of individuals contributing to XYO projects, and (iii) governing the use and licensing of XYO open-source assets, such as trademarks,
source code, and technical papers.
The XYO Network
In December 2017, the Company established
the XYO Network and its underlying protocols on the premise that the future of technology will rely heavily on autonomous machines and
devices, thereby creating a demand for innovative products and technologies that improve user ability to trust and access data from these
sources. Using its existing location technologies and consumer products, the Company is focused on building a data verification network
that incorporates cryptographic protocols and blockchain technology.
The Company is currently developing the second
full version of the XYO Network with the intention of improving ease of integration and performance, reducing usage costs, and more actively
supporting centralized solutions that access the functionality of the XYO Network. The Company continues to integrate solutions for the
XYO Network and to seek partnerships with third parties where appropriate.
COIN
In 2019, the Company introduced its COIN mobile
application (“COIN”). Users can access COIN on iOS and Android devices to claim digital location tiles by validating real
world geospatial location data within COIN. For claimed tiles, users collect in-app coins, which can be redeemed for a variety of items
such as physical products and other crypto assets. In 2019, the Company introduced paid COIN subscriptions, offering users premium features
including higher coin collections per tile and shortened cooldown times, among other features.
COIN can be used in connection with both the
Bluetooth Low Energy and Near-Field Communication (“NFC”) versions of the XYO Sentinel. COIN refers to these devices as eXtension
devices, or SentinelX.
The Company has added, and intends to continue
to add, additional data centric tasks to COIN, including tasks that promote a healthy lifestyle through physical and mental exercises,
real-world location discovery tasks, and additional ways to participate in the global data validation system, such as through point of
interest discovery and validation. Social interactions in, and the gamification of, COIN continue to be a focus of the Company to increase
user satisfaction, utility, and engagement.
The XYO Network is the data aggregation and validation
layer of COIN. The XYO Network provides fraud detection, data processing, and data validation for COIN.
XY Find It
Historically, the Company offered XY4+ Bluetooth
beacons which, when paired with a downloadable application operated on iOS and Android, allowed users to track the location of their
personal items such as keys, backpacks, and pets. Features also included alerts to notify users when such items had been inadvertently
left behind. The Company discontinued the line of business at the beginning of 2024.
Competition
Our business spans and competes in two primary
verticals:
Vertical 1: Blockchain protocol for geographical and
real-world data
The Company indirectly competes against all alternative
solutions for geographic and real world “oracle” information, meaning information that is accessed by a network of computers
and recorded on an immutable chain of cryptographically secured blocks of software hashes. This includes the growing industry of Geographic
Information System companies and several other Blockchain protocols that provide location information. However, the Company believes
that no dominant player has emerged in the sphere of blockchain protocols that combine geolocation data with blockchain immutability.
Vertical 2: COIN
The Company is not aware of any direct competitor
that offers a similar location-based application that allows users to collect in-app coins that can be redeemed for other products. However,
the Company is competing with other applications and platforms for user attention and engagement. The Company believes that one of COIN’s
key competitive advantages is that users can collect in-app coins and redeem them outside COIN.
Sales and Marketing
Subscriptions and products for consumers are
mainly sold through in-app purchases, which can be accessed through the Apple Store and Google Play Store, as well as through the Company
website.
Risk Factors
Our operations and financial results are subject
to various risks and uncertainties that could adversely affect our business, financial condition, results of operations, cash flows,
and the trading price of our Class A Common Stock. We are subject to continuing risks and uncertainties in connection with the current
macroeconomic and geopolitical environments, including risks related to the upcoming U.S. elections, supply chain disruptions, increases
in consumer prices, inflation, market volatility, interest rate fluctuations, actual or perceived instability in the financial and crypto
markets or the banking sector, crypto focused regulations and rulings, uncertainty with respect to the federal debt ceiling and budget
and the related potential for government shutdowns, labor shortages, cybersecurity events, ongoing regional conflicts around the world,
and acts of strikes, terrorism and other geo-political unrest. We are closely monitoring the impact of these factors on all aspects of
our operational and financial performance. To date, we have not experienced much of an impact on our business. The occurrence of any
such event in the future could have an adverse effect on our business, which, in turn, could have a material adverse effect on our financial
condition and results of operations.
SEC Subpoena
On July 21, 2022, the SEC filed a complaint
in the U.S. District Court for the Western District of Washington, alleging that a former Coinbase product manager and two other individuals
engaged in an unlawful insider trading scheme involving the purchase of at least 25 different crypto assets, including XYO. The
complaint alleged that the digital assets traded by the defendants, including XYO, are securities. In March 2024, the U.S. District
Court for the Western District of Washington entered a final judgment against the third and final plaintiff, thus concluding the litigation
in this matter, with no ruling made as to whether XYO or any of the other digital assets implicated are securities. The Company was not
a party to the SEC’s action, and the complaint did not allege that the Company or any of its personnel violated any federal securities
laws.
Listing of the Company’s Class A Common Stock
The Company’s
Class A Common Stock is listed for trading on tZero’s ATS platform under the symbol “XYLB”.
Critical Accounting Policies
This “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” section is based upon the Company’s financial statements, which
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The preparation of financial statements requires that the Company make estimates and judgments that affect the reported amounts of assets,
liabilities, net sales and expenses and related disclosures. On an ongoing basis, the Company evaluates its estimates. The Company bases
its estimates on historical experience, performance metrics and on various other assumptions that the Company believes to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results will differ from these estimates under different assumptions or conditions.
Please refer to
Note 2 – Summary of Significant Accounting Policies of the Notes to the Condensed Consolidated Financial Statements
for details.
Results of Operations for the six months ended June 30, 2024
and 2023
Net Sales:
Net Sales were
$4,420,332 and $5,969,368 in the six months ended June 30, 2024 and 2023, respectively. Net Sales decreased by $1,549,036,
or 25.9%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease in Net Sales
was mainly due to the Company’s decision to reduce online advertising for customer acquisition.
Cost of Sales:
Cost of Sales were $228,857 and $358,293 in the
six months ended June 30, 2024 and 2023, respectively. Cost of Sales decreased by $129,436, or 36.1%, in the six months ended June 30,
2024, compared to the six months ended June 30, 2023. The decrease was related to overall lower sales for the same period and the
decrease in product redeems which customers requested for in-app coins collected.
Research and Development:
Expenses for Research and development were $988,382
and $978,632 in the six months ended June 30, 2024 and 2023, respectively. Research and development expenses increased by $9,750,
or 1.0%, in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. Research and development expenses
remained relatively stable as the related headcount and compensation did not significantly change year over year.
Selling and Marketing:
Expenses for Selling and marketing were $1,157,688
and $3,741,212 in the six months ended June 30, 2024 and 2023, respectively. Selling and marketing expenses decreased by $2,583,524,
or 69.1%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The Company significantly
reduced its online advertising spend beginning in the second half of 2023, which was the main contributor to the year-over-year decrease
in this cost category.
General and Administration:
Expenses for General and administration were
$2,983,067 and $3,795,392 in the six months ended June 30, 2024 and 2023, respectively. General and administration expenses decreased
by $812,325, or 21.4%, in the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The main driver
for the decrease over year was the recognition of an inventory write-down provision of $516,071 during the first six months of 2023.
Other main drivers for the year-over-year decrease were lower costs related to payment processing as well as wages and salaries.
Realized Gain:
Realized gain was $554,097 and $1,437,899 in
the six months ended June 30, 2024 and 2023, respectively. The decrease of $883,802 was mainly attributable to the decreased sale
of crypto assets during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Other Expenses, net:
Other expenses, netted, were $5,469 and $5,891
in the six months ended June 30, 2024 and 2023, respectively. Crypto-related transactions fees were the main driver of other expenses
in both years.
Non-GAAP Financial Measures
To supplement the
Company’s financial information, which is prepared and presented in accordance with GAAP, the Company uses the following non-GAAP
financial measures: EBITDA and Adjusted EBITDA. EBITDA stands for earnings before interest tax, depreciation and amortization.
Adjusted EBITDA is EBITDA as further adjusted for provisional liability expenses as well as non-recurring and non-operational expenses.
The presentation of non-GAAP financial information
is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented
in accordance with GAAP. The Company uses these non-GAAP financial measures for financial and operational decision-making and for comparable
period-to-period comparison purposes. The Company’s management believes that these non-GAAP financial measures provide meaningful
supplemental information regarding the Company’s performance by excluding certain items that may not be indicative of the Company’s
recurring core business operating results. The Company’s management uses its judgement to identify items it deems not indicative
of the Company’s recurring core business results. The calculation of these non-GAAP financial measures may differ from the calculation
of similarly titled non-GAAP measures reported by other companies. These non-GAAP financial measures should not be considered in isolation
from, or as substitutes for, financial information prepared in accordance with GAAP.
To reconcile from Net loss to EBITDA, the Company
excludes all depreciation and impairment charges as the Company does not consider these charges as operationally driven expenses, which
is why they are excluded in the financial performance assessment. In calculating Adjusted EBITDA, the Company further excludes all expenses
related to provisional liabilities, non-recurring expenses and non-operational income and expenses. While the Company acknowledges that
expenses related to provisional liabilities, non-recurring expenses and non-operational income and expenses were incurred, the Company
does not consider such items to be reflective of the Company’s operational performance on a period over period basis. Provisional
liability expenses were incurred to set up provisional liabilities under GAAP. Non-recurring and non-operational expenses and income
relate to expenses and income that the Company did not expect to occur again or that the Company did not consider part of the business
operations. The Company uses its judgement to identify relevant transactions. Management excludes these items when reconciling to Adjusted
EBITDA for improved comparison of operational performance year over year.
The Company reported a positive Adjusted EBITDA
of $284,588 and a negative Adjusted EBITDA of $1,831,552 for the six months ended June 30, 2024 and 2023, respectively. The improvement
of $2,116,141 year over year was attributable to an improved operational result.
The following table provides a reconciliation
from Net loss to Adjusted EBITDA:
| | |
For the
six months ended | |
| | |
June 30,
2024 | | |
June 30,
2023 | |
| Net income/(loss) | |
$ | (610,291 | ) | |
$ | (1,477,066 | ) |
| Added: | |
| | | |
| | |
| Interest expense, net | |
| 9,049 | | |
| 838 | |
| Dividend income | |
| (16,235 | ) | |
| – | |
| Tax expense, net | |
| 9,798 | | |
| 3,785 | |
| Impairment expense | |
| 202,409 | | |
| 289 | |
| Depreciation expense | |
| 54,140 | | |
| 64,015 | |
| EBITDA | |
$ | (351,130 | ) | |
$ | (1,408,139 | ) |
| Added: | |
| | | |
| | |
| Increase of provisional liabilities | |
| 33,057 | | |
| – | |
| Stock option related expenses | |
| 646,449 | | |
| 638,653 | |
| Inventory reserve | |
| – | | |
| 516,071 | |
| Other non-recurring expenses | |
| 92,370 | | |
| 24,821 | |
| Deducted: | |
| | | |
| | |
| Divestment income | |
| – | | |
| (1,187,626 | ) |
| Release of provisional liabilities | |
| (614 | ) | |
| (165,060 | ) |
| Crypto related other
income | |
| (135,543 | ) | |
| (250,273 | ) |
| Adjusted EBITDA | |
$ | 284,588 | | |
$ | (1,831,552 | ) |
Liquidity and Capital Resources
The Company’s working capital deficiency was as follows:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Current assets | |
$ | 2,675,487 | | |
$ | 2,695,467 | |
| Current liabilities | |
$ | (5,369,776 | ) | |
$ | (5,123,685 | ) |
| Net working capital / (deficiency) | |
$ | (2,694,290 | ) | |
$ | (2,428,218 | ) |
Net Working Capital deficiency increased by $266,072,
or 11.0%, from December 31, 2023, to June 30, 2024. The primary changes in current assets were the decreases in payment processor
receivables by $117,960 and accounts receivable by $14,924. The decrease was mostly offset by the increase in cash and cash equivalents
of $113,551.The primary factors driving the increase in current liabilities were the increases of the Company’s accounts payable
and accrued expenses by $278,660 and other current liabilities by $33,057, mainly due to an increase in the Company’s COIN provisional
liability. Please refer to the Notes to the Condensed Consolidated Financial Statements for more details.
Cash Flow from operating activities:
Net cash provided by operating activities was
$675,124 and net cash used in operating activities was $2,331,400 in the six months ended June 30, 2024 and 2023, respectively.
Net cash provided by operating activities improved by $1,656,275 in the six months ended June 30, 2024, compared to 2023. The improvement
year-over-year was driven by better operational results due to reduced online advertising spend as well as cash freed up from working
capital.
Cash Flow from investing activities:
Net cash used by investing activities was $556,000
in the six months ended June 30, 2024, as compared to net cash provided of $1,090,333 by investing activities in the six months
ended June 30, 2023. Net cash from investing activities decreased by $1,646,333 in the six months ended June 30, 2024, compared
to the same period in 2023, as the Company purchased XYO crypto tokens in 2024, whereas in the prior year the Company was a net seller
of its crypto assets.
Cash Flow from financing activities:
Net cash used in financing activities was $5,573
in the six months ended June 30, 2024, as compared to net cash of $6,113 used in financing activities in the six months ended June 30,
2023. Net cash used in financing activities decreased by $540 in the six months ended June 30, 2024, from the same period in 2023.
The financing activities are related to the principal payment of the EIDL (as defined below).
Liquidity and Capital Resources:
As of June 30, 2024, the Company had cash
and cash equivalents totaling $1,039,408, alongside total net receivables of $1,371,130.Together, these balances provide the Company
with financing to support its current operations. Additionally, the Company reported positive cash flow from operating activities of
$675,124 for the six months ended June 30, 2024, marking a significant improvement from the $2,331,400 in cash used during the same
period in 2023. This improvement was driven by better operational performance, primarily through cost management and reduced online advertising
spend.
Despite these positive developments, the Company
has a history of net losses and may continue to incur operating losses over the next twelve months or longer. Given this, the Company
continues to actively monitor its financial position. Receivables, which form a key part of the Company’s working capital, play
an important role in maintaining liquidity, but any delays or fluctuations could adversely affect cash flow.
Market conditions and broader macroeconomic events,
including crypto market volatility and changes in interest rates, could also impact the Company’s operations and its ability to
raise additional funds. If necessary, the Company may seek future funding through equity or debt financing, although no such efforts
are currently underway. If the Company is unable to raise additional capital when required, this could negatively impact its financial
condition and ability to pursue its business strategies and continue operations.
Due to the Company’s financial performance
and liquidity challenges, there is substantial doubt about its ability to continue as a going concern for the next twelve months. Management
is committed to taking appropriate actions, including exploring financing solutions if needed, to address any liquidity shortfalls and
ensure the sustainability of the business.
Properties
Our headquarters
offices are located at 740 13th Street #224, San Diego, California 92101, for which the Company entered a lease agreement that commenced
on July 1, 2024. The monthly lease payment for this office location is $3,638 for the first twelve months following the lease commencement.
The Company’s lease for its prior head office and warehouse location at 1405 30th St, Suite A, San Diego, California 92154
expired on June 30, 2024. The Company entered into that lease agreement in March 2019. The combined monthly lease payment for
the office and warehouse location was $7,059 in the last year of the lease.
Trend Information
Crypto Market Environment
The Company closely follows developments in the
crypto market, given its significant impact on the Company's financial performance and user adoption rates. The crypto market experienced
a remarkable surge in 2021, peaking around the end of the fourth quarter of 2021. However, 2022 witnessed a substantial decline in crypto
market value, driven largely by the failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks,
Voyager, and Three Arrows Capital. Following the downturn in 2022, 2023 and 2024 year-to-date have seen some recovery and stabilization
in the market. As a company offering crypto-powered applications, the Company’s performance is tied to the overall health of the
crypto market. Heightened interest in the crypto market generally translates to a larger pool of interested users for the Company’s
products and services.
During the six months ended June 30, 2024,
the consumer facing application COIN continued to be the Company’s main revenue driver. COIN subscriptions contributed net sales
of $1,950,853 in the six months ended June 30, 2024, which constituted 43.9% of total net sales. The Company intends to further
increase its marketing and operational efforts to grow the XYO and COIN business. The application enables users to easily collect crypto
assets and other products through the ability to redeem in-app coins. The Company expects that blockchain technology and related crypto
assets will increase in relevance in the future, leading to a larger customer base and further engagement. The Company intends to further
build up the interoperability between the XYO Network and COIN.
XY Find It
The Company no longer pursues a long-term business
strategy on its XY Find It devices and has written off all related inventories. XY4+ net sales decreased to $263 from $9,642, or by 97.3%,
in the six months ended June 30, 2024, compared to the six months ended June 30, 2023.
Item 2. OTHER INFORMATION
None.
Item 3. CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Contents
XY Labs, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
| | |
As of | |
| | |
June 30,
2024 | | |
December 31,
2023 | |
| Assets | |
| | |
| |
| Current assets: | |
| | | |
| | |
| Cash and cash equivalents | |
$ | 1,039,408 | | |
$ | 925,856 | |
| Receivables from payment processors | |
| 371,562 | | |
| 489,522 | |
| Accounts receivable, net of allowance
for credit losses of $35,182 and $38,235 | |
| 964,385 | | |
| 979,310 | |
| Inventory, net | |
| 300,132 | | |
| 300,779 | |
| Total current assets | |
| 2,675,487 | | |
| 2,695,467 | |
| Crypto assets | |
| 643,776 | | |
| 377,255 | |
| Crypto pools | |
| 96,733 | | |
| 115,379 | |
| Crypto loans granted | |
| 124,043 | | |
| 31,888 | |
| Property and equipment, net | |
| 54,726 | | |
| 68,296 | |
| Right of use asset, net | |
| 0 | | |
| 40,570 | |
| Other assets | |
| 139,975 | | |
| 129,209 | |
| Total assets | |
$ | 3,734,741 | | |
$ | 3,458,064 | |
| Liabilities and Stockholders’ Deficit | |
| | | |
| | |
| Current liabilities: | |
| | | |
| | |
| Accounts payable and accrued expenses | |
$ | 698,425 | | |
$ | 419,765 | |
| Stock payable | |
| 1,392,760 | | |
| 1,392,760 | |
| Lease liability, current portion | |
| – | | |
| 42,354 | |
| Deferred revenue | |
| 144,712 | | |
| 167,983 | |
| Other current liabilities | |
| 3,133,879 | | |
| 3,100,822 | |
| Total current liabilities | |
| 5,369,776 | | |
| 5,123,685 | |
| Lease liability, net of current portion | |
| – | | |
| – | |
| Notes payable | |
| 482,051 | | |
| 487,624 | |
| Total liabilities | |
| 5,851,828 | | |
| 5,611,309 | |
| Commitments and contingencies (Refer to Notes 2 and 15) | |
| | | |
| | |
| Stockholders' equity (deficit): | |
| | | |
| | |
| Undesignated
preferred stock; $0.0001 par value; 30,000,000 shares authorized, none issued or outstanding at June 30, 2024 and December 31,
2023. | |
| | | |
| | |
| Class B
Common Stock; $0.0001 par value; 40,000,000 shares authorized at June 30, 2024 and 40,000,000 shares authorized at December 31,
2023; 12,006,846 shares issued and outstanding at June 30, 2024 and 12,006,846 shares issued and outstanding at December 31,
2023. | |
| 3,229 | | |
| 3,229 | |
| Class A
Common Stock; $0.0001 par value; 90,000,000 shares authorized at June 30, 2024 and 60,000,000 shares authorized at December 31,
2023; 32,282,712 shares issued and outstanding at June 30, 2024 and 32,282,712 shares issued and outstanding at December 31,
2023. | |
| 1,199 | | |
| 1,199 | |
| Additional paid-in capital | |
| 24,667,468 | | |
| 24,021,019 | |
| Accumulated deficit | |
| (26,788,983 | ) | |
| (26,178,692 | ) |
| Total stockholders’ deficit | |
| (2,117,087 | ) | |
| (2,153,245 | ) |
| Total liabilities and stockholders'
deficit | |
$ | 3,734,741 | | |
| 3,458,064 | |
See accompanying notes to condensed consolidated
financial statements.
