UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
(Amendment No. __)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 30, 2017
PetroTerra Corp. |
(Exact name of registrant as specified in its charter) |
Nevada | 001-34970 | 26-3106763 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
980 N FEDERAL Highway, Suite 304 BOCA RATON , FLORIDA |
33432 | |||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (561) 672-7068
(Former name or former address, if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))
TABLE OF CONTENTS
1 Note to Draft: Update page numbers when final.
i |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Current Report contains forward-looking statements, including, without limitation, in the sections captioned “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Plan of Operations,” and elsewhere. Any and all statements contained in this Report that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of the foregoing) may be intended to identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this Report may include, without limitation, statements regarding (i) the plans and objectives of management for future operations, (ii) a projection of income (including income/loss), earnings (including earnings/loss) per share, capital expenditures, dividends, capital structure or other financial items, (iii) our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the SEC, and (iv) the assumptions underlying or relating to any statement described in points (i), (ii), or (iii) above.
Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this Report to reflect any new information or future events or circumstances or otherwise.
Readers should read this Report in conjunction with the discussion under the caption “Risk Factors,” our financial statements and the related notes thereto in this Report, and other documents which we may file from time to time with the Securities and Exchange Commission (the “SEC”).
The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the inaccuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation, our inability to obtain adequate financing, the significant length of time and resources associated with the development of our products and services and related insufficient cash flows and resulting illiquidity, our inability to expand our business, significant government regulation of our industry, existing or increased competition, results of arbitration and litigation, stock volatility and illiquidity, and our failure to implement our business plans or strategies. A description of some of the risks and uncertainties that could cause our actual results to differ materially from those described by the forward-looking statements in this Report appears in the section captioned “Risk Factors” and elsewhere in this Report and include the following:
● | Our ability to execute our business plan; | |
● | Our ability to raise capital to develop our business and fund our operations; | |
● | Difficulties we may experience in building and operating key elements of our technical infrastructure; | |
● | Changes in tax laws, treaties or regulations, or their interpretation; | |
● | Share price volatility related to, among other things, speculative trading and certain traders shorting our common shares; | |
● | Our lack of an operating history on which to evaluate our new business and determine if we will be able to execute our new business plan; | |
● | Our increased risks, uncertainties, expenses and difficulties as a growing company; | |
● | The need to attract and retain personnel; and | |
● | Our dependence on increased penetration of existing markets |
We were originally incorporated under the laws of the State of Nevada on July 25, 2008 under the name Loran Connection Corp. We were formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently filed a resale registration statement with the Securities and Exchange Commission (the “SEC”) on May 28, 2009, which was declared effective on October 28, 2009. On January 25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra Corp.” and effect a thirty-two-for-one reverse split. We changed our name to reflect a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of the Company, the Company began business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of change to effect a one-for-two reverse stock split of our authorized and our outstanding shares of common stock and preferred stock. On July 1, 2015, we filed a certificate of change to effect a one-for-two and one half reverse stock split of our authorized and our outstanding shares of common stock. Since January 2016, as a result of the decline in the oil and gas markets, we generated minimal sales revenue and our operations were subject to all the risks inherent in the establishment of a new business enterprise.
Since January 2016, we have not engaged in any operations and our business has been dormant. As such, we have been a “shell” company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
On March 30, 2017, we executed a Share Exchange Agreement (the “Share Exchange Agreement”) of the same date between us and Save on Transport Inc., a Florida corporation (“Save on Transport”), pursuant to which Save on Transport became a wholly-owned subsidiary of ours (the “Reverse Merger”). In the Reverse Merger, we acquired all of the issued and outstanding common stock of Save on Transport from Steven Yariv, and in exchange, we issued 114,202,944 shares of our common stock, par value 0.001 per share (the “Common Stock”) to Steven Yariv, and he was appointed Chief Executive Officer and elected as the Chairman of our Board of Directors.
In accordance with “reverse acquisition” accounting treatment, our historical financial statements of Save on Transport as of period ends, and for periods ended, prior to the acquisition will become the historical financial statements of PetroTerra prior to the Reverse Merger in all future filings with the SEC.
As used in this Current Report, unless otherwise stated or the context clearly indicates otherwise, the terms the “Company,” the “Registrant,” “we,” “us,” “our,” and “PetroTerra” refer to PetroTerra Corp., incorporated in Nevada, after giving effect to the Reverse Merger.