XY Labs, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| | |
For the
six months ended | |
| | |
June 30,
2024 | | |
June 30,
2023 | |
| Sales | |
$ | 4,420,332 | | |
$ | 5,969,368 | |
| Cost of sales | |
| (228,857 | ) | |
| (358,293 | ) |
| Gross profit | |
| 4,191,475 | | |
| 5,611,074 | |
| Operating expenses: | |
| | | |
| | |
| Research and development | |
| 988,382 | | |
| 978,632 | |
| Selling and marketing | |
| 1,157,688 | | |
| 3,741,212 | |
| General and administrative | |
| 2,983,067 | | |
| 3,795,392 | |
| Total operating
expenses | |
| 5,129,137 | | |
| 8,515,236 | |
| Loss from operations | |
| (937,663 | ) | |
| (2,904,162 | ) |
| Other income | |
| | | |
| | |
| Impairment expense | |
| (202,409 | ) | |
| (289 | ) |
| Realized gain | |
| 554,097 | | |
| 1,437,899 | |
| Interest expense, net | |
| (9,049 | ) | |
| (838 | ) |
| Other expense,
net | |
| (5,469 | ) | |
| (5,891 | ) |
| Total other income | |
| 337,170 | | |
| 1,430,881 | |
| Loss before tax expense | |
| (600,493 | ) | |
| (1,473,281 | ) |
| Tax expense | |
| 9,798 | | |
| 3,785 | |
| Net loss | |
$ | (610,291 | ) | |
$ | (1,477,066 | ) |
See accompanying notes to condensed consolidated
financial statements.
XY Labs, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS’ DEFICIT
(unaudited)
| | |
Class B
Common
Stock | | |
Class A
Common
Stock | | |
Additional
paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
| Balance at December 31, 2022 | |
| 32,282,712 | | |
$ | 3,229 | | |
| 11,997,463 | | |
$ | 1,199 | | |
$ | 22,700,773 | | |
$ | (23,890,247 | ) | |
$ | (1,185,046 | ) |
| Stock-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| 638,653 | | |
| – | | |
| 638,653 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (1,477,066 | ) | |
| (1,477,066 | ) |
| Balance at June 30,
2023 | |
| 32,282,712 | | |
$ | 3,229 | | |
| 11,997,463 | | |
$ | 1,199 | | |
$ | 23,339,427 | | |
$ | (25,367,312 | ) | |
$ | (2,023,458 | ) |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance at December 31, 2023 | |
| 32,282,712 | | |
$ | 3,229 | | |
| 12,006,846 | | |
$ | 1,199 | | |
$ | 24,021,019 | | |
$ | (26,178,692 | ) | |
$ | (2,153,245 | ) |
| Stock-based compensation | |
| – | | |
| – | | |
| – | | |
| – | | |
| 646,449 | | |
| – | | |
| 646,449 | |
| Net loss | |
| – | | |
| – | | |
| – | | |
| – | | |
| – | | |
| (610,291 | ) | |
| (610,291 | ) |
| Balance at June 30,
2024 | |
| 32,282,712 | | |
$ | 3,229 | | |
| 12,006,846 | | |
$ | 1,199 | | |
$ | 24,667,468 | | |
$ | (26,788,983 | ) | |
$ | (2,117,088 | ) |
See accompanying notes
to condensed consolidated financial statements.
XY Labs, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| | |
For the
six months ended | |
| | |
June 30,
2024 | | |
June 30,
2023 | |
| Operating activities: | |
| | | |
| | |
| Net loss | |
$ | (610,291 | ) | |
$ | (1,477,066 | ) |
| Adjustments to reconcile net loss to
cash used in operating activities: | |
| | | |
| | |
| Depreciation and amortization | |
| 54,140 | | |
| 64,015 | |
| Impairments of crypto assets | |
| 202,409 | | |
| 289 | |
| Inventory reserve | |
| – | | |
| 516,071 | |
| Stock based compensation expense | |
| 646,449 | | |
| 638,653 | |
| Loss (gain) on crypto assets | |
| 13,661 | | |
| (1,246,432 | ) |
| Changes in assets and liabilities: | |
| | | |
| | |
| Receivables from online payment processors | |
| 117,960 | | |
| (363,884 | ) |
| Accounts receivable | |
| 14,924 | | |
| 177,253 | |
| Inventory | |
| 646 | | |
| (38,858 | ) |
| Prepaid expenses and other assets | |
| (10,866 | ) | |
| 38,969 | |
| Accounts payable and accrued expenses | |
| 278,660 | | |
| (209,804 | ) |
| Deferred revenue | |
| (23,271 | ) | |
| (219,843 | ) |
| Net change in operating lease liability | |
| (42,354 | ) | |
| (40,920 | ) |
| Other current liabilities | |
| 33,057 | | |
| (169,843 | ) |
| Net cash provided by (used in) operating
activities | |
| 675,124 | | |
| (2,331,400 | ) |
| Investing activities: | |
| | | |
| | |
| Investments in crypto and other assets | |
| (556,000 | ) | |
| (97,293 | ) |
| Proceeds from
the sale of crypto and other assets | |
| – | | |
| 1,187,626 | |
| Net cash (used in) provided by investing
activities | |
| (556,000 | ) | |
| 1,090,333 | |
| Financing activities: | |
| | | |
| | |
| Net change in
notes payable | |
| (5,573 | ) | |
| (6,113 | ) |
| Net cash (used in) financing activities | |
$ | (5,573 | ) | |
$ | (6,113 | ) |
| Net increase (decrease) in cash and cash equivalents | |
| 113,551 | | |
| (1,247,180 | ) |
| Cash and cash equivalents, beginning
of year | |
| 925,856 | | |
| 2,246,211 | |
| Cash and cash equivalents, end of year | |
$ | 1,039,408 | | |
$ | 999,033 | |
| Supplemental disclosures of cash flow information: | |
| | | |
| | |
| Interest paid | |
$ | 9,049 | | |
$ | 9,327 | |
| Taxes paid | |
$ | 13,123 | | |
$ | 16,685 | |
See accompanying notes
to condensed consolidated financial statements.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 1 – Description of Business
XY Labs, Inc. (the “Company”)
is a corporation organized under the laws of the State of Delaware. The Company was originally formed as a limited liability company
in June 2012. In May 2016, the Company changed its name from Ength Degree, LLC to XY – the Findables Company and converted
from a Delaware limited liability company to a Delaware corporation pursuant to applicable conversion statutes of the Delaware General
Corporation Law. On November 9, 2018, the Company changed its name to XY – The Persistent Company. The Company changed its
name to XY Labs, Inc. on May 4, 2021.
The XYO Foundation
is a wholly owned subsidiary of the Company and a California corporation. The primary objectives of XYO Foundation include (i) providing
software and technical documentation for the XYO Network, (ii) offering services and support to like-minded software project communities
contributing to XYO projects, and (iii) governing the use and licensing of XYO open-source assets. The XYO Foundation had no operational
activities, assets or liabilities in the six months ended June 30, 2024 and 2023.
Note 2 – Summary of Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been
prepared in accordance with GAAP.
Basis of Presentation and Consolidation
The condensed consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary, the XYO Foundation. All material intercompany accounts and transactions
have been eliminated during the consolidation process.
Use of Estimates
The preparation of financial statements and related
disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported
in the financial statements and accompanying notes. Management bases its estimates on historical experience and on various other assumptions
it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities. Significant estimates and assumptions reflected in the financial statements include, but are not limited to,
useful lives of property and equipment, value of crypto assets, stock options issued, fair value of services received, the Company’s
liability for activity in the COIN app, evaluation of intangible assets for impairment and valuation of deferred tax assets. Actual results
may differ from these estimates and these differences may be material.
Crypto assets
Crypto assets,
including Ethereum, Bitcoin and XYO Tokens, are recorded as assets on the Company’s balance sheet. Crypto assets purchased are
recorded at cost and crypto assets earned through the sale of Ethereum-based ERC20-compatible Tokens to be used via the XYO Network (the
“XYO Tokens”) or other products are accounted for in connection with the Company’s sales recognition policy,
as disclosed below. As the Company’s native XYO Token is a self-created intangible asset with a cost basis of $0, XYO Tokens are
not recorded on the balance sheet, unless the Company has purchased them in an open market transaction. Purchased XYO Tokens are recorded
at cost and impaired for any decline in value.
Crypto assets held are accounted for as intangible
assets with indefinite useful lives. An intangible asset with an indefinite life is not amortized but assessed for impairment annually,
or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived
asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the
crypto asset at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative
assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is unlikely an impairment
exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative
impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal
of impairment losses is not permitted.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Concentration of Credit Risk
Financial instruments
that potentially subject the Company to a concentration of credit risk principally consist of cash. The Company may maintain cash balances
at what it believes are high credit-quality financial institutions. At times, balances at one financial institution may exceed federally
insured limits of $250,000. The Company’s total cash balance was $1,039,408 as of December 31, 2023, of which $536,234
was uninsured. The Company has not experienced any losses in such accounts nor does the Company believe it is exposed to any significant
credit risk with respect to its cash and cash equivalents.
Concentrations of Customers, Vendors and Suppliers
Two vendors accounted for 100% of the Company’s
purchases in the six months ended June 30, 2024, related to packaging materials. The Company did not buy additional inventory during
this period. Comparatively, one vendor accounted for approximately 83% of the Company’s purchases in the six months ended June 30,
2023, relating to NFC cards. In the six months ended June 30, 2024 and 2023, the Company used third-party payment service providers,
most notably Apple and Google, through which COIN subscription and product payments were processed. Any loss of these providers would
have an adverse impact on the Company. For the six months ended June 30, 2024 and 2023, the Company had no customer concentration.
Most of the Company’s sales are made to end customers with immediate payment for purchased goods and services.
Receivables from Payment Processors
Receivables from
online payment processors are comprised of cash due from third-party online payment service providers for clearing transactions. The
cash was paid or deposited by customers or users through these online payment agencies for services provided by the Company. The Company
carefully considers and monitors the credit worthiness of the third-party payment service providers used. An allowance for credit losses
is recorded in any period in which a loss is determined to be probable. Receivable balances are written off when they are deemed uncollectible.
Receivables from payment processors were $371,562 and $489,522 as of June 30, 2024 and as of December 31, 2023, respectively.
No allowance for credit losses was provided for the receivables from online payment processors.
Accounts Receivable
The Company's accounts
receivables mainly comprised of Google Play Store and Apple App Store receivables as well as partnership and advertiser receivables.
The receivables represented payments due for sales through the App stores after the deduction of processing fees, as well as for user
engagements through the COIN App. The Company diligently monitors the creditworthiness of all involved parties and records an allowance
for credit losses when a loss is probable. Receivable balances are written off if deemed uncollectible. As of June 30, 2024
and as of December 31, 2023, total receivables were $964,385 and $979,310, respectively. The Company recorded an allowance for credit
losses of $35,183 as of June 30, 2024 and $38,235 as of December 31, 2023, respectively.
Inventory
Inventory is stated
at the lower of cost, determined on a weighted average basis, and net realizable value, and consists of purchased finished goods. Reserves
are provided for slow moving and obsolete inventory, which are estimated based on a comparison of the quantity and cost of inventory
on hand to management's forecast of customer demand. Inventory was $300,132 and $300,779 as of June 30, 2024 and 2023, respectively.
The Company had not set up an inventory reserve as of June 30, 2024. The inventory reserve was set up in relation to XY4+ devices,
which the Company discontinued to sell and disposed of in early 2024. The reserve reflected a 100% write down on the cost basis of the
XY4+ devices as well as related key chains the Company had on hand as of December 31, 2023. There were $665,454 inventory reserves
accounted as of December 31, 2023.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Property and Equipment
Property and equipment are recorded at cost and
depreciated over the estimated useful life of the asset (three to five years) using the straight-line method. Leasehold improvements
are depreciated over the shorter of the remaining lease term and useful life of the improvement using the straight-line method. Maintenance
costs are considered period costs and are expensed when incurred.
Accrued COIN Liability
COIN users can
collect in-app coins, which are redeemable for either crypto assets or physical products. The Company sets an internal price for each
in-app coin, which is used to determine the USD value for which customers can redeem such coin. Users must reach a threshold of 10,000
in-app coins before being eligible to redeem their collected coins. The Company records a liability for accrued coins within customer
accounts. The accrued COIN liability was $3,077,677 and $3,060,330 as of June 30, 2024 and December 31, 2023, respectively.
Sales Recognition
Sales
are recognized in accordance with Accounting Standards Codification 606 – Revenue from Contracts with Customers (“ASC
606”). In accordance with ASC 606, sales are recognized when the promised goods and services are provided or shipped
to customers. The amount of sales recognized reflects the consideration to which the Company expects to be entitled to receive in exchange
for these goods or services. To achieve this core principle, the Company applies the following five steps: (i) identifying
the contract with a customer; (2) identifying the performance obligations in the contract; (3) determining the transaction
price; (4) allocating the transaction price to performance obligations in the contract; and (5) recognizing sales when or as
the Company satisfies a performance obligation.
During the six months
ended June 30, 2024, the Company realized gross sales of $4,496,134 and net sales of $4,420,332. During this period, COIN subscription
sales accounted for 43.9% of gross sales, partnership, and advertiser sales for 43.3%, while other products accounted for 12.6% of gross
sales. The increase of COIN provisions was $17,346 during the six months ended June 30, 2024 and deducted from sales. During the
six months ended June 30, 2023, the Company generated gross sales of $6,129,167 and net sales of $5,969,368. During this period,
COIN subscription sales accounted for 57.2% of gross sales, partnership, and advertiser sales for 32.7%, while other products accounted
for 5.6% of gross sales. As of June 30, 2024 and December 31, 2023, the Company had recognized deferred revenue on its balance
sheet of $144,712 and $167,983, respectively.
Products
Sales
of COIN and XY Find It products are recognized upon shipment, net of an allowance for estimated and actual returns. Subscriptions
sales are mostly charged monthly, and in some cases also on an annual or semi-annual basis. The Company allows customers to claim a refund
for subscription charges under certain conditions. The allowance for sales returns is based on management’s judgement using historical
experience and expectation of future conditions. As of June 30, 2024 and December 31, 2023, the Company provided for $56,203
and $40,492, respectively, as sales and returns allowance.
Mobile Application
The Company operates
a self-developed mobile application, COIN, that lets users collect in-app coins when they move and collect coins located in map tiles.
Users can download the Company’s free-to-use or subscription-based application through digital storefronts such as the Google Play
Store and Apple App Store. Sales from subscriptions are recognized over the subscription term as the service is provided, which
is mostly monthly and to a lesser amount annually or semi-annually. The Company defers the recognition of sales for the portion of the
service period that the customer has already paid for, but that has not yet lapsed.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
The Company records sales generated through COIN
on a gross basis as the Company acts as the principal in the mobile game arrangements under which the Company controls the specified
services before they are provided to the customer. In addition, the Company is primarily responsible for fulfilling the promise to provide
the user experience, tracking the accumulation and payout of in-app coins, and maintaining services, and has discretion in setting the
price for the services to the customer.
The Company also
generates sales from advertising on COIN. For a limited number of advertising network arrangements, the transaction price is determined
based on a volume-tiered pricing structure, whereby the price per advertising unit in each month is determined by the number of impressions
delivered in that month. However, the uncertainty concerning the number of impressions delivered is resolved at the end of each month,
therefore, eliminating any uncertainty with respect to the price per advertising unit for each reporting period.
For in-app display advertisements, in-app offers,
engagement advertisements and other advertisements, sales are generated once the users interact with the offering to a predefined step.
The Company has no performance obligations that it needs to fulfill. Either the customer uses the in-app services or not.
Sale of XYO Tokens
The
Company derives part of its sales from the sale of XYO Tokens. In consideration for these XYO Tokens, the Company receives Ether
or U.S. dollars, and once received, sales are recognized. There is currently no specific definitive guidance under U.S. GAAP or alternative
accounting frameworks for accounting for the production of crypto assets, and management exercised significant judgement in determining
appropriate accounting treatment for the recognition of sales for the development of crypto assets. Management examined various factors
surrounding the substance of the Company’s operations and the guidance in ASC 606. In the event authoritative guidance is enacted
by the Financial Accounting Standards Board ("FASB"), the Company may be required to change its policies which could result
in a change in the Company’s financial statements.
Cost of Sales
Cost of sales includes the cost of product, packaging,
inbound freight, and any other direct costs associated with receipt of goods. Other costs, including purchasing, receiving, quality control,
and warehousing are classified as general and administrative expenses. At times, the Company provides free products to its customers.
These free products are recognized in cost of sales.
Research and Development Costs
The Company's research and development (“R&D”)
costs are mainly related to salaries and wages for its employees engaged in R&D activities. These activities involve the XYO Network,
the Company’s data verification network and the COIN App. The R&D team's contributions include development of the XYO Network's
architecture, protocols, and blockchain technology, as well as the COIN App's features, user experience, and gamification elements. The
team members have various roles and responsibilities, reflecting their focus on different aspects of the projects. R&D expenses also
included stock option expenses of $217,159 and $625,860 during the six months ended June 30, 2024 and 2023, respectively.
Online Advertising Costs
The Company mainly uses online advertising to
market its products to customers. The main online advertising platforms that the Company used during the six months ended June 30,
2024 and 2023 were Facebook and Google. The costs are expensed as incurred. Online advertising costs were $527,225 and $3,390,821 during
the six months ended June 30, 2024 and 2023, respectively.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Stock Based Compensation
The Company accounts
for stock-based compensation arrangements through the measurement and recognition of compensation expense for all option-based payment
awards to employees, consultants and directors based on estimated fair values. For employees and directors, fair value is measured at
the date of grant and remains constant during the vesting period of the grant. For all others, fair value is measured at each
date on which vesting of the grant occurs. Forfeitures of stock options are accounted for as they occur.
The Company uses
the Black-Scholes option valuation model to estimate the fair value of options and warrants at the date of grant. The Black-Scholes option
valuation model requires the input of subjective assumptions, including the risk-free interest rate, the expected volatility in
the value of the Company’s common stock, and the expected term of the option. These estimates involve inherent uncertainties and
the application of management’s judgment. If factors change and different assumptions are used, the share-based compensation expense
could be materially different in the future. These assumptions are estimated as follows:
Risk-free Interest Rate
The risk-free interest rate assumption is based
on the zero-coupon U.S. Treasury instruments appropriate for the expected term of the stock option grants.
Expected Volatility
The Company has limited historical data of its
own to determine expected volatility, and as such, based the volatility assumption on a combined weighted average of a selected peer
group. The peer group was developed based on similar sized companies in the mobile app and Geospace industries whose shares are publicly
traded.
Expected Term
The expected term represents the period that
options are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term
of the stock options awards granted, the expected life is determined using the simplified method, which is an average of the contractual
terms of the option and its ordinary vesting period.
Dividend Yield
We have no history or expectation of paying cash
dividends on our common stock, hence dividend yield is zero for all periods presented.
Income Taxes
Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases and for the expected future tax benefit to be derived from tax loss and credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the
related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount
that will more likely than not be realized.