This Current Report contains summaries of the material terms of various agreements executed in connection with the transactions described herein. Such agreements are filed as exhibits hereto and incorporated herein by reference.
This Current Report is being filed in connection with a series of transactions consummated by the Company and certain related events and actions taken by the Company.
This Current Report responds to the following Items in Form 8-K:
Item 1.01 | Entry into a Material Definitive Agreement | |
Item 2.01 | Completion of Acquisition or Disposition of Assets | |
Item 3.02 | Unregistered Sales of Equity Securities | |
Item 5.01 | Changes in Control of Registrant | |
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers | |
Item 5.06 | Change in Shell Company Status | |
Item 9.01 | Financial Statements and Exhibits |
2 |
ITEM 1.01 | Entry into a Material Definitive Agreement. |
The information contained in Item 2.01 below relating to the various agreements described therein is incorporated herein by reference.
ITEM 2.01 | Completion of Acquisition or Disposition of Assets. |
THE REVERSE MERGER AND RELATED TRANSACTIONS
Share Exchange Agreement
On March 30, 2017 (the “Closing Date”), our company and Save on Transport entered into a Share Exchange Agreement dated as of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, Save on Transport became a wholly-owned subsidiary of ours on the Closing Date (the “Reverse Merger”). In the Reverse Merger, we acquired all of the issued and outstanding common stock of Save on Transport from Steven Yariv, and in exchange, we issued 114,202,944 shares of our common stock, par value 0.001 per share (the “Common Stock”), to Steven Yariv, and Steven Yariv was appointed Chief Executive Officer and elected as the Chairman of our Board of Directors.
Pursuant to the Reverse Merger, we acquired the business of Save on Transport to establish our company as a provider of integrated transportation management solutions consisting of brokerage and logistic services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight.
The Share Exchange Agreement contained customary representations and warranties and pre- and post-closing covenants of each party and customary closing conditions.
The Reverse Merger will be treated as a recapitalization of Save on Transport for financial accounting purposes. Save on Transport will be considered the acquirer for accounting purposes, and our historical financial statements before the Reverse Merger will be the historical financial statements of Save on Transport in all future filings with the Securities and Exchange Commission (the “SEC”).
The Reverse Merger is intended to be treated as a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
The issuance of the Common Stock in connection with the Reverse Merger was not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act, which exempts transactions by an issuer not involving any public offering, and/or Regulation D promulgated by the SEC under that section. These securities may not be offered or sold absent registration or an applicable exemption from the registration requirement, and some of these securities are subject to further contractual restrictions on transfer as described below.
A copy of the Share Exchange Agreement is filed as Exhibit 2.1 to this Current Report.
3 |
Departure and Appointment of Directors and Officers
Our Board of Directors currently consists of one (1) member. On the Closing Date, Lawrence Sands, our former Chief Executive Officer, Chief Financial Officer and sole director, resigned from all of his positions. Steven Yariv was also elected as the Chairman of our Board of Directors and appointed Chief Executive Officer.
See “Management – Directors and Executive Officers” below for information about our new directors and executive officers.
Pro Forma Ownership
Immediately after giving effect to the Reverse Merger, there were 115,147,064 issued and outstanding shares of our Common Stock.
Following the Reverse Merger, there are 4,000,000 shares of Series A Preferred Stock convertible into 48,019,208 shares of our Common Stock.
Our Common Stock is quoted on the OTC Pink under the trading symbol “PTRA.”
Accounting Treatment; Change of Control
The Reverse Merger is being accounted for as a recapitalization of Save on Transport. Save on Transport is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that are reflected in the financial statements prior to the Reverse Merger will be those of Save on Transport and are recorded at the historical cost basis of Save on Transport, and the financial statements after completion of the Reverse Merger will include the assets and liabilities of Save on Transport at historical cost, the assets and liabilities of PetroTerra Corp. at historical cost, and the historical operations of Save on Transport and the operations of PetroTerra Corp. from the Closing Date of the Reverse Merger.
The issuance of the Common Stock to Steven Yariv pursuant to the Reverse Merger resulted in a change in control of our company. Except as described in this Current Report, no arrangements or understandings exist among present or former controlling stockholders with respect to the election of members of our Board of Directors and, to our knowledge, no other arrangements exist that might result in a change of control of our company.
We continue to be a “smaller reporting company,” as defined under the Exchange Act, following the Reverse Merger.
OUR BUSINESS
Overview
We are a holding company that operates as a Florida based provider of integrated transportation management solutions through our wholly-owned subsidiary, Save on Transport. Save on Transport’s integrated transportation management solutions consist of brokerage and logistics services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight.