The Company has adopted accounting guidance for
uncertainty in income taxes. The Company recognizes tax positions in its financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. The Company had no uncertain tax positions that qualify for either recognition
or disclosure in the financial statements. The Company’s tax returns are subject to examination by the Federal taxing authorities
for a period of three years from the date they are filed and a period of four years for California taxing authorities. The years open
for tax examinations are 2020 through 2023.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Going Concern
For the six months ended June 30, 2024,
the Company recognized a net loss of $610,291. The Company was not able to cover its operational costs with the product and services
sales generated and will likely need to further invest in marketing for user acquisition to increase COIN App income and advertising
revenue to reach break-even for its products and services. As a result, the Company may incur further operating losses and seek to fund
its operations through equity and/or debt financing or other sources, as it deems necessary. Additional capital may not be available
on terms favorable to the Company, if at all, including due to general macroeconomic conditions or unforeseen factors. If the Company
fails to raise capital or generate liquidity through the sale of its products and services, it will have a negative impact on its financial
condition and its ability to pursue its business strategies. Those conditions raise substantial doubt about the Company's ability to
continue as a going concern from the filing date of this Semi-Annual Report on Form 1-SA. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Recent Accounting Pronouncements
In December 2023, the FASB released Accounting
Standards Update No. 2023-08, "Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and
Disclosure of Crypto Assets" (“ASU 2023-08”). ASU 2023-08 aims to refine the accounting practices and disclosures associated
with crypto assets. The update outlines the requirements for entities to measure and recognize crypto assets that meet certain criteria
at market value measurements. The application of ASU 2023-08 results that crypto assets will be measured at fair value separately from
other intangible assets in the Company’s financial statements. Additionally, the update introduces comprehensive disclosure requirements,
including details on significant crypto asset holdings and their fair values.
This update becomes effective for all entities
for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted,
offering flexibility to entities in aligning with the new standards ahead of the mandatory implementation date. Management will apply
the standard for its 2025 financial reporting.
Subsequent events
Management has evaluated subsequent events related
to the historical financial statements until the date which the financial statements were available to be issued.
New Offices
The Company
entered into a new lease agreement for an office location at 740 13th Street #224, San Diego, California 92101, which commenced on July 1,
2024 and has an initial term of 36 months. The Company recognized a right-of-use asset and a corresponding lease liability as of July 1, 2024. Please refer to “Note 10 – Right of use asset and Lease liability” of the Notes to the condensed
consolidated financial statements.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 3 – Crypto Assets
The Company held the following crypto assets:
As of June 30, 2024
| | |
Units | | |
Gross
balance | | |
Accumulated
impairment
charge | | |
Net
balance | |
| XYO | |
| 828,035,377 | | |
$ | 773,711 | | |
$ | 186,481 | | |
$ | 587,230 | |
| ETH | |
| 35 | | |
| 48,953 | | |
| 162 | | |
| 48,791 | |
| BTC | |
| 0 | | |
| 118 | | |
| – | | |
| 118 | |
| USDC | |
| 2,773 | | |
| 2,583 | | |
| – | | |
| 2,583 | |
| USDT | |
| 17,361 | | |
| 5,056 | | |
| 1 | | |
| 5,055 | |
| | |
| | | |
$ | 830,422 | | |
$ | 186,645 | | |
$ | 643,776 | |
As of December 31, 2023
| | |
Units | | |
Gross
balance | | |
Accumulated
impairment
charge | | |
Net
balance | |
| XYO | |
| 836,218,173 | | |
$ | 567,539 | | |
$ | 248,354 | | |
$ | 319,186 | |
| ETH | |
| 47 | | |
| 43,725 | | |
| – | | |
| 43,725 | |
| BTC | |
| 0 | | |
| 6,272 | | |
| – | | |
| 6,272 | |
| USDC | |
| 6,093 | | |
| 1,556 | | |
| – | | |
| 1,556 | |
| USDT | |
| 8,634 | | |
| 6,105 | | |
| – | | |
| 6,105 | |
| UNI | |
| 197 | | |
| 409 | | |
| – | | |
| 409 | |
| DAI | |
| 3 | | |
| 3 | | |
| – | | |
| 3 | |
| | |
| | | |
$ | 625,609 | | |
$ | 248,354 | | |
$ | 377,255 | |
The Company used decentralized
crypto pools to provide additional trading liquidity for its native XYO Token. To provide trading liquidity, the Company either added
different crypto asset pairs, with one side always being the XYO Token, into existing liquidity pools or created new liquidity pools.
During the six months ended June 30, 2024,
the Company recorded several transactions with a statement of operations impact. The Company recognized a USD equivalent of $5,762 in
network transaction fees compared to $4,414 during the six months ended June 30, 2023. The Company used XYO Tokens to pay for services
with a total equivalent of $429,391 and $6,680 during the six months ended June 30, 2024 and 2023, respectively.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 3 – Crypto Assets (cont’d)
Additionally, the Company earned crypto pool
fees of $135,543 and $263,401 during the six months ended June 30, 2024 and 2023, respectively. Earned crypto pool fees are recognized
at the time when the accrued pool fees are taken from the crypto pools (such as the Uniswap crypto pool) and determined based on the
market value of the crypto assets withdrawn at the time. The Company used approximately 158,027,842 XYO, 4.3 ETH and 0.4 BTC tokens for
COIN user redemptions during the six months ended June 30, 2024, recognizing the cost at the carrying value of the crypto assets
at the time of distribution. Total expenses recognized in connection with in-app COIN redemptions in crypto assets were $118,086 and
$114,905 during the six months ended June 30, 2024 and 2023, respectively, comprising crypto assets and physical products.
The Company performed several transactions related
to buying, selling, and exchanging crypto assets during the six months ended June 30, 2024 and 2023, respectively. The Company purchased
crypto assets for an equivalent of $556,000 during the six months ended June 30, 2024, compared to $97,293 during the six months
ended June 30, 2023. The Company did not sell crypto assets during the six months ended June 30, 2024, however it did sell
crypto assets, namely XYO tokens, for an equivalent of $1,187,626 during the six months ended June 30, 2023.
Moreover, the Company exchanged crypto assets
in its possession for other crypto assets during the six months ended June 30, 2024 and 2023, respectively. However, the exchange
between crypto assets is recognized at their respective carrying value. As a result, no profit and loss impact is recognized from these
transactions.
During the six months ended June 30, 2024,
the Company loaned crypto assets at an equivalent of $92,157 at book value to third parties. The loaned crypto assets were comprised
of 39,171,605 XYO, 38 ETH, 3,000 USDC and 87,000 USDT tokens. During the six months ended June 30, 2023, the Company loaned 124,079,068
XYO tokens at a $0 cost book value to a third party.
In February 2023, the Company invested 4,370,629
XYO tokens into a German company, Natix GmbH. The cost basis of the XYO tokens was $0, hence the Company recorded no asset in its balance
sheet. The Company did receive 80,000,000 Natix tokens, a USD equivalent of approximately $69,344, in exchange on July 2, 2024,
which were issued by Natix GmbH under the investment agreement and represented approximately 10% of the tokens the Company is entitled
to receive. The Company did not recognize the received tokens in its financial information through June 30, 2024.
Regarding impairment
losses and realized gains, the Company had recognized an impairment charge of $202,409 in connection with crypto assets held during the
six months ended June 30, 2024, compared to $289 during the six months ended June 30, 2023. The crypto assets were impaired
when the fair value was less than the carrying value. The impairment charge was not reversed when the quoted price increased in subsequent
periods. If crypto assets are sold for fiat or used to pay for services a revaluation gain is recognized for the difference of the book
value and market value. The revaluation gain was $402,319 during the six months ended June 30, 2024 and $1,437,899 during the six
months ended June 30, 2023.
The Company used published data on CoinCodex
to determine the daily prices of the crypto assets it held in 2024 and 2023. This information was utilized to calculate the equivalent
in USD for each transaction involving crypto assets.
Note 4 – Note Receivable
In August 2022, the Company issued an unsecured
note receivable to SeriesX.net, Inc., the owner of Vertalo Inc., the Company’s transfer agent, in the amount of $100,000.
The note became due and payable on August 5, 2023. The note accrued interest at 5% APY for the first six months post-issuance and
at 20% APY for the seventh through twelfth months post-issuance. The loan balance of $100,000 plus accrued interest of $7,621 was paid
in full in May 2023.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 5 – Property and Equipment
Property and equipment consisted of the following:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Computer equipment | |
$ | 231,767 | | |
$ | 231,767 | |
| Office equipment | |
| 65,221 | | |
| 65,221 | |
| Furniture and fixtures | |
| 74,202 | | |
| 74,202 | |
| | |
| 371,189 | | |
| 371,189 | |
| Less accumulated depreciation | |
| (316,463 | ) | |
| (302,893 | ) |
| Property and equipment, net | |
$ | 54,726 | | |
$ | 68,296 | |
Depreciation expense related to property and
equipment was $13,570 and $25,046 during the six months ended June 30, 2024 and 2023, respectively.
Note 6 – Other Current Liabilities
Other current liabilities consisted of the following:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Sales returns and allowances | |
$ | 56,203 | | |
$ | 40,492 | |
| Accrued COIN liability | |
| 3,077,677 | | |
| 3,060,330 | |
| Total | |
$ | 3,133,879 | | |
$ | 3,100,823 | |
Note 7 – Stock Based Compensation
2016 Equity Incentive Plan, as Amended
In June 2016,
the Company adopted the 2016 Equity Incentive Plan (as amended as of the date hereof, the “2016 Equity Incentive Plan”) and
authorized the issuance of options for up to 3,025,900 shares of the Company’s Class A Common Stock that may be granted to
directors, employees, and key consultants thereunder. In March 2018, the Company approved an amendment to the 2016 Equity Incentive
Plan, increasing the aggregate number of shares of Class A Common Stock reserved for issuance thereunder to 25,000,000. In
January 2023, the Company approved an amendment to the 2016 Equity Incentive Plan, further increasing the aggregate number of shares
of Class A Common Stock reserved for issuance thereunder to 45,000,000, all of which are issuable as stock options. The stock options
granted under the 2016 Equity Incentive Plan are exercisable at no less than the fair market value of the underlying shares on the date
of grant. Generally, one quarter of the stock options vest one year after the vesting commence date with the remainder vesting 1/36th
per month thereafter. Stock options generally have a term of 10 years.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 7 – Stock Based Compensation (cont’d)
The following table summarizes the Company’s
stock option activity:
| | |
Number
of
Shares | | |
Weighted
Average
Exercise
Price ($) | | |
Weighted
Average
Remaining
Contractual
Terms
(Years) | |
| Outstanding at December 31, 2022 | |
| 17,369,552 | | |
| 0.63 | | |
| | |
| Granted | |
| 2,565,000 | | |
| 0.66 | | |
| | |
| Forfeited | |
| (10,714 | ) | |
| 1.13 | | |
| | |
| Outstanding at December 31, 2023 | |
| 19,923,838 | | |
| 0.75 | | |
| 6.74 | |
| Granted | |
| 72,500 | | |
| 1.00 | | |
| | |
| Outstanding at June 30, 2024 | |
| 19,996,338 | | |
| 0.75 | | |
| 6.24 | |
| Exercisable at June 30, 2024 | |
| 15,893,494 | | |
| 0.73 | | |
| | |
| Total unvested or expected to vest | |
| 4,102,844 | | |
| 0.86 | | |
| | |
The following table summarizes unvested stock options:
| | |
Number
of
Shares | | |
Fair
Value Per
Share on Grant
Date ($) |
| Non-vested at December 31, 2022 | |
| 4,658,692 | | |
0.00 - 0.80 |
| Granted | |
| 2,565,000 | | |
0.62 |
| Vested | |
| (2,279,777 | ) | |
0.00 - 0.80 |
| Forfeited | |
| (10,714 | ) | |
0.00
- 0.00 |
| Non-vested at December 31, 2023 | |
| 4,933,200 | | |
0.00 - 0.80 |
| Granted | |
| 72,500 | | |
0.20 |
| Vested | |
| (902,857 | ) | |
0.00
- 0.80 |
| Non-vested at June 30, 2024 | |
| 4,102,843 | | |
0.00
- 0.80 |
Total stock-based
compensation related to the issuance of stock options exercisable for shares of Class A Common Stock was $646,449 and $658,114 during
the six months ended June 30, 2024 and 2023, respectively.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 7 – Stock Based Compensation (cont’d)
The following table summarizes the assumptions
used by the Company for calculating the fair value of the stock options and warrants using the Black-Scholes valuation model:
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Stock Option assumptions: | |
| | | |
| | |
| Risk-free interest rate | |
| 4.08 | % | |
| 4.49 | % |
| Expected volatility of Common Stock | |
| 157 | % | |
| 159 | % |
| Dividend yield | |
| 0 | % | |
| 0 | % |
| Expected term (in years) | |
| 6.25 | | |
| 6.25 | |
Note 8 - XYO Proxy Token Plan
On July 31, 2018, the Company adopted the
2018 Proxy Token Plan pursuant to which proxy token awards (“Proxy Tokens”) may be authorized and granted to the Company’s
executive officers, directors, employees, and key consultants. The value of the Proxy Tokens is tied to the value of the Company’s
native XYO Token at the time of vesting, and the Proxy Tokens vest pursuant to a vesting schedule as determined by the Board. Payments
made in respect of vested Proxy Tokens will be made, as determined by the Board, in either (i) cash equal to the value of such Proxy
Tokens, or (ii) a number of XYO Tokens with a value equal to the value of such Proxy Tokens.
The table below
shows the Proxy Tokens issued and vested during the six months ended June 30, 2024 and the twelve months ended December 31,
2023:
| | |
Number
of Proxy
Tokens | | |
Weighted
Average
Exercise Price | |
| Outstanding at December 31, 2022 | |
| 130,586,887 | | |
$ | 0.0794 | |
| Granted | |
| 132,000,000 | | |
| 0.0055 | |
| Forfeited | |
| (329,670 | ) | |
| 0.1000 | |
| Outstanding at December 31, 2023 | |
| 262,257,217 | | |
$ | 0.0422 | |
| Granted | |
| 12,000,000 | | |
| 0.0047 | |
| Exercised | |
| (2,000,000 | ) | |
| 0.0055 | |
| Forfeited | |
| (7,420,000 | ) | |
| 0.0064 | |
| Outstanding at June 30, 2024 | |
| 264,837,217 | | |
$ | 0.0418 | |
| Exercisable at June 30, 2024 | |
| 141,825,722 | | |
$ | 0.0478 | |
| Total vested or expected to vest | |
| 123,011,495 | | |
$ | 0.0349 | |
The proxy tokens are tied to an internally developed
intangible asset, the XYO Token, and therefore no value has been ascribed to them. As of June 30, 2024 and December 31, 2023,
respectively, the Company recognized no provisional liability from the Proxy Token Plan.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 9 - XYO Warrants
In 2019, the
Company issued XYO Token warrants to consultants. The warrants enable the holders thereof to purchase XYO Tokens at a fixed price
for up to 10 years. These warrants were deemed to be a form of additional compensation and an obligation, rather than equity,
however, as the warrants are tied to an internally developed intangible asset, the XYO Token. Therefore, no value has been ascribed
to them. As of June 30, 2024 and December 31, 2023, respectively, the Company recognized no provisional liability from the
XYO Warrants granted. The Company had 13 and 13 outstanding warrants for a total of 258,387,376 and 312,387,376 XYO tokens
as of June 30, 2024 and December 31, 2023, respectively. The Company paid out 36,905,433 XYO tokens under the XYO warrant
plan during the six months ended June 30, 2024.
Note 10 – Right of use asset and Lease liability
The Company adopted Accounting Standards Codification
842 – Leases (“ASC 842”) effective January 1, 2019. The Company determines if an arrangement is or contains a
lease at inception by assessing whether the arrangement contains an identified asset and whether we have the right to control the identified
asset. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease. Lease liabilities are recognized at the lease commencement date based on the present value
of the future lease payments over the lease term. Right of use assets are based on the measurement of the lease liability and also include
any lease payments made prior to or on lease commencement and exclude lease incentives and initial direct costs incurred, as applicable.
In addition, the Company has chosen, as an accounting policy election by class of underlying asset, not to separate non-lease components
from the associated lease for all its leased asset classes. The Company determined to treat lease costs with an original maturity of
less than one year as short-term lease costs and did not record a right-of-use asset or related lease liability for these leases, but
rather continued to record rent expense for the six months ended June 30, 2024 and 2023, respectively.
The Company did not extend its lease for its
office and warehouse location at 1405 30th St, Suite A, San Diego, California 92154, and the lease ended as of June 30, 2024.
Therefore, the Company did not recognize a right of use asset or lease liability in connection to with this lease as of June 30,
2024.
The Company entered into a new lease agreement
for an office location at 740 13th Street #224, San Diego, California 92101, which commenced on July 1, 2024. The Company did not
recognize a right of use asset or lease liability in connection with this lease as of June 30, 2024. However, the Company recognized
a right of use asset and lease liability of $135,605 as of July 1, 2024.
Operating lease right of use assets and operating
lease liabilities relating to the operating leases reported are as follows:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Right of use asset | |
$ | — | | |
$ | 40,570 | |
| Lease liability | |
$ | — | | |
$ | (42,354 | ) |
The weighted average discount rate used to calculate
the carrying value of the right of use assets and lease liabilities for location 1405 30th St, Suite A, San Diego, California 92154
lease was 6.8% as this was consistent with the Company’s incremental borrowing rate. The remaining right-of-use asset and lease
liability expired on June 30, 2024. The weighted average discount rate used to calculate the carrying value of the right of use
assets and lease liabilities for the 740 13th Street #224, San Diego, California 92101 lease is 14.1%, consistent with the Company’s
current incremental borrowing rate.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 10 – Right of use asset and Lease liability (cont’d)
The Company did
not recognize any rent expenses during the first six months ended June 30, 2024, while rent expenses were $239 in the six
months ended June 30, 2023. The Company also recorded $40,570 and $38,969 of amortization of right of use asset for six months ended
June 30, 2024 and 2023, respectively.
Note 11 – Stock Issuance and Stocks Payable
In the years ended December 31, 2019, and
2018, the Company received proceeds from the sale of certain shares of its Class A Common Stock. For some of these sales, the Company
did not receive the necessary paperwork from the stock purchasers and had in turn not surrendered documentation to its transfer agent
nor issued shares as of each respective year end. In connection with the receipt of proceeds from such sales, the Company had recognized
$1,392,760 and $1,392,760 in shares of Class A Common Stock payable as an obligation on the balance sheets as of June 30, 2024
and December 31, 2023, respectively.
Note 12 – Notes Payable
Disaster
Loan – In April 2020, the Company received an Economic Injury Disaster Loan (“EIDL”) and
an Emergency Grant from the Small Business Administration authorized under the Coronavirus Aid, Relief, and Economic Security Act. The
Company received funds in the amount of $498,281 in April 2020. EIDL proceeds may be used to cover a wide array of working capital
and normal operating expenses, such as continuation to health care benefits, rent, utilities, and fixed debt payments. As of June 30,
2024 and December 31, 2023, the Company had $482,051 and $487,624 outstanding on the EIDL loan, respectively. The EIDL accrues interest
at 3.75% per annum and matures 30 years after the grant date with interest payments starting twelve months after the issuance date of
the EIDL. The Company recognized interest expense related to the EIDL of $9,049 and $9,244 for the six months ended June 30, 2024
and 2023, respectively.
Note 13 - Litigation
As of each of June 30, 2024 and December 31,
2023, the Company had not accounted for any litigation provisions, including any litigation provisions related to the SEC subpoena and
the subsequent federal district court complaint. This is because the Company is not a party to the SEC's action, and the complaint does
not allege that the Company or any of its personnel violated the federal securities laws.
Note 14 – Stockholders’ Deficit
Stockholders’ Deficit
The Company has
authorized the issuance of 160,000,000 shares of capital stock, consisting of 90,000,000 shares of Class A Common Stock, $0.0001
par value per share, 40,000,000 shares of Class B Common Stock, $0.0001 par value per share, and 30,000,000 shares of undesignated
preferred stock, $0.0001 par value per share. Holders of Class A Common Stock and Class B Common Stock have identical
rights, including liquidation preferences, except that the holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to 10 votes per share on all matters submitted for a stockholder vote.
The Company did not convert any shares payable
to equity during the six months ended June 30, 2024 and 2023.
Public Offering
The Company did
not sell any shares of Class A Common Stock during the six months ended June 30, 2024 and 2023.
Note 15 – Related Party Transactions
There were no related party transactions during
the six months ended June 30, 2024 and 2023.
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 16 – Income Taxes
Income Tax expenses are calculated as follows:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2024 | | |
2023 | |
| Current | |
| | |
| |
| Federal | |
$ | 5,849 | | |
$ | 70,000 | |
| State | |
| 3,948 | | |
| 1,451 | |
| | |
$ | 9,797 | | |
$ | 71,451 | |
| Deferred | |
| | | |
| | |
| Federal | |
$ | 270,504 | | |
$ | 55,839 | |
| State | |
| 27,128 | | |
| (1,589 | ) |
| Change in valuation
allowance | |
| (297,633 | ) | |
| (54,251 | ) |
| Income tax expense | |
$ | 9,798 | | |
$ | 71,451 | |
A reconciliation of income tax expense computed
at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:
| | |
As of | |
| | |
June 30, | | |
June 30, | |
| | |
2024 | | |
2023 | |
| Federal income tax expense at statutory rate | |
$ | (127,048 | ) | |
$ | (311,258 | ) |
| State income tax (net of federal benefit) | |
| 30,247 | | |
| (29,253 | ) |
| Permanent differences | |
| 403,495 | | |
| (275,101 | ) |
| Effect of federal research credits | |
| – | | |
| (29,287 | ) |
| True-up | |
| – | | |
| 115,377 | |
| Deferred adjustment | |
| 735 | | |
| – | |
| Change in valuation allowance | |
| (297,633 | ) | |
| 533,307 | |
| Total | |
$ | 9,798 | | |
$ | 3,785 | |
XY Labs, Inc.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
Note 16 – Income Taxes (cont’d)
Deferred taxes are recognized for temporary differences
between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s
deferred tax assets are comprised of the following:
| | |
As of | |
| | |
June 30, | | |
December 31, | |
| | |
2023 | | |
2023 | |
| Deferred tax assets: | |
| | | |
| | |
| Timing differences of deductions | |
$ | 2,854,934 | | |
$ | 2,620,455 | |
| Net Operating Losses carry forwards | |
| 1,802,663 | | |
| 2,292,228 | |
| Capital Loss | |
| – | | |
| – | |
| Tax Credit carry forwards | |
| 688,582 | | |
| 731,128 | |
| Total deferred assets | |
| 5,346,178 | | |
| 5,643,811 | |
| Less valuation allowance | |
| (5,346,178 | ) | |
| (5,643,811 | ) |
| Total | |
$ | – | | |
$ | – | |
As of June 30, 2024, the Company had Federal
and state net operating loss carryforwards for income tax purposes of approximately $7.67 million, which can be carried forward indefinitely.
Under the provisions of the Internal Revenue
Code, the net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service
and state tax authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of
certain cumulative changes in the ownership interest of significant stockholders over a three-year period more than 50%, as defined under
Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions. This could limit the amount of
tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation
is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect
the limitation in future years. The Company has completed financing since May 2016 which may have resulted in a change in control
as defined by Sections 382 and 383 of the Internal Revenue Code or could result in a change in control in the future.
The Company will recognize interest and penalties
related to uncertain tax positions in income tax expense. As of June 30, 2024 and December 31, 2023, the Company had no accrued
interest or penalties related to uncertain tax positions and no amounts have been recognized in the Company’s statements of operations.
Item 4. EXHIBITS
Exhibit
Number |
|
Description |
| |
|
|
| 2.1 |
|
Certificate
of Incorporation of the Company (previously filed as Exhibit 2.1 to the Preliminary Offering Circular filed by the Company on June 17,
2016) |
| |
|
|
| 2.2 |
|
Certificate
of Amendment of Certificate of Incorporation of the Company, dated November 2, 2018 (previously filed as Exhibit 2.2 to the
Form 1-A filed by the Company on December 10, 2018) |
| |
|
|
| 2.3 |
|
Certificate
of Amendment of Certificate of Incorporation of the Company, dated May 3, 2021 (previously filed as Exhibit 2.3 to the Form 1-SA
filed by the Company on September 28, 2021) |
| |
|
|
| 2.4 |
|
Certificate of Amendment to
Certificate of Incorporation of the Company, dated January 18, 2023 (previously filed as Exhibit 2.1 to the Current Report
on Form 1-U filed by the Company on February 6, 2023) |
| |
|
| 2.5 |
|
Amended
and Restated Bylaws of the Company, as currently in effect |
| |
|
|
| 6.1 |
|
2016
Equity Incentive Plan, as amended |
SIGNATURES
Pursuant to the requirements of Regulation A,
the issuer has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| |
|
XY Labs, Inc. |
| |
|
|
| |
|
By: |
/s/
Arie Trouw |
| |
|
|
|
| |
|
Name: |
Arie Trouw |
| |
|
|
|
| |
|
Title: |
Chairman and Chief Executive
Officer |
| |
|
|
|
| |
|
Date: |
September 30, 2024 |
Pursuant to the requirements of Regulation A,
this report has been signed below by the following persons on behalf of the issuer and in the capacities and on the dates indicated.
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| /s/ Arie
Trouw |
|
Chairman and Chief Executive Officer |
|
September 30, 2024 |
| Arie Trouw |
|
(Principal executive officer and principal financial officer) |
|
|
Exhibit 2.5
BYLAWS
OF
XY LABS, INC.,
a Delaware corporation
TABLE OF CONTENTS
| ARTICLE I |
OFFICES |
1 |
| Section 1. |
Registered Office |
1 |
| Section 2. |
Other Offices |
1 |
| |
|
|
| ARTICLE II |
CORPORATE SEAL |
1 |
| Section 3. |
Corporate Seal |
1 |
| |
|
|
| ARTICLE III |
STOCKHOLDERS’ MEETINGS |
1 |
| Section 4. |
Place of Meetings |
1 |
| Section 5. |
Annual Meeting |
2 |
| Section 6. |
Special Meetings |
3 |
| Section 7. |
Notice of Meetings |
4 |
| Section 8. |
Quorum |
5 |
| Section 9. |
Adjournment and Notice of Adjourned Meetings |
5 |
| Section 10. |
Voting Rights |
5 |
| Section 11. |
Joint Owners of Stock |
6 |
| Section 12. |
List of Stockholders |
7 |
| Section 13. |
Nominations of Persons for Election to the Board |
7 |
| Section 14. |
Action Without a Meeting |
8 |
| Section 15. |
Organization |
9 |
| |
|
|
| ARTICLE IV |
DIRECTORS |
10 |
| Section 16. |
Number |
10 |
| Section 17. |
Powers |
10 |
| Section 18. |
Term of Office |
10 |
| Section 19. |
Vacancies |
11 |
| Section 20. |
Resignation |
11 |
| Section 21. |
Removal |
11 |
| Section 22. |
Meetings |
11 |
| Section 23. |
Quorum and Voting |
12 |
| Section 24. |
Action Without Meeting |
13 |
| Section 25. |
Fees and Compensation |
13 |
| Section 26. |
Committees |
13 |
| Section 27. |
Organization |
14 |
| |
|
|
| ARTICLE V |
OFFICERS |
14 |
| Section 28. |
Officers Designated |
14 |
| Section 29. |
Tenure and Duties of Officers |
14 |
| Section 30. |
Delegation of Authority |
15 |
| Section 31. |
Resignations |
16 |
| Section 32. |
Removal |
16 |
| |
|
|
| ARTICLE VI |
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION |
16 |
| Section 33. |
Execution of Corporate Instruments |
16 |
| Section 34. |
Voting of Securities Owned by the
Corporation |
17 |
| |
|
|
| ARTICLE VII |
SHARES OF STOCK |
17 |
| Section 35. |
Uncertificated Shares |
17 |
| Section 36. |
Transfers |
17 |
| Section 37. |
Fixing Record Dates |
17 |
| Section 38. |
Registered Stockholders |
18 |
| |
|
|
| ARTICLE VIII |
OTHER SECURITIES OF THE CORPORATION |
18 |
| Section 39. |
Execution of Other Securities |
18 |
| |
|
|
| ARTICLE IX |
DIVIDENDS |
19 |
| Section 40. |
Declaration of Dividends |
19 |
| Section 41. |
Dividend Reserve |
19 |
| |
|
|
| ARTICLE X |
FISCAL YEAR |
19 |
| Section 42. |
Fiscal Year |
19 |
| |
|
|
| ARTICLE XI |
INDEMNIFICATION |
19 |
| Section 43. |
Indemnification |
19 |
| |
|
|
| ARTICLE XII |
NOTICES |
23 |
| Section 44. |
Notices |
23 |
| |
|
|
| ARTICLE XIII |
AMENDMENTS |
24 |
| Section 45. |
Amendments |
24 |
| |
|
|
| ARTICLE XIV |
LOANS TO OFFICERS |
24 |
| Section 46. |
Loans to Officers |
24 |
| |
|
|
| ARTICLE XV |
FORUM FOR ADJUDICATION OF DISPUTES |
25 |
| Section 47. |
Forum for Adjudication of Disputes |
25 |
| |
|
|
| ARTICLE XVI |
ARBITRATION |
25 |
| Section 48. |
Procedures for Arbitration of Disputes |
25 |
| Section 49. |
Arbitrators |
25 |
| Section 50. |
Place of Arbitration |
26 |
| Section 51. |
Discovery |
26 |
| Section 52. |
Awards |
26 |
| Section 53. |
Costs and Expenses |
26 |
| Section 54. |
Final and Binding |
26 |
| Section 55. |
Miscellaneous |
26 |
AMENDED AND RESTATED
BYLAWS
OF
XY LABS, INC.,
a Delaware corporation
ARTICLE I
OFFICES
Section 1. Registered
Office. The registered office of XY Labs, Inc. (the “Corporation”) in the State of Delaware shall be as stated
in the Corporation’s Certificate of Incorporation, as amended and restated from time to time (the “Certificate of Incorporation”).
Section 2. Other
Offices. The Corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the
board of directors of the Corporation (the “Board”), and may also have offices at such other places, both within and
without the State of Delaware, as the Board may from time to time determine or the business of the Corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate
Seal. The Board may adopt a corporate seal. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed
or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS’ MEETINGS
Section 4. Place
of Meetings. Meetings of the stockholders of the Corporation may be held at such place, either within or without the State of Delaware,
as may be determined from time to time by the Board. The Board may, in its sole discretion, determine that the meeting shall not be held
at any place, but may instead be held solely by means of remote communication as provided under the Delaware General Corporation Law
(the “DGCL”).
Section 5. Annual
Meeting.
(a) The
annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated from time to time by the Board. Nominations of persons
for election to the Board and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders: (i) pursuant to the Corporation’s notice of a meeting of stockholders; (ii) by
or at the direction of the Board; or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in the following paragraph, who is entitled to vote at the meeting and who complied with the notice procedures
set forth in Section (b) of these Bylaws.
(b) At
an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting.
For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of
Section (a) of these Bylaws, (i) the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation, (ii) such other business must be a proper matter for stockholder action under the DGCL, (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a
Solicitation Notice (as defined in this Section (b)), such stockholder or beneficial owner must, in the case of a proposal,
have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and
form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial
owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have
included in such materials the Solicitation Notice, and (iv) if no Solicitation Notice relating thereto has been timely provided
pursuant to this section, the stockholder or beneficial owner proposing such business or nomination must not have solicited a number
of proxies sufficient to have required the delivery of such a Solicitation Notice under this Section 5. To be timely, a stockholder’s
notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business
on the 90th day nor earlier than the close of business on the 120th
day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary
of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close
of business on the 120th day prior to such annual meeting and not later than the close of business
on the later of the 90th day prior to such annual meeting or the 10th
day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement
of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.
Such stockholder’s notice shall set forth: (A) as to each person whom the stockholder proposed to nominate for election or
reelection as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election
of directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the “1934 Act”) and Rule 14a-11 thereunder (including such person’s written consent
to being named in the proxy statement as a nominee and to serving as a director if elected); (B) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any,
on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s
books, and of such beneficial owner, (ii) the class and number of shares of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or beneficial owner intends to deliver
a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Corporation’s voting
shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders
of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation
Notice”).
(c) Notwithstanding
anything in the second sentence of Section (b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the
size of the increased Board made by the Corporation at least 100 days prior to the first anniversary of the preceding year’s annual
meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices
of the Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(d) Only
such persons who are nominated in accordance with the procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 5. Except as otherwise provided by law, the Chairman of the meeting shall have the
power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as
the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance
with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting
and shall be disregarded.
(e) Notwithstanding
the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations
promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation proxy statement pursuant to Rule 14a-8 under the 1934 Act.
(f) For
purposes of this Section 5, “public announcement” shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special
Meetings. Special meetings of the stockholders of the Corporation may be called for any purpose or purposes by (i) the Chairman
of the Board; (ii) the Chief Executive Officer; (iii) the Board pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption); or (iv) by the holders of shares entitled to cast not less than 10% of the votes
at the meeting, and shall be held at such place, on such date, and at such time as the Board shall fix.
Section 7. Notice
of Meetings.
(a) In
General. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, notice, given in writing or by electronic
transmission, of each meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings,
the purpose or purposes of the meeting, and the means of remote communications, if any, by which stockholders and proxyholders may be
deemed to be present in person and vote at any such meeting; except that where the matter to be acted on is a merger or consolidation
of the Corporation or a sale, lease or exchange of all or substantially all of its assets, such notice shall be given not less than 20
nor more than 60 days prior to such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed
to the stockholder at such stockholder’s address as it appears on the records of the Corporation. Notice of the time, place, if
any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof or by electronic
transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in
person, by remote communication, if applicable, or by proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given. If at any meeting action is proposed to be taken which, if taken, would entitle stockholders fulfilling the requirements
of Section 262(d) of the DGCL to an appraisal of the fair value of their shares, the notice of such meeting shall contain a
statement of that purpose and to that effect and shall be accompanied by a copy of that statutory section.
(b) By
Electronic Transmission. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice
to stockholders given by the Corporation under the DGCL, the Certificate of Incorporation or these Bylaws shall be effective if given
by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable
by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable
to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent, and (ii) such
inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent or other person responsible
for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not
invalidate any meeting or other action. Notice given pursuant to this subparagraph (b) shall be deemed given: (1) if by facsimile
telecommunication, when directed to a number at which the stockholder has consented to receive notice; (2) if by electronic mail,
when directed to an electronic mail address at which the stockholder has consented to receive notice; (3) if by a posting on an
electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting
and (B) the giving of such separate notice; and (4) if by any other form of electronic transmission, when directed to the stockholder.
An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has
been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
Section 8.
Quorum. At all meetings of stockholders, except where otherwise provided by statute, the Certificate of Incorporation or these
Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of outstanding shares
representing a majority of the voting power entitled to vote shall constitute a quorum for the transaction of business. Shares, the voting
of which at said meeting have been enjoined, or which for any reason cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at said meeting. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either
by the chairman of the meeting or by vote of the holders of outstanding shares representing a majority of the voting power represented
thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at
which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders
to leave less than a quorum. Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, in all matters
other than the election of directors, the affirmative vote of a majority of the holders of outstanding shares representing a majority
of the voting power present in person, by remote communication, if applicable, or represented by proxy duly authorized at the meeting
and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by statute, the
Certificate of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person,
by remote communication, if applicable, or represented by proxy duly authorized at the meeting and entitled to vote generally on the
election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute,
the Certificate of Incorporation or these Bylaws, outstanding shares representing a majority of the voting power of such class or classes
or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum
entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute, the Certificate of Incorporation
or these Bylaws, the affirmative vote of outstanding shares representing a majority (plurality, in the case of the election of directors)
of the voting power of shares of such class or classes or series present in person, by remote communication, if applicable, or represented
by proxy at the meeting shall be the act of such class or classes or series.
Section 9.
Adjournment and Notice of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time
to time either by the chairman of the meeting or by the vote of outstanding shares representing a majority of the voting power present
in person, by remote communication, if applicable, or represented by proxy. When a meeting is adjourned to another time or place, if
any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original
meeting. If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting,
a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
Section 10. Voting
Rights.
(a) For
the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the Corporation on the record date, as provided in Section 12
of these Bylaws, shall be entitled to vote at any meeting of stockholders.
(b) Every
person entitled to vote or execute consents shall have the right to do so either in person, by remote communication, if applicable, or
by an agent or agents authorized by a proxy granted in accordance with Delaware law, which proxy shall be filed with the Secretary of
the Corporation at or before the meeting at which it is to be used. An agent so appointed need not be a stockholder. No proxy shall be
voted after three years from its date of creation unless the proxy provides for a longer period. Unless and until voted, every proxy
shall be revocable at the pleasure of the person who executed it or of his or her legal representatives or assigns, except in those cases
where an irrevocable proxy permitted by statute has been given.
(c) Without
limiting the manner in which a stockholder may authorize an agent or agents to act for him as proxy pursuant to subsection (b) of
this section, the following shall constitute a valid means by which a stockholder may grant such authority:
(1) A
stockholder may execute a writing authorizing another person or persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed
to such writing by any reasonable means including, but not limited to, by facsimile signature.
(2) A
stockholder may authorize another person or persons to act for him or her as proxy by transmitting or authorizing the transmission of
a telephone, telegram, cablegram or other means of electronic transmission to the person who will be the holder of the proxy or to a
proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the
proxy to receive such transmission, provided that any such telephone, telegram, cablegram or other means of electronic transmission must
either set forth or be submitted with information from which it can be determined that the telephone, telegram, cablegram or other electronic
transmission was authorized by the stockholder. Such authorization can be established by the signature of the stockholder on the proxy,
either in writing or by a signature stamp or facsimile signature, or by a number or symbol from which the identity of the stockholder
can be determined, or by any other procedure deemed appropriate by the Inspectors (as defined in Section 15(c)) or other
persons making the determination as to due authorization. If it is determined that such telegrams, cablegrams or other electronic transmissions
are valid, the Inspectors or, if there are no Inspectors, such other persons making that determination shall specify the information
upon which they relied.
(d) Any
copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to subsection (c) of
this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original
writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section 11.
Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or
more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary
and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their
acts with respect to voting shall have the following effect: (a) if only one votes, his act binds all; (b) if more than one
votes, the act of the majority so voting binds all; (c) if more than one votes, but the vote is evenly split on any particular matter,
each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided
in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests,
a majority or even-split for the purpose of subsection (c) shall be a majority or even-split in interest.
Section 12.
List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation need
not include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination
of any stockholder, for any purpose germane to the meeting, on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of the meeting, or during ordinary business hours, at the principal
place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network,
the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the
meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication,
then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible
electronic network, and the information required to access such list shall be provided with the notice of the meeting.
Section 13.