OVERVIEW OF THE AUTOMOBILE SHIPPING INDUSTRY AND SAVE ON TRANSPORT
Introduction to the Transportation Management and Logistics Industry
Transportation management and other third-party logistics companies offer transportation and freight management services to shippers of freight and inventory. The U.S. third-party logistics sector revenue increased from approximately $76.9 billion in 2003 to approximately $157.2 billion in 2014 (and experienced growth each year during such period other than from 2008 to 2009), according to Armstrong & Associates, Inc., a leading supply chain market research firm. In addition, only 10.9% of logistics expenditures by U.S. businesses were outsourced in 2014, according to Armstrong & Associates. We believe that the market penetration of third-party logistics providers will expand in the future as companies increasingly redirect their resources to core competencies and outsource their transportation and logistics requirements as they realize the cost-effectiveness of 3PL providers.
4 |
Corporate History and Information
We were originally incorporated under the laws of the State of Nevada on July 25, 2008 under the name Loran Connection Corp. We were formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently filed a resale registration statement with the SEC on May 28, 2009, which was declared effective on October 28, 2009. On January 25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra Corp.” and effect a thirty-two-for-one reverse split. We changed our name to reflect a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of the Company, the Company began business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of change to effect a one-for-two reverse stock split of our authorized and our outstanding shares of common stock and preferred stock. On July 1, 2015, we filed a certificate of change to effect a one-for-two and one half reverse stock split of our authorized and our outstanding shares of common stock. Since January 2016, as a result of the decline in the oil and gas markets, we generated minimal sales revenue and our operations were subject to all the risks inherent in the establishment of a new business enterprise.
On November 22, 2016, the Company filed a Certificate of Change with the Secretary of State of the State of Nevada to effect a reverse stock split of its outstanding and authorized shares of common stock at a ratio of 1 for 30 (the “Reverse Stock Split”). Upon the effectiveness of the Reverse Stock Split, the Company’s issued and outstanding shares of common stock was decreased from approximately 28,323,588 to 944,120 shares, all with a par value of $0.001. The Company has no outstanding shares of preferred stock. Accordingly, all share and per share information has been restated to retroactively show the effect of the last three Reverse Stock Splits.
As a result of the Reverse Merger, we are the holding company for our wholly-owned subsidiary, Save on Transport. Save on Transport was formed under the laws of the state of Florida in July 2016. Save on Transport operates as an automobile shipping company that provides transportation, brokerage, and logistics services relating to vehicle shipping.
In connection with the Reverse Merger, Steven Yariv was appointed Chief Executive Officer and elected as the Chairman of our Board of Directors.
Our principal executive offices are located in the United States at 2833 Exchange Court, West Palm Beach, Florida 33409, and our telephone number is (561) 891-9188.
Business and Operations
Save on Transport is a Florida based non-asset provider of integrated transportation management solutions. We provide brokerage and logistics services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight, which involve the use of independent contractor-owned trucks and equipment. We do not own the trucks or other equipment used to transport freight. Instead we utilize our relationships with subcontracted transportation providers – typically independent contract motor carriers. We make a profit on the difference between what we charge our customers for the services we provide and what we pay to the transportation providers to transport our customers’ freight. Our success depends in large part on our ability to hire and train talented salespeople and deploy them under exceptional leaders, develop sophisticated information technology, and build relationships with the carriers in our network so that we can purchase the optimal transportation solutions for our customers. Currently, all of our revenues are derived from domestic shipments.
5 |
Our Strategy and Competitive Strengths
Our growth strategy focuses on developing a full suite of automobile transportation brokerage and logistics solutions for our customers. Our service offerings consist of non-asset based transportation supply chain management, logistics and brokerage solutions. We facilitate cost-effective vehicle shipping for customers for a variety of reasons including:
● | Household moves; | |
● | Seasonal moves; | |
● | Military moves; | |
● | College moves; | |
● | Company relocation; | |
● | Internet automobile purchases; | |
● | Classic car and collector shows; and | |
● | Transportation for car dealerships. |
Save on Transport differentiates itself from the competition and grows its business by sustaining a high level of customer service, offering expedited and time-definite services, while providing competitive pricing.
Government Regulation
Our operations are regulated and licensed by various governmental agencies in the United States. Such regulations impact us directly and indirectly by regulating third-party transportation providers we use to transport freight for our customers.