Nominations of Persons for Election to the Board. In addition to any other applicable requirements, only persons who are nominated
in accordance with the following procedures shall be eligible for election as directors. Nominations of persons for election to the Board
may be made at a meeting of stockholders by or at the direction of the Board, by any nominating committee or person appointed by the
Board or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section 13. Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must
be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 45 days nor more than 75
days prior to the date on which the Corporation first mailed its proxy materials for the previous year’s annual meeting of stockholders
(or the date on which the Corporation mails its proxy materials for the current year if during the prior year the Corporation did not
hold an annual meeting or if the date of the annual meeting was changed more than 30 days from the prior year). Such stockholder’s
notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director,
(i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of the Corporation which are beneficially owned by the person, and (iv) any other
information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to
Rule 14a under the 1934 Act; and (b) as to the stockholder giving the notice, (i) the name and record address of the stockholder,
and (ii) the class and number of shares of the Corporation which are beneficially owned by the stockholder. The Corporation may
require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility
of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth herein. These provisions shall not apply to nomination of any persons entitled
to be separately elected by holders of preferred stock. The Chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
Section 14. Action
Without a Meeting.
(a) Unless
otherwise provided in the Certificate of Incorporation, any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, or by electronic transmission, setting forth the action so taken, shall
be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were present and voted.
(b) Every
written consent or electronic transmission shall bear the date of signature of each stockholder who signs the consent, and no written
consent or electronic transmission shall be effective to take the corporate action referred to therein unless, within 60 days of the
earliest dated consent delivered to the Corporation in the manner herein required, written consents or electronic transmissions signed
by a sufficient number of stockholders to take action are delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded. Delivery made to a corporation’s registered office shall be by hand or by certified or
registered mail, return receipt requested.
(c) Prompt
notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders
who have not consented in writing or by electronic transmission and who, if the action had been taken at a meeting, would have been entitled
to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of
stockholders to take action were delivered to the Corporation as provided in Section 228(c) of the DGCL. If the action which
is consented to is such as would have required the filing of a certificate under any section of the DGCL if such action had been voted
on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required
by such section concerning any vote of stockholders, that written consent has been given in accordance with Section 228 of the DGCL.
(d) A
telegram, cablegram or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder,
or other person authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes
of this section, provided that any such telegram, cablegram or other electronic transmission sets forth or is delivered with information
from which the Corporation can determine (i) that the telegram, cablegram or other electronic transmission was transmitted by the
stockholder or proxyholder or by a person or persons authorized to act for the stockholder and (ii) the date on which such stockholder,
proxyholder or authorized person or persons transmitted such telegram, cablegram or electronic transmission. The date on which such telegram,
cablegram or electronic transmission is transmitted shall be deemed to be the date on which such consent was signed. No consent given
by telegram, cablegram or other electronic transmission shall be deemed to have been delivered until such consent is reproduced in paper
form and until such paper form shall be delivered to the Corporation by delivery to its registered office in the state of Delaware, its
principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation’s registered office shall be made by hand or by certified or registered
mail, return receipt requested. Notwithstanding the foregoing limitations on delivery, consents given by telegram, cablegram or other
electronic transmission may be otherwise delivered to the principal place of business of the Corporation or to an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded if, to the extent and in the
manner provided by resolution of the Board. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted
or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy,
facsimile or other reproduction shall be a complete reproduction of the entire original writing.
Section 15. Organization.
(a) Chairman.
At every meeting of stockholders, the Chairman of the Board, or, if a Chairman has not been appointed or is absent, the Chief Executive
Officer, or, if the Chief Executive Officer is absent, the President, or, if the President is absent, a chairman of the meeting chosen
by outstanding shares representing a majority of the voting power entitled to vote, present in person or by proxy, shall act as chairman.
The Secretary, or, in his absence, an Assistant Secretary directed to do so by the Chief Executive Officer, shall act as secretary of
the meeting.
(b) Rules and
Regulations. The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairman of the
meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment
of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing
an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those
present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted
proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter
upon which the stockholders will vote at the meeting shall be announced at the meeting. No ballot, proxies or votes, nor any revocations
thereof or changes thereto, shall be accepted by the Inspectors after the closing of the polls unless the Court of Chancery upon application
by a stockholder shall determine otherwise. Unless and to the extent determined by the Board or the chairman of the meeting, meetings
of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.
(c) Inspectors
of Elections. The Board shall, in advance of any meeting of stockholders, appoint one or more inspectors (“Inspectors”)
to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate Inspectors (“Alternate
Inspectors”) to replace any Inspector who fails to act. If no Inspector or Alternate Inspector is able to act at a meeting
of stockholders, the person presiding at the meeting shall appoint one or more Inspectors to act at the meeting. Each Inspector, before
entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector with strict impartiality
and according to the best of his ability. The Inspectors shall (i) ascertain the number of shares outstanding and the voting power
of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes
and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination
by the Inspectors, and (v) certify their determination of the number of shares represented at the meeting and their count of all
votes and ballots. The Inspectors may appoint or retain other persons or entities to assist the Inspectors in the performance of the
duties of the Inspectors. In determining the validity and counting of proxies and ballots, the Inspectors shall be limited to an examination
of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Sections 211(e) or 212(c)(2) of
the DGCL, or any information provided pursuant to Section 211(a)(2)(B)(i) or (iii) thereof, ballots and the regular books
and records of the Corporation, except that the Inspectors may consider other reliable information for the limited purpose of reconciling
proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the
holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the Inspectors consider
other reliable information for the limited purpose permitted herein, the Inspectors at the time they make their certification pursuant
to (v) of this section shall specify the precise information considered by them including the person or persons from whom they obtained
the information, when the information was obtained, the means by which the information was obtained and the basis for the Inspectors’
belief that such information is accurate and reliable.
ARTICLE IV
DIRECTORS
Section 16.
Number. The authorized number of directors of the Corporation shall be fixed by the Board from time to time. Directors need not
be stockholders unless so required by the Certificate of Incorporation. If for any cause, the directors shall not have been elected at
an annual meeting, they may be elected as soon thereafter as convenient.
Section 17.
Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board, except
as may be otherwise provided by statute, the Certificate of Incorporation or these Bylaws.
Section 18.
Term of Office. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected by a plurality vote of the shares represented in person or by proxy at each annual meeting
of stockholders and entitled to vote on the election of directors. Elected directors shall hold office until the next annual meeting
and until their successors shall be duly elected and qualified or until their death, resignation or removal. No decrease in the number
of directors constituting the Board shall shorten the term of any incumbent director.
Section 19.
Vacancies. Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series
of Preferred Stock, any vacancies on the Board resulting from death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors shall, unless the Board determines by resolution that any
such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of
the directors then in office, even though less than a quorum of the Board. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s
successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under this Bylaw in the case of the
death, removal or resignation of any director, or if the stockholders fail at any meeting of stockholders at which directors are to be
elected to elect the number of directors then constituting the whole Board.
Section 20.
Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the
Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure
of the Board. If no such specification is made, it shall be deemed effective at the pleasure of the Board. When one or more directors
shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned,
shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated
and until his successor shall have been duly elected and qualified.
Section 21.
Removal. The Board or any director may be removed from office at any time, with or without cause, and a new director or directors
elected by a vote of stockholders holding outstanding shares representing a majority of the voting power entitled to vote at an election
of directors.
Section 22. Meetings.
(a) Annual
Meetings. The annual meeting of the Board shall be held immediately after the annual stockholders’ meeting and at the place
where such meeting is held or at the place announced by the Chairman at such meeting. No notice of an annual meeting of the Board shall
be necessary, and such meeting shall be held for the purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular
Meetings. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board may be held at any time
or date and at any place within or without the State of Delaware which has been designated by the Board and publicized among all directors,
either orally or in writing, including a voice-messaging system or other system designated to record and communicate messages, facsimile,
telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for a regular meeting of the
Board.
(c) Special
Meetings. Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board may be held at any time
and place within or without the State of Delaware whenever called by the Chairman of the Board or, if there is no Chairman of the Board,
by the Chief Executive Officer or by any of the directors.
(d) Meetings
by Electronic Communications Equipment. Any member of the Board, or of any committee thereof, may participate in a meeting by means
of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person at such meeting.
(e) Notice
of Special Meetings. Notice of the time and place of all special meetings of the Board shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or
telex, or by electronic mail or other electronic means, during normal business hours, at least 48 hours before the date and time of the
meeting, or sent in writing to each director by first class mail, postage prepaid, at least 120 hours before the date of the meeting.
Notice of any meeting may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived
by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
(f) Waiver
of Notice. The transaction of all business at any meeting of the Board, or any committee thereof, however called or noticed, or wherever
held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive
notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 23. Quorum
and Voting.
(a) Unless
the Certificate of Incorporation requires a greater number, a quorum of the Board shall consist of a majority of the exact number of
directors fixed from time to time by the Board in accordance with the Certificate of Incorporation; provided, however,
at any meeting, whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the
time fixed for the next regular meeting of the Board, without notice other than by announcement at the meeting.
(b) At
each meeting of the Board at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority
of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.
Section 24.
Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission
or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes
are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 25.
Fees and Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board, including,
if so approved, by resolution of the Board, a fixed sum and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board and at any meeting of a committee of the Board. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.
Section 26. Committees.
(a) Executive
Committee. The Board may appoint an Executive Committee to consist of one or more members of the Board. The Executive Committee,
to the extent permitted by law and provided in the resolution of the Board, shall have and may exercise all the powers and authority
of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting,
or recommending to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the Corporation.
(b) Other
Committees. The Board may, from time to time, appoint such other committees as may be permitted by law. Such other committees appointed
by the Board shall consist of one or more members of the Board and shall have such powers and perform such duties as may be prescribed
by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term.
The Board, subject to any requirements of any outstanding series of Preferred Stock, the provisions of subsections (a) or
(b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of
a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee
or from the Board. The Board may at any time for any reason remove any individual committee member and the Board may fill any committee
vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee,
and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting in the place of any such absent or disqualified member.
(d) Meetings.
Unless the Board shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this
Section 26 shall be held at such times and places as are determined by the Board, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special
meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called
by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special
meeting given in the manner provided for the giving of notice to members of the Board of the time and place of special meetings of the
Board. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived
by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Unless otherwise
provided by the Board in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of
any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting
at which a quorum is present shall be the act of such committee.
Section 27.
Organization. At every meeting of the directors, the Chairman of the Board, or, if a Chairman has not been appointed or is absent,
the Chief Executive Officer, or if the Chief Executive Officer is absent, the most senior officer (if also a director) or, in the absence
of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary,
or in his absence, any Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 28.
Officers Designated. The officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary and a Chief
Financial Officer (or Treasurer). The Board may also appoint a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries,
Assistant Treasurers, and such other officers and agents with such powers and duties as it or he shall deem necessary. The order of the
seniority of the Vice Presidents shall be in the order of their nomination unless otherwise determined by the Board. The Board may assign
such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of
the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers
of the Corporation shall be fixed by or in the manner designated by the Board.
Section 29. Tenure
and Duties of Officers.
(a) General.
All officers shall hold office at the pleasure of the Board and until their successors shall have been duly elected and qualified, unless
sooner removed. Any officer elected or appointed by the Board may be removed at any time by the Board. If the office of any officer becomes
vacant for any reason, the vacancy may be filled by the Board. Nothing in these Bylaws shall be construed as creating any kind of contractual
right to employment with the Corporation.
(b) Duties
of Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Corporation and when present
shall preside at all meetings of the stockholders, unless the Chairman of the Board of Directors has been appointed and is present. The
Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have
such other powers as the Board shall designate from time to time.
(c) Duties
of President. The President shall perform other duties commonly incident to the office and shall also perform such duties and have
such powers as the Board shall designate from time to time.
(d) Duties
of Vice Presidents. The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President
or whenever the office of President is vacant. The Vice Presidents shall perform other duties commonly incident to their office and shall
also perform such other duties and have such other powers as the Board or the President shall designate from time to time.
(e) Duties
of Secretary. The Secretary shall attend all meetings of the stockholders and of the Board and any committee thereof, and shall record
all acts and proceedings thereof in the minute book of the Corporation, which may be maintained in either paper or electronic form. The
Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board and
any committee thereof requiring notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly
incident to the office and shall also perform such other duties and have such other powers as the Board shall designate from time to
time. The Board may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of
the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other
duties and have such other powers as the Board shall designate from time to time.
(f) Duties
of Chief Financial Officer. The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in
a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required
by the Board. The Chief Financial Officer, subject to the order of the Board, shall have the custody of all funds and securities of the
Corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board shall designate from time to time. The Board may direct the Chief Financial Officer or
any Assistant Financial Officer to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Chief Financial Officer and Assistant Financial Officer shall perform other duties commonly incident to the
office and shall also perform such other duties and have such other powers as the Board shall designate from time to time.
Section 30. Delegation
of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding
any provision hereof.
Section 31.
Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission notice to the Board,
the Chief Executive Officer or the Secretary. Any such resignation shall be effective when received by the person or persons to whom
such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time.
Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation
shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.
Section 32. Removal.
Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors
in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS
AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 33. Execution
of Corporate Instruments.
(a) The
Board may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute
on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without
limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such
execution or signature shall be binding upon the Corporation.
(b) All
checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation
shall be signed by such person or persons as the Board shall authorize so to do.
(c) Unless
otherwise specifically determined by the Board or otherwise required by law, formal contracts of the Corporation, promissory notes, deeds
of trust, mortgages and other evidences of indebtedness of the Corporation, and other corporate instruments or documents requiring the
corporate seal, and certificates of shares of stock owned by the Corporation, shall be executed, signed or endorsed by the Chairman of
the Board (if there be such an officer appointed) or by the Chief Executive Officer; such documents may also be executed by the President,
any Vice President and by the Secretary or Chief Financial Officer or any Assistant Secretary or Assistant Financial Officer. All other
instruments and documents requiring the corporate signature but not requiring the corporate seal may be executed as aforesaid or in such
other manner as may be directed by the Board. Notwithstanding the foregoing provisions of this subsection, no officer, agent or employee
shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable
for any purpose or for any amount unless authorized or ratified by the Board or within the agency power of such officer, agent or employee.
(d) Execution
of any corporate instrument may be effected in such form, either manual, facsimile or electronic signature, as may be authorized by the
Board.
Section 34.
Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the Corporation
for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board or, in the absence of such authorization, by the Chairman of the Board (if there be such
an officer appointed), or by the Chief Executive Officer, the President or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 35. Uncertificated
Shares. The shares of the Corporation shall be uncertificated.
Section 36. Transfers.
(a) Transfers
of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly
authorized.
(b) The
Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock
of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders
in any manner not prohibited by the DGCL.
Section 37. Fixing
Record Dates.
(a) In
order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board, and which record date shall, subject to applicable law, not be more than 60 nor less than 10
days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice
is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned meeting.
(b) In
order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board
may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the
Board, and which date shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the
Board. Any stockholder of record seeking to have the stockholders authorize or take corporate action by written consent shall, by written
notice to the Secretary, request the Board to fix a record date. The Board shall promptly, but in all events within 10 days after the
date on which such a request is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board within
10 days of the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board is required by applicable law, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by
hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by
the Board is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without
a meeting shall be at the close of business on the day on which the Board adopts the resolution taking such prior action.
(c) In
order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which
the Board adopts the resolution relating thereto.
Section 38.
Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim
to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39.
Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation may be signed by the Chairman
of the Board (if there be such an officer appointed), the Chief Executive Officer, the President or any Vice President, or such other
person as may be authorized by the Board, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and
attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or an Assistant Financial Officer;
provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other
corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or
other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such
bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Chief Financial Officer
or an Assistant Financial Officer of the Corporation or such other person as may be authorized by the Board or bear imprinted thereon
the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before
the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of the Corporation.
ARTICLE IX
DIVIDENDS
Section 40.
Declaration of Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board pursuant to law at any regular or special meeting. Dividends may
be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable
law.
Section 41.
Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends
such sum or sums as the Board from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies,
or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board
shall think conducive to the interests of the Corporation, and the Board may modify or abolish any such reserve in the manner in which
it was created.
ARTICLE X
FISCAL YEAR
Section 42. Fiscal
Year. The fiscal year of the Corporation shall be fixed by resolution of the Board.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification.
(a) Directors
and Officers. The Corporation shall indemnify its directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the Corporation may modify the extent of such indemnification by individual
contracts with its directors and officers; and, provided, further, that the Corporation shall not be required to indemnify
any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification
is expressly required to be made by law, (ii) the proceeding
was authorized by the Board, (iii) such indemnification is provided by the Corporation, in its sole discretion, pursuant to the
powers vested in the Corporation under the DCGL or any other applicable law or (iv) such indemnification is required to be made
under subsection (d) of this Section 43.
(b) Officers.
The Corporation shall have power to indemnify its officers, employees and other agents as set forth in the DGCL or any other applicable
law. The Board shall have the power to delegate the determination of whether indemnification shall be given to any such person to such
officers or other persons as the Board shall determine.
(c) Expenses.
The Corporation shall 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 Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request therefor,
all expenses incurred by any director or officer in connection with such proceeding, provided, however, that, if the DGCL
requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such indemnitee, to repay all amounts
so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such
indemnitee is not entitled to be indemnified for such expenses under this Section 43 or otherwise. Expenses incurred by other
agents of the Corporation (or by the directors or officers not acting in their capacity as such, including service with respect to employee
benefit plans) may be advanced upon such terms and conditions as the Board deems appropriate. Any obligation to reimburse the Corporation
for expenses advances shall be unsecured and no interest shall be charged thereon. Notwithstanding the foregoing, unless otherwise determined
pursuant to paragraph (e) of this Bylaw, no advance shall be made by the Corporation to an officer of the Corporation (except
by reason of the fact that such officer is or was a director of the Corporation, 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
(i) by a majority vote of a quorum consisting of directors who were not parties to the proceeding, even if not a quorum, or (ii) by
a committee of such directors designated by a majority of such directors, even though less than a quorum, or (iii) if there are
no such directors, or such directors so direct, 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 Corporation.
(d) Enforcement.
Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under
this Bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between
the Corporation and the director or officer. Any right to indemnification or advances granted by this Bylaw to a director or officer
shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for
indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 45 days of request
therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting the claim. In connection with any claim for indemnification, the Corporation shall be entitled to raise as a defense to any
such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law
for the Corporation to indemnify the claimant for the amount claimed. The burden of proving such a defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board, independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the Corporation (including its
Board, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that claimant has not met the applicable standard of conduct.
(e) Non-Exclusivity
of Rights. The rights conferred on any person by this Bylaw shall not be exclusive of any other right that such person may have or
hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding
office. To the extent that any provision of the Certificate of Incorporation, agreement, or vote of the stockholders or disinterested
directors is inconsistent with these Bylaws, the provision, agreement, or vote shall take precedence, but only to the extent that the
provision, agreement, or vote provides greater rights to such person than the rights conferred on such person by this section. The Corporation
is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent not prohibited by the DGCL or any other applicable law.
(f) Survival
of Rights. The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(g) Insurance.
To the fullest extent permitted by the DGCL, or any other applicable law, the Corporation, upon approval by the Board, may purchase insurance
on behalf of any person required or permitted to be indemnified pursuant to this Bylaw.
(h) Settlement
of Claims. The Corporation shall not be liable to indemnify any director, officer, employee or other agent under this Bylaw for (a) any
amounts paid in settlement of any action or claim effected without the Corporation’s written consent, which consent shall not be
unreasonably withheld; or (b) any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense,
to participate in the defense of such action.
(i) Amendments.
Any amendment, repeal or modification of this Bylaw shall only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the Corporation.
(j) Subrogation.
In the event of payment under this Bylaw, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery
of the indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including
the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.
(k) No
Duplication of Payments. The Corporation shall not be liable under this Bylaw to make any payment in connection with any claim made
against the indemnitee to the extent he has otherwise actually received payment (under any insurance policy, agreement, vote, or otherwise)
of the amounts otherwise indemnifiable hereunder.
(l) Saving
Clause. If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation
shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section 43 shall be invalid due to the application
of the indemnification provisions of another jurisdiction, then the Corporation shall indemnify each director and officer to the full
extent under applicable law.