Regulation affecting Motor Carriers, Owner Operators and Transportation Brokers.
In the United States, our third-party providers that operate as motor carriers have licenses to operate as motor carriers from the Federal Motor Carrier Safety Administration (“FMCSA”) of the U.S. Department of Transportation (“DOT”). The third-party motor carriers we engage in the United States must comply with the safety and fitness regulations of the DOT, including those relating to drug- and alcohol-testing, hours-of-service, records retention, vehicle inspection, driver qualification and minimum insurance requirements. Weight and equipment dimensions also are subject to government regulations. Other agencies, such as the U.S. Environmental Protection Agency (“EPA”), the Food and Drug Administration, the California Air Resources Board, and U.S. Department of Homeland Security (“DHS”), also regulate our third-party motor carriers and independent contractor drivers. The third-party carriers we use are also subject to a variety of vehicle registration and licensing requirements of the state or other local jurisdictions in which they operate.
In 2010, the FMCSA introduced the Compliance Safety Accountability program (“CSA”), which uses a Safety Management System (“SMS”) to rank motor carriers on seven categories of safety-related data, known as Behavioral Analysis and Safety Improvement Categories, or “BASICs,” which data, it is anticipated, will eventually be used for determining a carrier’s DOT safety rating under revisions to existing Safety Fitness Determination (“SFD”) regulations. In December 2015, the Fixing America’s Surface Transportation Act (“FAST Act”) was signed into law, which requires the FMCSA to review the CSA program to ensure that it provides the most reliable analysis possible. During this review period, the FAST Act requires the FMCSA to remove a property carrier’s CSA scores from public view. The FMCSA has since announced an SFD Notice of Proposed Rulemaking (“NPRM”) that would revamp the current three-tier federal rating system for federally regulated commercial motor carriers.
6 |
Although the CSA scores are not currently publicly available, this development is likely to be temporary. As a result, once the program has been revamped, our network of third-party transportation providers may could be ranked poorly as compared to competitors, and the safety ratings of their motor carrier operations could be adversely impacted. A reduction in safety and fitness ratings may result in difficulty attracting and retaining qualified independent contractors and could cause our customers to direct their business away from us and to carriers with more favorable CSA scores, which would adversely affect our results of operations.
Classification of Independent Contractors.
Tax and other federal and state regulatory authorities as well as private litigants continue to assert that independent contractor drivers in the trucking industry are employees rather than independent contractors. Federal legislators have introduced legislation in the past to make it easier for tax and other authorities to reclassify independent contractors as employees, including legislation to increase the recordkeeping requirements for employers of independent contractors and to heighten the penalties of employers who misclassify their employees and are found to have violated employees’ overtime and/or wage requirements. Additionally, federal legislators have sought to abolish the current safe harbor allowing taxpayers meeting certain criteria to treat individuals as independent contractors if they are following a long-standing, recognized practice. Federal legislators also sought to expand the Fair Labor Standards Act to cover “non-employees” who perform labor or services for businesses, even if the “non-employees” are properly classified as independent contractors; require taxpayers to provide written notice to workers based upon their classification as either an “employee” or a “non-employee”; and impose penalties and fines for violations of the notice requirements or “employee” or “non-employee” misclassifications. Some states have put initiatives in place to increase their revenues from items such as unemployment, workers’ compensation and income taxes, and a reclassification of independent contractors as employees would help states with this initiative. Taxing and other regulatory authorities and courts apply a variety of standards in their determination of independent contractor status. If our independent contractor drivers are determined to be our employees, we would incur additional exposure under some or all of the following: federal and state tax, workers’ compensation, unemployment benefits, labor, employment and tort laws, including for prior periods, as well as potential liability for employee benefits and tax withholdings.
Other Regulations.
We are subject to a variety of other U.S. and foreign laws and regulations, including but not limited to, the Foreign Corrupt Practices Act and other similar anti-bribery and anti-corruption statutes. Further, the transportation industry is subject to possible other regulatory and legislative changes (such as the possibility of more stringent environmental, climate change and/or safety/security regulations) that may affect the economics of the freight shipping industry by requiring changes in operating practices or changing the demand for motor carrier services or the cost of providing transportation logistics services.
Employees
As of the date of this filing, Save on Transport has 1 full-time employee. PetroTerra Corp. has no full-time employees.
Marketing and Significant Customers
Our customers are primarily different and distinct individuals introduced through referrals sources. Our business serves the North American market, with a near total concentration in the United States.