(m) Certain
Definitions. For the purposes of this Bylaw, the following definitions shall apply:
(1) The
term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(2) The
term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with
any proceeding.
(3) The
term the “corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee
or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(4) References
to a “director,” “executive officer,” “officer,” “employee,” or “agent” of
the Corporation shall include, without limitation, situations where such person is serving at the request of the Corporation as, respectively,
a director, executive officer, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other
enterprise.
(5) References
to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation”
shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services
by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred
to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice
to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 44 herein.
Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such
stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may
be by United States mail, facsimile, telegraph or telex or by electronic mail or other electronic means.
(b) Notice
to Directors. Any notice required to be given to any director may be given by the method stated in subsection (a), or as provided
for in ARTICLE IVSection 22 of these Bylaws. If such notice is not delivered personally, it shall be sent to such address
as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address
of such director.
(c) Affidavit
of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent
appointed with respect to the class of stock affected or other agent, specifying the name and address or the names and addresses of the
stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method
of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained. All notices given by mail,
as above provided, shall be deemed to have been given as at the time of mailing, and all notices given by means of electronic transmission
shall be deemed to have been given as at the sending time recorded by the electronic transmission equipment operator transmitting the
same.
(d) Methods
of Notice. It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but
one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in
respect of any other or others. The period or limitation of time within which any stockholder may exercise any option or right, or enjoy
any privilege or benefit, or be required to act, or within which any director may exercise any power or right, or enjoy any privilege,
pursuant to any notice sent him in the manner above provided, shall not be affected or extended in any manner by the failure of such
a stockholder or such director to receive such notice.
(e) Waiver
of Notice. Whenever any notice is required to be given under the provisions of controlling statutes, the Certificate of Incorporation
or these Bylaws, a waiver thereof in writing signed by the person or persons entitled to said notice, or a waiver by electronic transmission
by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
(f) Notice
to Person with Whom Communication Is Unlawful. Whenever notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the Corporation, to any person with whom communication is unlawful, the giving of such notice to such person
shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such
notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is
unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation
is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and
if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is
unlawful.
ARTICLE XIII
AMENDMENTS
Section 45.
Amendments. Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be repealed, altered or amended
or new Bylaws adopted by written consent of stockholders in the manner authorized by ARTICLE IIISection 14, or
at any meeting of the stockholders, either annual or special, by the affirmative vote of outstanding shares representing a majority of
the voting power entitled to vote at such meeting, unless a larger vote is required by these Bylaws or the Certificate of Incorporation.
Except as otherwise provided in the Certificate of Incorporation, the Board shall also have the authority to repeal, alter or amend these
Bylaws or adopt new Bylaws by unanimous written consent or at any annual, regular, or special meeting by the affirmative vote of a majority
of the whole number of directors, subject to the power of the stockholders to change or repeal such Bylaws and provided that the Board
shall not make or alter any Bylaws fixing the qualifications, classifications, or term of office of directors.
LOANS TO OFFICERS
Section 46.
Loans to Officers. The Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the Corporation or of its subsidiaries, including any officer or employee who is a director of the Corporation or its subsidiaries,
whenever, in the judgment of the Board, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. The
loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board shall
approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in these Bylaws shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the Corporation at common law or under any statute.
ARTICLE XV
FORUM FOR ADJUDICATION OF DISPUTES
Section 47.
Forum for Adjudication of Disputes. Unless the Corporation consents in writing to the selection of an alternative forum, the sole
and exclusive forum for (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting
a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s
stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (d) any
action asserting a claim governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the
Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware). Any person or entity purchasing
or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to
the provisions of this ARTICLE XV.
ARTICLE XVI
ARBITRATION
Section 48.
Procedures for Arbitration of Disputes. Any disputes, claims or controversies brought by or on behalf of any stockholder of the
Corporation (which, for purposes of this ARTICLE XVI, shall mean any stockholder of record or any beneficial owner of shares
of the Corporation, or any former stockholder of record or beneficial owner of shares of the Corporation), either on his, her or its
own behalf, on behalf of the Corporation or on behalf of any series or class of shares of the Corporation or stockholders of the Corporation
against the Corporation or any trustee, officer, manager, agent or employee of the Corporation, including disputes, claims or controversies
relating to the meaning, interpretation, effect, validity, performance or enforcement of the Declaration of Corporation or these Bylaws
(all of which are referred to as “Disputes”) or relating in any way to such a Dispute or Disputes shall, on the demand
of any party to such Dispute, be resolved through binding and final arbitration in accordance with the Commercial Arbitration Rules (the
“Rules”) of the American Arbitration Association (“AAA”) then in effect, except as those Rules may
be modified in this ARTICLE XVI. For the avoidance of doubt, and not as a limitation, Disputes are intended to include derivative
actions against trustees, officers, directors, managers, agents or employees of the Corporation and the Corporation and class actions
by stockholders against those individuals or entities and the Corporation. For the avoidance of doubt, a Dispute shall include a Dispute
made derivatively on behalf of one party against another party.
Section 49.
Arbitrators. There shall be three arbitrators. If there are only two parties to the Dispute, each party shall select one arbitrator
within 15 days after receipt by respondent of a copy of the demand for arbitration. Such arbitrators may be affiliated or interested
persons of such parties. If either party fails to timely select an arbitrator, the other party to the Dispute shall select the second
arbitrator who shall be neutral and impartial and shall not be affiliated with or an interested person of either party. If there are
more than two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand, shall each select, by the
vote of a majority of the claimants or the respondents, as the case may be, one arbitrator. Such arbitrators may be affiliated or interested
persons of the claimants or the respondents, as the case may be. If either all claimants or all respondents fail to timely select an
arbitrator then such arbitrator (who shall be neutral, impartial and unaffiliated with any party) shall be appointed by the parties who
have appointed the first arbitrator. The two arbitrators so appointed shall jointly appoint the third and presiding arbitrator (who shall
be neutral, impartial and unaffiliated with any party) within 15 days of the appointment of the second arbitrator. If the third arbitrator
has not been appointed within the time limit specified herein, then AAA shall provide a list of proposed arbitrators in accordance with
the Rules, and the arbitrator shall be appointed by AAA in accordance with a listing, striking and ranking procedure, with each party
having a limited number of strikes, excluding strikes for cause.
Section 50.
Place of Arbitration. The place of arbitration shall be determined pursuant to ARTICLE XV Section 47 unless
otherwise agreed by the parties.
Section 51.
Discovery. There shall be only limited documentary discovery of documents directly related to the issues in dispute, as may be
ordered by the arbitrators.
Section 52.
Awards. In rendering an award or decision (the “Award”), the arbitrators shall be required to follow the laws
of the State of Delaware (without regard to conflicts of law principles). Any arbitration proceedings or Award rendered hereunder and
the validity, effect and interpretation of this arbitration agreement shall be governed by the Federal Arbitration Act, 9 U.S.C. §1
et seq. The Award shall be in writing and may, but shall not be required to, briefly state the findings of fact and conclusions of law
on which it is based. Any monetary award shall be made and payable in U.S. dollars free of any tax, deduction or offset. The party against
which the Award assesses a monetary obligation shall pay that obligation on or before the 30th day following the date of the Award or
such other date as the Award may provide.
Section 53.
Costs and Expenses. Except as otherwise set forth in the Certificate of Incorporation or these Bylaws, or as otherwise agreed
between the parties, each party involved in a Dispute shall bear its own costs and expenses (including attorneys’ fees), and the
arbitrators shall not render an award that would include shifting of any such costs or expenses (including attorneys’ fees) or,
in a derivative case or class action, award any portion of the Corporation’s award to the claimant or the claimant’s attorneys.
Each party (or, if there are more than two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other
hand, respectively) shall bear the costs and expenses of its (or their) selected arbitrator and the parties (or, if there are more than
two parties to the Dispute, all claimants, on the one hand, and all respondents, on the other hand) shall equally bear the costs and
expenses of the third appointed arbitrator.
Section 54.
Final and Binding. An Award shall be final and binding upon the parties thereto and shall be the sole and exclusive remedy between
such parties relating to the Dispute, including any claims, counterclaims, issues or accounting presented to the arbitrators. Judgment
upon the Award may be entered in any court having jurisdiction. To the fullest extent permitted by law, no application or appeal to any
court of competent jurisdiction may be made in connection with any question of law arising in the course of arbitration or with respect
to any award made except for actions relating to enforcement of this agreement to arbitrate or any arbitral award issued hereunder and
except for actions seeking interim or other provisional relief in aid of arbitration proceedings in any court of competent jurisdiction.
Section 55.
Miscellaneous. This ARTICLE XVI. is intended to benefit and be enforceable by the stockholders, trustees, officers,
directors, managers, agents or employees of the Corporation and the Corporation, and shall be binding on the stockholders of the Corporation
and the Corporation, as applicable, and shall be in addition to, and not in substitution for, any other rights to indemnification or
contribution that such individuals or entities may have by contract or otherwise. Any person or entity purchasing or otherwise acquiring
any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this
ARTICLE XVI.
Exhibit 6.1
2016 EQUITY INCENTIVE PLAN,
AS AMENDED
XY LABS, INC.
2016 EQUITY INCENTIVE PLAN
ADOPTED BY BOARD OF DIRECTORS:
JUNE 2, 2016
APPROVED BY STOCKHOLDERS:
JUNE 2, 2016
AMENDED: MARCH 14,
2018
(a) Eligible
Stock Award Recipients. The persons eligible to receive Stock Awards are the Employees, Directors and Consultants of the Company
and its Affiliates.
(b) Available
Stock Awards. The purpose of the Plan is to provide a means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Class A Common Stock through the granting of the following Stock Awards: (i) Incentive
Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General
Purpose. The Company, by means of the Plan, seeks to retain the services of the group of persons eligible to receive Stock Awards,
to secure and retain the services of new members of this group and to provide incentives for such persons to exert maximum efforts for
the success of the Company and its Affiliates.
| 2. | Definitions.
For purposes of this Plan, the following terms shall have the following meanings: |
“Affiliate”
means any parent corporation or subsidiary corporation of the Company, whether now or hereafter existing, as those terms are defined
in Sections 424(e) and (f), respectively, of the Code.
“Board” means the Board of Directors
of the Company.
“Cause”
shall mean any of the following of or by a Participant (each, as determined by the Board in its sole and absolute discretion): (i) conviction
of, or the entering of a guilty plea or plea of no contest with respect to, any felony or any crime involving moral turpitude or dishonesty;
(ii) participation in a fraud or act of dishonesty against the Company; (iii) willful and material breach of Participant’s
duties to the Company that has not been cured within 30 days after written notice from the Board of such breach; (iv) intentional
and material damage to the Company’s material property; (v) material breach of any agreement between the Company and Participant;
or (vi) abuse of, or addiction to, drugs or alcohol or reporting to work or performing Participant’s duties to the Company
under the influence of drugs or alcohol.
“Change of Control”
means (a) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other
corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization,
own less than 50% of the voting power of the surviving entity (or its parent) immediately after such consolidation, merger or reorganization,
excluding any consolidation or merger effected exclusively to change the domicile of the Company or the form of entity of the Company,
(b) any sale, lease or other disposition of all or substantially all of the assets of the Company, (c) or any transaction (or
series of related transactions involving a person or entity, or a group of affiliated persons or entities) in which more than 50% of
the Company’s outstanding voting power is transferred; provided, however, that (i) any change in voting power
which occurs as a result of a private financing of the Company that is approved by the Board will not be considered a Change of Control,
and (ii) a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company
will not be considered a Change of Control. Notwithstanding the foregoing or any other provision of this Plan, (x) a transaction
shall not be deemed a Change of Control unless the transaction qualifies as a change in control event within the meaning of Section 409A
of the Code, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and Internal Revenue
Service guidance that has been promulgated or may be promulgated thereunder from time to time, and (y) the definition of Change
of Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall
supersede the foregoing definition with respect to Stock Awards subject to such agreement; provided further, however, that
if no definition of Change of Control or any analogous term is set forth in such individual written agreement, the foregoing definition
shall apply.
“Class A Common
Stock” means the Class A Common Stock (as defined in the Company’s Certificate of Incorporation, as amended), par
value $0.0001 per share, of the Company.
“Class B Common
Stock” means the Class B Common Stock (as defined in the Company’s Certificate of Incorporation, as amended), par
value $0.0001 per share, of the Company.
“Code” means the Internal Revenue Code
of 1986, as amended.
“Committee” means a committee appointed
by the Board in accordance with subsection 3(c).
“Common Stock”
means the Common Stock (as defined in the Company’s Certificate of Incorporation, as amended), par value $0.0001 per share, including
shares of Class A Common Stock and Class B Common Stock, of the Company.
“Company” means XY Labs, Inc., a
Delaware corporation.
“Consultant”
means any person, including an advisor, (a) engaged by the Company or an Affiliate to render consulting or advisory services and
who is compensated for such services, or (b) who is a member of the Board of Directors of an Affiliate. However, the term “Consultant”
shall not include either (i) Directors who are not compensated by the Company for their services as Directors or (ii) Directors
who are merely paid a director’s fee by the Company for their services as Directors.
“Continuous Service”
means that Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, continues and
is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of
a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director
or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination
of the Participant’s Continuous Service. For example, a change in status from an Employee of the Company to a Consultant of an
Affiliate or a Director of the Company will not constitute an interruption of Continuous Service. The Board or the Chief Executive Officer
of the Company, in such party’s sole discretion, may determine whether Continuous Service shall be considered interrupted in the
case of any leave of absence approved by that party, including sick leave, military leave or any other personal leave.
“Convertible Securities”
means any stock or securities convertible into or exchangeable for Common Stock.
“Covered Employee”
means the Chief Executive Officer and the four other highest compensated officers of the Company for whom total compensation is required
to be reported to stockholders under the Exchange Act, as determined for purposes of Section 162(m) of the Code.
“Director” means a member of the Board.
“Disability”
means (a) before the Listing Date, the inability of a person, in the opinion of a qualified physician acceptable to the Company,
to perform the major duties of that person’s position with the Company or an Affiliate of the Company because of the sickness or
injury of the person, and (b) after the Listing Date, the permanent and total disability of a person within the meaning of Section 22(e)(3) of
the Code.
“Employee”
means any person employed by the Company or an Affiliate. Mere service as a Director or payment of a director’s fee by the Company
or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“Exchange Act” means the Securities Exchange
Act of 1934, as amended.
“Fair Market Value”
means, as of any date, the value of the Class A Common Stock determined as follows:
(a) If
the Common Stock is listed on any established stock exchange or traded on the Nasdaq National Market or the Nasdaq Small Cap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on
the last market trading day prior to the day of determination, as reported in THE WALL STREET JOURNAL or such other source as the Board
deems reliable.
(b) In
the absence of such markets for the Common Stock, the Fair Market Value shall be determined in good faith by the Board.
“Fully Diluted Basis”
means all outstanding shares of Common Stock plus all shares of Common Stock which would be outstanding upon the exercise in full of
all Convertible Securities, Options and Stock Purchase Rights.
“Incentive Stock
Option” means an option to purchase shares of Common Stock granted under the Plan which is intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
“Listing Date”
means the first date upon which any security of the Company is listed (or approved for listing) upon notice of issuance on any securities
exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation
system; provided, that the Listing Date shall not include a listing on the over the counter or similar market.
“Non-Employee Director”
means a Director of the Company who either (a) is not a current Employee or Officer of the Company or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Company or its parent or a subsidiary for services rendered as a consultant
or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of
Regulation S-K promulgated pursuant to the Securities Act (“Regulation S-K”)), does not possess an interest in any
other transaction as to which disclosure would be required under Item 404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of Regulation S-K, or (b) is otherwise considered a
“non-employee director” for purposes of Rule 16b-3.
“Nonstatutory Stock
Option” means an option to purchase shares of Common Stock granted under the Plan which is not intended to qualify as an Incentive
Stock Option.
“Officer”
means (a) before the Listing Date, any person designated by the Company as an officer, and (b) on and after the Listing Date,
a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
“Option”
means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
“Option Agreement”
means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
“Optionholder”
means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
“Outside Director”
means a Director of the Company who either (a) is not a current Employee of the Company or an “affiliated corporation”
(within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former Employee of the
Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified
pension plan), was not an Officer of the Company or an “affiliated corporation” at any time and is not currently receiving
direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as
a Director, or (b) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code.
“Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in Section 424(e) of the Code.
“Participant”
means a person to whom a Stock Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock
Award, including, without limitation, an Optionholder.
“Plan”
means this XY Labs, Inc. 2016 Equity Incentive Plan, as amended from time to time.
“Rule 16b-3”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“Securities Act”
means the Securities Act of 1933, as amended.
“Share”
means a share of Common Stock, as adjusted in accordance with Section 11 below.
“Stock Award” means any right
granted under the Plan, including an Option, a stock bonus and a right to acquire restricted stock.
“Stock Award Agreement”
means a written agreement between the Company and a Participant evidencing the terms and conditions of an individual Stock Award grant,
including, without limitation, an Option Agreement. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan.
“Stock Purchase
Rights” means any warrants, options or other rights of any kind to subscribe for, purchase or otherwise acquire any shares
of Common Stock, Options or any Convertible Securities.
“Ten Percent Stockholder”
means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of any of its Affiliates.
(a) Administration
by Board. The Board shall administer the Plan unless and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by the Board under the Plan shall be final and binding
on all persons and entities.
(b) Powers
of Board. The Board shall have the power, subject to, and within the limitations of, the express provisions of the Plan:
(i) To
determine from time to time (A) which of the persons eligible under the Plan shall be granted Stock Awards, (B) when and how
each Stock Award shall be granted, (C) what type or combination of types of Stock Award shall be granted, (D) the provisions
of each Stock Award granted (which need not be identical), including the time or times when a person shall be permitted to receive stock
pursuant to a Stock Award, and (E) the number of shares of Common Stock with respect to which a Stock Award shall be granted to
each such person.
(ii) To
construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any
Stock Award Agreement, in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective.
(iii) To
amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally,
to exercise such powers and to perform such act as the Board deems necessary or expedient to promote the best interests of the Company
which are not in conflict with the provisions of the Plan.
| (c) | Delegation
to Committee. |
(i) General.
The Board may delegate administration of the Plan to a Committee or Committees of one or more Directors, and the term “Committee”
shall apply to any person or persons to whom such authority has been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the
Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions
of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board
the administration of the Plan.
(ii) Committee
Composition When Common Stock Is Publicly Traded. At such time as the Common Stock is publicly traded, in the discretion of the Board,
a Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, and/or solely
of two or more Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such authority, the Board or the Committee
may (A) delegate to a committee of one or more Directors who are not Outside Directors the authority to grant Stock Awards to eligible
persons who are either (x) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award, or (y) not persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code and/or (B) delegate to a committee of one or more Directors who are not Non-Employee Directors the authority to grant Stock
Awards to eligible persons who are not then subject to Section 16 of the Exchange Act.
| 4. | Shares
Subject to the Plan. |
(a) Share
Reserve. Subject to the provisions of Section 11 relating to adjustments upon changes in Common Stock, the aggregate number
of shares of Common Stock that may be issued pursuant to Stock Awards shall not exceed 25,000,000 shares of Class A Common Stock
and 0 shares of Class B Common Stock.
(b) Reversion
of Shares to the Share Reserve. If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of restricted stock awards), the shares of Common Stock not acquired under such
Stock Award shall revert to and again become available for issuance under the Plan. If any Common Stock acquired pursuant to the exercise
of an Option shall for any reason be repurchased by the Company under an unvested share repurchase option provided under the Plan, the
shares of Common Stock repurchased by the Company under such repurchase option shall revert to and again become available for issuance
under the Plan.
(c) Source
of Shares. The shares of Common Stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise.
(d) Incentive
Stock Option Limitation. The total number of shares of Common Stock issuable upon exercise of all outstanding Incentive Stock Options
and the total number of shares of Common Stock provided for under any stock bonus or similar plan of the Company shall not exceed in
the aggregate 25,000,000 shares of Class A Common Stock and 0 shares of Class B Common Stock.
(a) Eligibility
for Specific Stock Awards. Incentive Stock Options may be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) Ten
Percent Stockholders. No Ten Percent Stockholder shall be eligible for the grant of an Incentive Stock Option unless the exercise
price of such Option is at least 110% of the Fair Market Value of the Common Stock at the date of grant and the Option is not exercisable
after the expiration of 5 years from the date of grant.
(c) Section 162(m) Limitation.
Subject to the provisions of Section 11 relating to adjustments upon changes in Common Stock, no Employee shall be eligible to be
granted Options covering more than 1,000,000 shares of the Common Stock during any calendar year; provided, however, that
this subsection 5(c) shall not apply prior to the Listing Date and, following the Listing Date, this subsection 5(c) shall
not apply until (i) the earliest of: (A) the first material modification of the Plan (including any increase in the number
of shares of Common Stock reserved for issuance under the Plan in accordance with Section 4), (B) the issuance of all of the
shares of Common Stock reserved for issuance under the Plan, (C) the expiration of the Plan, and (D) the first meeting of stockholders
at which Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which occurred
the first registration of an equity security of the Company under Section 12 of the Exchange Act, or (ii) such other date required
by Section 162(m) of the Code and the rules and regulations promulgated thereunder.
(d) Consultants.
(i) Prior
to the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, either the offer or
the sale of the Company’s securities to such Consultant is not exempt under Rule 701 of the Securities Act (“Rule 701”)
because of the nature of the services that the Consultant is providing to the Company, or because the Consultant is not a natural person,
or as otherwise provided by Rule 701, unless the Company determines that such grant need not comply with the requirements of Rule 701
and will satisfy another exemption under the Securities Act as well as comply with the securities laws of all other relevant jurisdictions.
(ii) From
and after the Listing Date, a Consultant shall not be eligible for the grant of a Stock Award if, at the time of grant, a Form S-8
Registration Statement under the Securities Act (“Form S-8”) is not available to register either the offer or
the sale of the Company’s securities to such Consultant because of the nature of the services that the Consultant is providing
to the Company, or because the Consultant is not a natural person, or as otherwise provided by the rules governing the use of Form S-8,
unless the Company determines both (A) that such grant (x) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (y) does not require registration under the Securities Act in order to comply with
the requirements of the Securities Act, if applicable, and (B) that such grant complies with the securities laws of all other relevant
jurisdictions.
(iii) Rule 701
and Form S-8 generally are available to consultants and advisors only if (i) they are natural persons; (ii) they provide
bona fide services to the issuer, its parents, its majority-owned subsidiaries or majority-owned subsidiaries of the issuer’s parent;
and (iii) the services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly
or indirectly promote or maintain a market for the issuer’s securities.
6. Option
Provisions. Each Option shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. All
Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and a separate certificate
or certificates will be issued for shares purchased on exercise of each type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance
of each of the following provisions:
(a) Term.
Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, no Option shall be exercisable after the expiration
of 10 years from the date it was granted.
(b) Exercise
Price. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders:
(i) Incentive
Stock Option. The per-share exercise price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
(ii) Nonstatutory
Stock Option. The per-share exercise price of each Nonstatutory Stock Option shall be not less than 100% of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing,
an Incentive Stock Option and/or a Nonstatutory Stock Option may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions
of Section 424(a) of the Code.
(c) Payment
of Exercise Price. The exercise price for the Common Stock acquired pursuant to an Option shall be paid, to the extent permitted
by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of
the Board at the time of the grant of the Option (or subsequently in the case of a Nonstatutory Stock Option) by (A) delivery to
the Company of other Common Stock, (B) according to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other Common Stock) with the Participant or (C) in any other form of legal consideration
that may be acceptable to the Board; provided, however, that payment of the Common Stock’s “par value”
shall not be made by deferred payment.
In the case of any deferred
payment arrangement, interest shall be compounded at least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) Transferability
of Options.
(i) Incentive
Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Optionholder only by the Optionholder.
(ii) Nonstatutory
Stock Option. A Nonstatutory Stock Option granted (A) prior to the Listing Date shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder, and
(B) on or after the Listing Date shall be transferable to the extent provided in the Option Agreement. If the Nonstatutory Stock
Option does not provide for transferability, then the Nonstatutory Stock Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing
provisions of this subsection 6(d), the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
(e) Vesting.
The total number of shares of Common Stock subject to an Option may, but need not, vest and therefore become exercisable in periodic
installments which may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when
it may be exercised (which may be based on performance or other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection 6(e) are subject to any Option provisions governing the minimum number
of shares as to which an Option may be exercised.
(f) Exercisability
Upon Termination of Continuous Service.
(i) General.
In the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the
Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination)
but only within such period of time ending on the earlier of (A) except as otherwise provided in the applicable Option Agreement,
the date three months following the termination of the Optionholder’s Continuous Service (or such longer or shorter period specified
in the Option Agreement, which, for Options granted prior to the Listing Date, shall not be less than 30 days, unless such termination
is for Cause), or (B) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified in the Option Agreement, the Option shall terminate.
(ii) Extension
of Termination Date. An Optionholder’s Option Agreement may also provide that if the exercise of the Option following the termination
of the Optionholder’s Continuous Service (other than upon the Optionholder’s death or Disability) would be prohibited at
any time solely because the issuance of shares would violate the registration requirements under the Securities Act, then the Option
shall terminate on the earlier of (A) the expiration of the term of the Option set forth in subsection 6(a), or (B) the expiration
of a period of 3 months after the termination of the Optionholder’s Continuous Service during which the exercise of the Option
would not be in violation of such registration requirements.
(iii) Disability
of Optionholder. In the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability,
the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise it as of the date of termination),
but only within such period of time ending on the earlier of (A) the date 12 months following such termination (or such longer or
shorter period specified in the Option Agreement, which, for Options granted prior to the Listing Date, shall not be less than 6 months),
or (B) the expiration of the term of the Option as set forth in the Option Agreement. If, after termination, the Optionholder does
not exercise his or her Option within the time specified herein, the Option shall terminate.
(iv) Death
of Optionholder. In the event (A) an Optionholder’s Continuous Service terminates as a result of the Optionholder’s
death, or (B) the Optionholder dies within the period (if any) specified in the Option Agreement after the termination of the Optionholder’s
Continuous Service for a reason other than death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise
the Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the Optionholder’s death pursuant to subsection 6(d),
but only within the period ending on the earlier of (x) the date 12 months following the date of death (or such longer or shorter
period specified in the Option Agreement, which, for Options granted prior to the Listing Date, shall not be less than 6 months) or (y) the
expiration of the term of such Option as set forth in the Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(g) Early
Exercise. The Option may, but need not, include a provision whereby the Optionholder may elect at any time before the Optionholder’s
Continuous Service terminates to exercise the Option as to any part or all of the shares of Common Stock subject to the Option prior
to the full vesting of the Option. Subject to the “Repurchase Limitation” in subsection 10(g), any unvested shares of Common
Stock so purchased may be subject to an unvested share repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.
(h) Right
of Repurchase. Subject to the “Repurchase Limitation” in Subsection 10(g), the Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or any part of the vested shares acquired by the Optionholder
pursuant to the exercise of the Option.
(i) Right
of First Refusal. The Option may, but need not, include a provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the Optionholder of the intent to transfer all or any part of the
shares of Common Stock received upon the exercise of the Option. Except as expressly provided in this subsection 6(i), such right of
first refusal shall otherwise comply with any applicable provisions of the Bylaws of the Company.
(j) Re-Load
Options. Without in any way limiting the authority of the Board to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any Option Agreement a provision entitling the Optionholder to a further
Option (a “Re-Load Option”) in the event the Optionholder exercises the Option evidenced by the Option Agreement,
in whole or in part, by surrendering other shares of Common Stock in accordance with this Plan and the terms and conditions of the Option
Agreement. Unless otherwise specifically provided in the Option, the Optionholder shall not surrender shares of Common Stock acquired,
directly or indirectly from the Company, unless such shares have been held for more than six (6) months (or such longer or shorter
period of time required to avoid a charge to earnings for financial accounting purposes). Any such Re-Load Option shall (i) provide
for a number of shares equal to the number of shares surrendered as part or all of the exercise price of such Option; (ii) have
an expiration date which is the same as the expiration date of the Option the exercise of which gave rise to such Re- Load Option; and
(iii) have an exercise price which is equal to one hundred percent (100%) of the Fair Market Value of the Common Stock subject to
the Re-Load Option on the date of exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option shall be subject to
the same exercise price and term provisions heretofore described for Options under the Plan. Any such Re-Load Option may be an Incentive
Stock Option or a Nonstatutory Stock Option, as the Board may designate at the time of the grant of the original Option; provided,
however, that the designation of any Re-Load Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock Options described in subsection 10(d) and in Section 422(d) of
the Code. There shall be no Re-Load Options on a Re-Load Option.
Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and the “Section 162(m) Limitation”
on the grants of Options under subsection 5(c) and shall be subject to such other terms and conditions as the Board may determine
which are not inconsistent with the express provisions of the Plan regarding the terms of Options.
| 7. | Provisions
of Stock Awards Other Than Options. |
(a) Stock
Bonus Awards. Each Stock Award Agreement relating to a Stock Award consisting of a Common Stock bonus (a “Stock Bonus”)
shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms and conditions of Stock
Bonus agreements may change from time to time, and the terms and conditions of separate Stock Bonus agreements need not be identical,
but each Stock Bonus agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) Consideration.
A Stock Bonus shall be awarded in consideration for past services actually rendered to the Company for its benefit.
(ii) Vesting.
Subject to the “Repurchase Limitation” in Subsection 10(g), shares of Common Stock awarded under a Stock Bonus may, but need
not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination
of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in subsection 10(g), in the event a
Participant’s Continuous Service terminates, the Company may reacquire any or all of the shares of Common Stock held by the Participant
which have not vested as of the date of termination under the terms of the Stock Bonus agreement.
(iv) Transferability.
For a Stock Bonus made (A) before the Listing Date, rights to acquire shares of Common Stock under the Stock Bonus agreement shall
not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Participant
only by the Participant, and (B) on or after the Listing Date, rights to acquire shares of Common Stock under the Stock Bonus agreement
shall be transferable by the Participant only upon such terms and conditions as are set forth in the Stock Bonus agreement, as the Board
shall determine in its discretion, so long as Common Stock awarded under the Stock Bonus agreement remains subject to the terms of the
Stock Bonus agreement.
(b) Restricted
Stock Awards. Each Stock Award Agreement relating to a Stock Award consisting of a grant of restricted Common Stock (a “Restricted
Stock Award”) shall be in such form and shall contain such terms and conditions as the Board shall deem appropriate. The terms
and conditions of the Restricted Stock Award agreements may change from time to time, and the terms and conditions of separate Restricted
Stock Award agreements need not be identical, but each Restricted Stock Award agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
(i) Purchase
Price. Subject to the provisions of subsection 5(b) regarding Ten Percent Stockholders, the purchase price under each Restricted
Stock Award agreement shall be such amount as the Board shall determine and designate in such Restricted Stock Award agreement. The purchase
price of Restricted Stock Awards shall not be less than 100% of the Fair Market Value of the Common Stock on the date such award is made
or at the time the purchase is consummated.
(ii) Consideration.
The purchase price of shares of Common Stock acquired pursuant to the Restricted Stock Award agreement shall be paid either (A) in
cash at the time of purchase, (B) at the discretion of the Board, according to a deferred payment or other arrangement with the
Participant, or (C) in any other form of legal consideration that may be acceptable to the Board in its discretion; provided, however,
that payment of the Common Stock’s “par value” shall not be made by deferred payment.
(iii) Vesting.
Subject to the “Repurchase Limitation” in Subsection 10(g), shares of Common Stock acquired under a Restricted Stock Award
agreement may, but need not, be subject to a share repurchase option in favor of the Company in accordance with a vesting schedule to
be determined by the Board.
(iv) Termination
of Participant’s Continuous Service. Subject to the “Repurchase Limitation” in subsection 10(g), in the event a
Participant’s Continuous Service terminates, the Company may repurchase or otherwise reacquire any or all of the shares of Common
Stock held by the Participant which have not vested as of the date of termination under the terms of the Restricted Stock Award agreement.
(v) Transferability.
For a Restricted Stock Award made (A) before the Listing Date, rights to acquire shares of Common Stock under the Restricted Stock
Award agreement shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant, and (B) on or after the Listing Date, rights to acquire shares of Common stock
under the Restricted Stock Award agreement shall be transferable by the Participant only upon such terms and conditions as are set forth
in the Restricted Stock Award agreement, as the Board shall determine in its discretion, so long as shares of Common Stock awarded under
the Restricted Stock Award agreement remains subject to the terms of the Restricted Stock Award agreement.
| 8. | Covenants
of the Company. |
(a) Availability
of Shares. During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of Common Stock
required to satisfy all such Stock Awards.
(b) Securities
Law Compliance. The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided,
however, that this undertaking shall not require the Company to register under the Securities Act, the Plan, any Stock Award or
any stock issued or issuable pursuant to any such Stock Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
| 9. | Use
of Proceeds From Stock. Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company. |
(a) Acceleration
of Exercisability and Vesting. The Board shall have the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised or the time during which it will vest.
(b) Stockholder
Rights. No Participant shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares
of Common Stock subject to such Stock Award unless and until such Participant has satisfied all requirements for exercise of the Stock
Award pursuant to its terms.
(c) No
Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Stock Award granted pursuant thereto shall
confer upon any Participant or other holder of Stock Awards any right to continue to serve the Company or an Affiliate in the capacity
in effect at the time the Stock Award was granted or shall affect the right of the Company or an Affiliate to terminate (i) the
employment of an Employee with or without notice and with or without cause, (ii) the service of a Consultant pursuant to the terms
of such Consultant’s agreement with the Company or an Affiliate or (iii) the service of a Director pursuant to the Bylaws
of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate
is incorporated, as the case may be.
(d) Incentive
Stock Option $100,000 Limitation. To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under
all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to
the order in which they were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment
Assurances. The Company may require a Participant, as a condition of exercising or acquiring stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award, and (ii) to give written assurances satisfactory to the Company stating that the Participant
is acquiring the stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling
or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative
if (i) the issuance of the shares upon the exercise or acquisition of stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities Act or (ii) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(f) Withholding
Obligations. To the extent provided by the terms of a Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock under a Stock Award by any of the following means (in addition
to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means
(i) tendering a cash payment, (ii) authorizing the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock under the Stock Award, or (iii) delivering to the
Company owned and unencumbered shares of the Common Stock.
(g) Repurchase
Limitation. The terms of any repurchase option shall be specified in the Stock Award and may be either at Fair Market Value at the
time of repurchase or at not less than the original purchase price.
| 11. | Adjustments
Upon Changes in Common Stock. |
(a) Capitalization
Adjustments. If any change is made in the stock subject to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property
other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure, conversion
of outstanding shares of Class B Common Stock to shares of Class A Common Stock pursuant to the applicable conversion procedures
set forth in the Company’s Certificate of Incorporation (a “Class B Conversion”) or other transaction not
involving the receipt of consideration by the Company), the Plan will be appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a) and the maximum number of securities subject to award to any person pursuant
to Subsection 5(c), and the outstanding Stock Awards will be appropriately adjusted in the class(es) and number of securities and price
per share of stock subject to such outstanding Stock Awards; provided, however, that in the event of a Class B Conversion,
any outstanding Stock Award exercisable for shares of Class B Common Stock immediately shall become exercisable for the same number
of shares of Class A Common Stock (without further adjustment for any differences in value of shares of Class A Common Stock
and shares of Class B Common Stock) and shall no longer be exercisable for shares of Class B Common Stock. The Board, the determination
of which shall be final, binding and conclusive, shall make such adjustments. (The conversion of any convertible securities of the Company
(other than a Class B Conversion) shall not be treated as a transaction “without receipt of consideration” by the Company).
(b) Dissolution,
Liquidation or Change of Control. In the event of a dissolution or liquidation of the Company or a Change of Control, all Stock Awards
shall be terminated if not exercised (if applicable) prior to such event, unless such outstanding Stock Awards are assumed by a subsequent
purchaser.
(c) Change
of Control.
(i) In
the event the Company undergoes a Change of Control, any surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including an award to acquire the same consideration paid to the
stockholders in the transaction causing the Change of Control) for those outstanding under the Plan. If such surviving or acquiring corporation
does not comply with the foregoing, the sole remedy shall be as set forth in Section 11(c)(ii) below.
(ii) In
the event any surviving corporation or acquiring corporation in a Change of Control refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, then with respect to (A) Stock Awards held by Participants whose Continuous
Service has not terminated prior to such event, the vesting of such Stock Awards (and, if applicable, the time during which such Stock
Awards may be exercised) shall be accelerated, with respect to such number of the then unvested Stock Awards as would have vested (notwithstanding
the Change of Control) had the Participant remained employed by (or continued to provide services to) the Company for a period of one
year following closing of the Change of Control, and made exercisable at least 30 days prior to the closing of the Change of Control
(and all of the Stock Awards (both vested and unvested) shall be terminated if not exercised prior to the closing of such Change of Control),
and (B) any other Stock Awards outstanding under the Plan, such Stock Awards shall be terminated if not exercised prior to the closing
of the Change of Control.
(iii) For
the purposes of this Section 11(c), a Stock Award shall be considered assumed if, following the Change of Control, the option or
right confers the right to purchase or receive, for each share subject to the Stock Award immediately prior to the Change of Control,
the consideration (whether stock, cash, or other securities or property) received in the Change of Control by holders of Common Stock
for each Share held on the effective date of the transaction (and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration
received in the Change of Control is not solely common stock of the successor corporation or its Parent, the Board may, with the consent
of the successor corporation, provide for the consideration to be received upon the exercise of the Stock Award, for each Share subject
to the Stock Award, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change of Control.
| 12. | Amendment
of the Plan and Stock Awards. |
(a) Amendment
of Plan. The Board at any time, and from time to time, may amend the Plan. However, except as provided in Section 11 relating
to adjustments upon changes in stock, no amendment shall be effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3 or any NASDAQ or securities
exchange listing requirements.
(b) Stockholder
Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) Contemplated
Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be provided under the provisions of the Code and the regulations
promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) No
Impairment of Rights. Rights under any Stock Award granted before amendment of the Plan shall not be impaired by any amendment of
the Plan unless (i) the Company requests the consent of the Participant and (ii) the Participant consents in writing.
(e) Amendment
of Stock Awards. The Board at any time, and from time to time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by any such amendment unless (i) the Company requests
the consent of the Participant and (ii) the Participant consents in writing.
| 13. | Termination
or Suspension of the Plan. |
(a) Plan
Term. The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on the day before
the 10th anniversary of the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
(b) No
Impairment of Rights. Suspension or termination of the Plan shall not impair rights and obligations under any Stock Award granted
while the Plan is in effect except with the written consent of the Participant.
14. Effective
Date of Plan. The Plan shall become effective as determined by the Board, but no Stock Award shall be exercised (or, in the case
of a stock bonus, shall be granted) unless and until the Plan has been approved by the stockholders of the Company, which approval shall
be within 12 months before or after the date the Plan is adopted by the Board.
15. Choice
of Law. The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this
Plan, without regard to such state’s conflict of laws rules.
XY LABS, INC.