To best serve our customers, we will need to hire and maintain a significant staff of sales representatives and related support personnel. Our sales strategy is twofold: we seek to establish long-term relationships with new accounts and to increase the amount of business generated from our existing customer base. We believe that these attributes are competitive advantages in the transportation and logistics industry.
Information Systems
We utilize two main cloud based Information Systems: jTracker for taking customer orders and Central Dispatch for posting orders for carrier communications.
7 |
Competition
The transportation and logistics industry is highly competitive, with thousands of companies competing in the domestic and international markets. Our competitors include local, regional, national and international companies with the same services that our business provides. Due in part to the fragmented nature of the industry, our business units must strive daily to retain existing business relationships and forge new relationships.
We compete on service, reliability, and price. Some competitors have larger customer bases, significantly more resources and more experience than we do. The health of the transportation and logistics industry will continue to be a function of domestic and global economic growth.
Seasonality
Generally, our revenues do not exhibit a significant seasonal pattern; however, revenue is affected by adverse weather conditions, holidays and the number of business days that occur during a given period because revenue is directly related to the available work days of our third party shipping providers.
Properties
Our principal executive offices are rented from an affiliate of our Chief Executive Officer and are located in the United States at 2833 Exchange Court, West Palm Beach, Florida 33409, comprised of 400 square feet of office space. Total monthly rent for this property, including common area maintenance and real estate taxes, is approximately $300 per month.
Legal Proceedings
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We are not currently a party to in any legal proceeding that we believe would have a material adverse effect on our business, financial condition or operating results.
AN INVESTMENT IN OUR SECURITIES IS HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. WE FACE A VARIETY OF RISKS THAT MAY AFFECT OUR OPERATIONS OR FINANCIAL RESULTS AND MANY OF THOSE RISKS ARE DRIVEN BY FACTORS THAT WE CANNOT CONTROL OR PREDICT. BEFORE INVESTING IN THE SECURITIES YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS, TOGETHER WITH THE FINANCIAL AND OTHER INFORMATION CONTAINED IN THIS REPORT. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCURS, OUR BUSINESS, PROSPECTS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN THAT CASE, THE TRADING PRICE OF OUR COMMON STOCK WOULD LIKELY DECLINE AND YOU MAY LOSE ALL OR A PART OF YOUR INVESTMENT. ONLY THOSE INVESTORS WHO CAN BEAR THE RISK OF LOSS OF THEIR ENTIRE INVESTMENT SHOULD CONSIDER AN INVESTMENT IN OUR SECURITIES.
THIS REPORT CONTAINS CERTAIN STATEMENTS RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL PERFORMANCE OF OUR COMPANY. PROSPECTIVE INVESTORS ARE CAUTIONED THAT SUCH STATEMENTS ARE ONLY PREDICTIONS AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY. IN EVALUATING SUCH STATEMENTS, PROSPECTIVE INVESTORS SHOULD SPECIFICALLY CONSIDER THE VARIOUS FACTORS IDENTIFIED IN THIS REPORT, INCLUDING THE MATTERS SET FORTH BELOW, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE INDICATED BY SUCH FORWARD-LOOKING STATEMENTS.
8 |
If any of the following or other risks materialize, the Company’s business, financial condition, and results of operations could be materially adversely affected which, in turn, could adversely impact the value of our Common Stock. In such a case, investors in our Common Stock could lose all or part of their investment.
Prospective investors should consider carefully whether an investment in the Company is suitable for them in light of the information contained in this Report and the financial resources available to them. The risks described below do not purport to be all the risks to which the Company or the Company could be exposed. This section is a summary of certain risks and is not set out in any particular order of priority. They are the risks that we presently believe are material to the operations of the Company. Additional risks of which we are not presently aware or which we presently deem immaterial may also impair the Company’s business, financial condition or results of operations.
RISKS ASSOCIATED WITH OUR BUSINESS AND INDUSTRY
We lack an established operating history on which to evaluate our business and determine if we will be able to execute our business plan, and can give no assurance that operations will result in profits.