STOCK OPTION AGREEMENT
UNDER THE 2016 EQUITY INCENTIVE
PLAN, AS AMENDED
(INCENTIVE AND NONSTATUTORY
STOCK OPTIONS)
Pursuant to the Stock Option
Grant Notice (“Grant Notice”) and this Stock Option Agreement, XY Labs, Inc. (the “Company”) has granted
you an option under its 2016 Equity Incentive Plan, as amended by that certain Amendment to the 2016 Equity Incentive Plan dated
March 14, 2018 (as amended, the “Plan”) to purchase the number and class of shares of the Company’s Common
Stock indicated in the Grant Notice at the exercise price indicated in the Grant Notice. Capitalized terms used but not otherwise
defined herein have the same meanings as set forth in the Plan.
The details of your Option are as follows:
1. Grant
of Option. Subject to the terms and conditions set forth herein and in the Plan, the Company grants to you this Option to purchase
up to the number of shares of Common Stock provided in the Grant Notice.
2. Vesting.
Subject to the limitations contained herein, your option will vest as provided in the Grant Notice, except that vesting will irrevocably
cease upon the interruption or termination of your Continuous Service.
3. Number
of Shares and Exercise Price. The number of shares of Common Stock subject to your option and your exercise price per share referenced
in the Grant Notice may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
4. Exercise
Prior to Vesting (“Early Exercise”). If permitted in the Grant Notice (i.e., the “Exercise Schedule” indicates
that “Early Exercise” of your option is permitted) and subject to the provisions of this option, you may elect at any time
that is both (i) during the period of your Continuous Service, and (ii) during the term of your Option, to exercise all or
part of your Option, including the nonvested portion of your Option; provided, however, that:
(a) a
partial exercise of your Option shall be deemed to cover first vested shares of Common Stock and then the earliest vesting installment
of unvested shares of Common Stock;
(b) any
shares of Common Stock so purchased from installments which have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company’s form of Early Exercise Stock Purchase Agreement;
(c) you
shall enter into the Company’s form of Early Exercise Stock Purchase Agreement with a vesting schedule that will result in the
same vesting as if no early exercise had occurred; and
(d) if
your Option is an Incentive Stock Option, then, as provided in the Plan, to the extent that the aggregate Fair Market Value of the Common
Stock (determined at the time of grant) purchasable pursuant to this Option plus all other Incentive Stock Options you hold are exercisable
for the first time by you during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options
or portions thereof that exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
5. Method
of Payment. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner permitted by the Grant Notice, which may include one or more of the
following:
(a) In
the Company’s sole discretion at the time your Option is exercised and provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a program developed under Regulation T as promulgated
by the Federal Reserve Board which, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company
or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.
(b) Provided
that at the time of exercise the Common Stock is publicly traded and quoted regularly in The Wall Street Journal, by delivery
of already-owned shares of Common Stock that either have been held for the period required to avoid a charge to the Company’s reported
earnings (generally six months) or were not acquired, directly or indirectly from the Company, that are owned free and clear of any liens,
claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise. “Delivery”
for these purposes, in the sole discretion of the Company at the time your Option is exercised, shall include delivery to the Company
of your attestation of ownership of such shares of Common Stock in a form approved by the Company. Notwithstanding the foregoing, your
Option may not be exercised by tender to the Company of Common Stock to the extent such tender would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company’s stock.
(c) Pursuant
to the following deferred payment alternative:
(i) Not
less than 100% of the aggregate exercise price, plus accrued interest, shall be due four years from date of exercise or, at the Company’s
election, upon termination of your Continuous Service.
(ii) Interest
shall be compounded at least annually and shall be charged at the market rate of interest necessary to avoid a charge to earnings for
financial accounting.
(iii) Payment
of the Common Stock’s “par value” shall be made in cash and not by deferred payment.
(iv) In
order to elect the deferred payment alternative, you must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and, in order to secure the payment of the deferred exercise price to the Company hereunder, if the Company
so requests, you must tender to the Company a promissory note and a security agreement covering the purchased shares of Common Stock,
both in form and substance satisfactory to the Company, or such other or additional documentation as the Company may request.
6. Whole
Shares. Your Option may only be exercised for whole shares of Common Stock.
7.
Securities Law Compliance. Notwithstanding anything to the contrary contained herein, your Option may not be exercised unless
the shares of Common Stock issuable upon exercise of your Option are then registered under the Securities Act or, if such shares of Common
Stock are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements
of the Securities Act. The exercise of your Option must also comply with other applicable laws and regulations governing the Option,
and the Option may not be exercised if the Company determines that the exercise would not be in material compliance with such laws and
regulations.
8. Term.
The term of your Option commences on the Date of Grant and expires upon the earliest of the following:
(a) Subject
to the limitations set forth in Section 8(c), if your Option is an Incentive Stock Option, the term of your Option commences on
the Date of Grant and expires upon the earliest of the following:
(i) three
months after the termination of your Continuous Service for any reason other than Cause, Disability or death, provided that if
during any part of such three month period the Option is not exercisable solely because of the condition set forth in Section 7,
the Option shall not expire until the earlier of the Expiration Date or until it shall have been exercisable for an aggregate period
of three months after the termination of your Continuous Service;
(ii) 12
months after the termination of your Continuous Service due to Disability;
(iii) 12
months after your death if you die either during your Continuous Service or within three months after your Continuous Service terminates;
(iv) the
Expiration Date indicated in the Grant Notice; or
(v) the
10th anniversary of the Date of Grant.
If your Option is an Incentive
Stock Option, note that, to obtain the federal income tax advantages associated with an “incentive stock option,” the Code
requires that at all times beginning on the date of grant of the Option and ending on the day three months before the date of the Option’s
exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or your Disability. The Company has
provided for extended exercisability of your Option under certain circumstances for your benefit, but cannot guarantee that your Option
will necessarily be treated as an “incentive stock option” if you provide services to the Company or an Affiliate as a Consultant
or Director or if you exercise your option more than three months after the date your employment with the Company or an Affiliate terminates.
(b) Subject
to the limitations set forth in Section 8(c), if your Option is a Nonstatutory Stock Option, the term of your Option commences on
the Date of Grant and expires upon the earliest of the following:
(i) so
long as your Continuous Service has not terminated for Cause, due to Disability or death, the date upon which the number of months equivalent
to your Applicable Vesting Period have lapsed following the date that your Continuous Service ends, provided that such period shall not
exceed 10 years since the Date of Grant. The “Applicable Vesting Period” for a Grant means the number of months between the
Vesting Commencement Date for such Grant and the date that your Continuous Service ends;
(ii) 12
months after the termination of your Continuous Service due to Disability;
(iii) 12
months after your death if you die either during your Continuous Service or within three months after your Continuous Service terminates;
(iv) the
Expiration Date indicated in the Grant Notice; or
(v) the
10th anniversary of the Date of Grant.
(c) In
the event that the Company terminates your Continuous Service for Cause, all outstanding Options (whether or not vested) shall immediately
terminate and cease to be exercisable.
9. Exercise.
(a) Subject
to Section 8 above, you (or, if applicable, your representative) may exercise the vested portion of your Option (and the unvested
portion of your Option if the Grant Notice so permits) during its term by delivering an executed Notice of Exercise (in a form designated
by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate,
during regular business hours, together with such additional documents as the Company may then require; provided, however,
that such exercise must occur on an anniversary of the Grant Date set forth in the Option, unless such exercise occurs after your Continuous
Service ends.
(b) By
exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise
of your Option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time
of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.
(c) If
your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within 15 days
after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your Option that occurs within two
years after the Date of Grant of your Option or one year after such shares of Common Stock are transferred upon exercise of your Option.
(d) By
exercising your Option you agree that the Company (or a representative of the underwriters) may, in connection with the underwritten
registration of the offering of any securities of the Company under the Securities Act, require that you not (directly or indirectly)
sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale, any shares of Common Stock or other securities of the Company, for a period of time specified
by the underwriter (not to exceed 180 days) following the effective date of the registration statement of the Company filed under the
Securities Act. You further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or the
underwriter which are consistent with the foregoing or which are necessary to give further effect thereto. In order to enforce the foregoing
covenant, the Company may impose stop-transfer instructions with respect to your Common Stock until the end of such period.
10. Transferability.
Your Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to exercise your Option.
11. Sale
of the Company. Shares of Common Stock that you acquire upon exercise of your Option are subject to any drag-along rights that may
be described in the Company’s Bylaws, as amended from time to time, which may require you to vote your shares to approve certain
events involving a sale of the Company, and you hereby agree to be bound by such restrictions and limitations, which shall be deemed
incorporated herein by this reference.
12. Option
Not a Service Contract. Your Option is not an employment or service contract, and nothing in your Option shall be deemed to create
in anyway whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate
to continue your employment. In addition, nothing in your Option shall obligate the Company or an Affiliate, their respective stockholders,
Boards of Directors, Officers or Employees to continue any relationship that you might have as a Director or Consultant for the Company
or an Affiliate.
13. No
Rights As Stockholder. You shall have no rights as a stockholder of the Company with respect to any shares of Common Stock covered
by the Option until you shall have become the holder of record of such shares
14. Withholding
Obligations.
(a) At
the time your Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, you hereby authorize withholding
from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “cashless
exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted
by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with your Option.
(b) Upon
your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from the fully vested shares of Common Stock otherwise issuable to you upon the exercise of your Option
a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess
of the minimum amount of tax required to be withheld by law. If the date of determination of any tax withholding obligation is deferred
to a date later than the date of exercise of your Option, share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common
Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of
such tax withholding obligation to the date of exercise of your Option. Notwithstanding the filing of such election, shares of Common
Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your Option that are
otherwise issuable to you upon such exercise. Any adverse consequences to you arising in connection with such share withholding procedure
shall be your sole responsibility.
(c) Your
Option is not exercisable unless the tax withholding obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation to issue
a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein.
15. Notices.
Any notices provided for in your Option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed
to you at the last address you provided to the Company.
16. Waiver
and Amendment. Any waiver, alteration, amendment or modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto.
17. Governing
Plan Document. Your Option is subject to all the provisions of the Plan, the terms and provisions of which are hereby incorporated
into and made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations which may
from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of your Option
and those of the Plan, the provisions of the Plan shall control.
18. Code
Section 409A. Under Code Section 409A, an Option that vests after December 31, 2004 that was granted with an exercise
price per share of Common Stock that is determined by the Internal Revenue Service (the “IRS”) to be less than the
Fair Market Value of a share of Common Stock on the date of grant (a “discount option”) may be considered “deferred
compensation.” An Option that is a “discount option” may result in (i) income recognition by Participant prior
to the exercise of the Option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and
interest charges. The “discount option” may also result in additional state income, penalty and interest tax to you. You
acknowledge and agree that the Company cannot and has not guaranteed that the IRS will agree that the per share exercise price of this
Option equals or exceeds the Fair Market Value of a share of Common Stock on the date of grant in a later examination. Further, you agree
that if the IRS determines that the Option was granted with a per share exercise price that was less than the Fair Market Value of a
share of Common Stock on the date of grant, you shall be solely responsible for your costs related to such determination.
19. Right
of First Refusal. Shares of Common Stock that you acquire upon exercise of your Option are subject to any right of first refusal
that may be described in the Company’s Bylaws, as amended from time to time, and you hereby agree to be bound by such right of
first refusal, which shall be deemed incorporated herein by this reference.
20. Right
of Repurchase in Bylaws. To the extent provided in the Company’s Bylaws, as amended from time to time, the Company shall have
the right to repurchase all or any part of the shares of Common Stock you acquire pursuant to the exercise of your Option.
21. Limitations
on Transfer. You shall not assign, hypothecate, donate, encumber or otherwise dispose of any interest in the Shares except in compliance
with the provisions herein and applicable securities laws. Furthermore, the Shares shall be subject to any right of first refusal in
favor of the Company or its assignees that may be contained in the Company’s Bylaws.
22. Restrictive
Legends. All certificates representing the Shares, if any, shall have endorsed thereon legends in substantially the following forms
(in addition to any other legend which may be required by other agreements between you and the Company):
(a) “THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN AGREEMENTS REGARDING THE VOTING OF SUCH SHARES AND TRANSFER RESTRICTIONS
SET FORTH IN THE BYLAWS OF THE COMPANY IN EFFECT FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.
BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL
THE PROVISIONS OF THE BYLAWS OF THE COMPANY IN EFFECT FROM TIME TO TIME, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER AND OWNERSHIP
SET FORTH THEREIN. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO TRANSFER RESTRICTIONS IS VOID WITHOUT THE PRIOR EXPRESS
WRITTEN CONSENT OF THE COMPANY.”
(b) “THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”
(c) THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND/OR ITS ASSIGNEE(S) AS
PROVIDED IN THE BYLAWS OF THE COMPANY.”
(d) Any
legend required by appropriate blue sky officials.
NOTICE OF EXERCISE
UNDER THE 2016 EQUITY INCENTIVE
PLAN, AS AMENDED
XY Labs, Inc.
1405 30th Street, Suite A
| San Diego, CA 92154 |
| Date
of Exercise: | |
Ladies and Gentlemen:
This constitutes notice under
my Option that I elect to purchase the number of shares of Class A Common Stock for the price set forth below. Capitalized terms
used herein have the meanings given to them in the Option Agreement with respect to my Option.
| Type of Option (check one): | |
¨
Incentive Stock Option |
| | |
x Nonstatutory
Stock Option |
| Grant Date of Option: |
|
|
| |
|
|
| Number of shares of Class A
Common Stock as to which the Option is being exercised: |
|
|
| |
|
|
| If applicable,
certificates for the shares of Class A Common Stock should be issued in the name of: |
|
|
| |
|
|
| Total exercise price: |
|
$ |
| |
|
|
| Cash payment delivered herewith: |
|
$ |
| |
|
|
| Value of shares
of Class A Common Stock delivered herewith3: |
|
$ |
By this exercise, I
agree (a) to provide such additional documents as the Company may require pursuant to the terms of the Plan, (b) to provide
for the payment by me to the Company (in the manner designated by the Company) of the Company’s withholding obligation, if any,
relating to the exercise of this Option, and (c) if this exercise relates to an Incentive Stock Option, to notify the Company in
writing within 15 days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this Option that
occurs within two years after the Date of Grant of this Option or within one year after such shares of Class A Common Stock are
issued upon exercise of this Option.
3
Shares must meet the public trading requirements set forth in the Option. Shares must be valued in accordance with the terms
of the option being exercised, must have been owned for the minimum period required in the option, and must be owned free and clear of
any liens, claims, encumbrances or security interests. Certificates must be endorsed or accompanied by an executed assignment separate
from certificate.
In connection with the exercise
of the Option, I hereby make the following certifications, representations and warranties to the Company with respect to the number
of shares of Class A Common Stock of the Company listed above (the “Shares”), which are being acquired upon exercise
of the Option as set forth above:
(a) I
am acquiring the Shares for investment only for my own account and have no present intention of distributing or selling said Shares,
except as permitted under the Securities Act and any applicable state securities laws.
(b) I
acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”),
and are deemed to constitute “restricted securities” under Rule 701 and “restricted securities” under Rule 144
promulgated under the Securities Act.
(c) I
acknowledge that I will not be able to resell the Shares for at least 90 days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701
and that more restrictive conditions apply to Affiliates of the Company under Rule 144.
(d) I
acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company’s
Certificate of Incorporation, Bylaws, the Plan and/or applicable securities laws.
I AGREE THAT THE SHARES SHALL
BE SUBJECT TO THE TERMS AND PROVISIONS OF THE COMPANY’S BYLAWS, AS AMENDED FROM TIME TO TIME, INCLUDING WITHOUT LIMITATION
SUCH LIMITATIONS, RESTRICTIONS AND COVENANTS RELATED TO AN APPROVED SALE OF THE COMPANY AND RIGHTS OF FIRST REFUSAL, AND I HEREBY AGREE
TO BE BOUND BY SUCH TERMS AND PROVISIONS.
(e) I
agree to adhere to the Company’s Insider Trading Policy.
I further agree that, if
required by the Company (or a representative of the underwriters) in connection with the underwritten registration of the offering of
any securities of the Company under the Securities Act, I will not (directly or indirectly) sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as
a sale of any shares of Common Stock or other securities of the Company during such period (not to exceed 180 days) following the effective
date of the registration statement of the Company filed under the Securities Act as may be requested by the Company or the representative
of the underwriters. I further agree to execute and deliver such other agreements as may be reasonably requested by the Company and/or
the underwriter that are consistent with the foregoing or that are necessary to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
| |
|
Very truly yours, |
| |
|
|
|
| |
|
By: |
|
| |
|
|
|
| |
|
Name: |
|
XY LABS, INC.
STOCK OPTION GRANT NOTICE
2016 EQUITY INCENTIVE PLAN, AS AMENDED
XY Labs, Inc. (the “Company”),
pursuant to its 2016 Equity Incentive Plan, as amended by that certain Amendment to the 2016 Equity Incentive Plan dated March 14,
2018 (as amended, the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Class A
Common Stock set forth below. This option is subject to all of the terms and conditions set forth herein and in the Plan (attached hereto
as Attachment I), the Stock Option Agreement (attached hereto as Attachment II) and the Notice of Exercise (attached hereto as Attachment
III), all of which are incorporated herein in their entirety.
| Optionholder: |
|
| |
|
| Date of Grant: |
|
| |
|
| Vesting Commencement Date: |
|
| |
|
| Number of Shares Subject to Option: |
|
| |
|
| Exercise Price Per Share: |
|
| |
|
| Expiration Date (Not to Exceed 10 Years)1: |
|
| TYPE OF GRANT2: |
¨ Incentive
Stock Option x Nonstatutory Stock Option |
| |
|
| VESTING SCHEDULE: |
|
| |
|
| EXERCISE SCHEDULE: |
x Same
as Vesting Schedule ¨ Early Exercise Permitted |
| |
|
| PAYMENT: |
By one or a combination of the following items (described
in the Stock Option Agreement): |
| |
|
By cash or check |
| |
|
Pursuant to a Regulation T Program if the Shares
are publicly traded |
| |
|
By delivery of already-owned shares if the Shares
are publicly traded |
1
Optionholder shall provide proof of delivery for the notice of exercise along with the exercise payment to the Company on
or before the end date of the Option’s term (see Section 8 of the Stock Option Agreement), subject to additional terms set
forth in the Plan and the Stock Option Agreement.
2
If this is an Incentive Stock Option, it (plus Optionholder’s other outstanding Incentive Stock Options) cannot be
exercisable for more than $100,000 in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option.
| ADDITIONAL
TERMS AND ACKNOWLEDGEMENTS: |
The undersigned Optionholder acknowledges
receipt of, and understands and agrees to and is bound by, this Grant Notice, the Stock Option Agreement and the Plan. Participant
further acknowledges that as of the Date of Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the entire
understanding between Participant and the Company regarding the acquisition of stock or other securities of the Company and supersede
all prior oral and written agreements on that subject with the exception of (i) Stock Awards previously granted and delivered
to Participant under the Plan, and (ii) the following agreements only ((i) and (ii) together, the “Acknowledged
Agreements”): |
| |
|
| OTHER AGREEMENTS: |
None. |
This Grant Notice is null and void if not executed
and returned to the Company within 30 days of the Grant Date.
| XY LABS, INC. |
|
OPTIONHOLDER: |
| |
|
|
| |
|
|
| Arie Trouw |
|
Signature |
| Chief Executive Officer |
|
|
| |
|
Address: |
| Date: |
|
|
| |
|
|
| |
|
|
| |
|
Date: |
ATTACHMENTS:
| Attachment I |
2016 Equity Incentive Plan,
As Amended |
| |
|
| Attachment II |
Stock Option Agreement |
| |
|
| Attachment III |
Notice of Exercise |
XY Labs (PK) (USOTC:XYLB)
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XY Labs (PK) (USOTC:XYLB)
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