We have only been engaged in our current and proposed business operations since July 2016. As a result, we have a limited operating history upon which you may evaluate our proposed business and prospects. Our proposed business operations are subject to numerous risks, uncertainties, expenses and difficulties associated with early stage enterprises. You should consider an investment in our company in light of these risks, uncertainties, expenses and difficulties. Such risks include:
● | the absence of an operating history at our current scale; | |
● | our ability to raise capital to develop our business and fund our operations; | |
● | expected continual losses for the foreseeable future; | |
● | our ability to anticipate and adapt to a developing market(s); | |
● | acceptance by customers; | |
● | limited marketing experience; | |
● | competition from internet-based logistics and freight companies; | |
● | competitors with substantially greater financial resources and assets; | |
● | the ability to identify, attract and retain qualified personnel; | |
● | our ability to provide superior customer service; and | |
● | reliance on key personnel. |
Because we are subject to these risks, you may have a difficult time evaluating our business and your investment in our company. We may be unable to successfully overcome these risks which could harm our business.
Our business strategy may be unsuccessful and we may be unable to address the risks we face in a cost-effective manner, if at all. If we are unable to successfully address these risks our business will be harmed.
9 |
Economic recessions and other factors that reduce freight volumes could have a material adverse impact on our business.
The transportation industry historically has experienced cyclical fluctuations in financial results due to economic recession, downturns in business cycles of our customers, increases in prices charged by third-party carriers, interest rate fluctuations and other U.S. and global economic factors beyond our control. During economic downturns, reduced overall demand for transportation services will likely reduce demand for our services and exert downward pressures on rates and margins. In periods of strong economic growth, demand for limited transportation resources can result in increased network congestion and resulting operating inefficiencies. In addition, deterioration in the economic environment subjects our business to various risks that may have a material impact on our operating results and cause us to not reach our long-term growth goals. These risks may include the following:
● A reduction in overall freight volumes in the marketplace reduces our opportunities for growth.
● A downturn in our customers’ business cycles causes a reduction in the volume of freight shipped by those customers.
● Some of our customers may face economic difficulties and may not be able to pay us, and some may go out of business.
● Some of our customers may not pay us as quickly as they have in the past, causing our working capital needs to increase.
● A significant number of our transportation providers may go out of business and we may be unable to secure sufficient equipment or other transportation services to meet our commitments to our customers.
● We may not be able to appropriately adjust our expenses to changing market demands.
We have ongoing capital requirements that necessitate sufficient cash flow from operations and/or obtaining financing on favorable terms.
We have depended on cash from operations to expand the size of our operations and upgrade and expand the size of our revenue equipment fleet. In the future, we could face inabilities with generating sufficient cash from operations or obtaining sufficient financing on favorable terms. If any of these events occur, then we may face liquidity constraints or be forced to enter into less than favorable financing arrangements. Additionally, such events could adversely impact our ability to provide services to our customers.
We may not be profitable.
There can be no assurance that we will be able to implement our business plan, generate sustainable revenue or ever achieve consistently profitable operations. We cannot assure you that we can achieve or sustain profitability on a quarterly or annual basis in the future.
Our success is dependent on our Chief Executive Officer and other key personnel.
Our success depends on the continuing services of our Chief Executive Officer, Mr. Steven Yariv. We believe that Mr. Yariv possesses valuable knowledge and skills that are crucial to our success and would be very difficult to replicate.
Over time, our success will depend on attracting and retaining qualified personnel, including a senior management team. Competition for senior management is intense, and we may not be able to retain our management team or attract additional qualified personnel. The loss of a member of senior management would require our remaining senior officers to divert immediate and substantial attention to fulfilling the duties of the departing executive and to seeking a replacement. The inability to adequately fill vacancies in our senior executive positions on a timely basis could negatively affect our ability to implement our business strategy, which could adversely impact our results of operations and prospects.
10 |
Changes in our relationships with our significant customers, including the loss or reduction in business from one or more of them, could have an adverse impact on us.
No single customer accounted for more than 5% of our revenue for 2016. We do not believe the loss of any single customer would materially impair our overall financial condition or results of operations; however, collectively, some of our large customers might account for a relatively significant portion of the growth in revenue and margins in a particular quarter or year. Our contractual relationships with customers generally are terminable at will by the customers on short notice and do not require the customer to provide any minimum commitment. Our customers could choose to divert all or a portion of their business with us to one of our competitors, demand rate reductions for our services, require us to assume greater liability that increases our costs, or develop their own logistics capabilities. Failure to retain our existing customers or enter into relationships with new customers could materially impact the growth in our business and the ability to meet our current and long-term financial forecasts.
We depend on third-parties in the operation of our business.
In our forwarding and freight brokerage operations, we do not own or control the transportation assets that deliver our customers’ freight, and we do not employ the people directly involved in delivering the freight. In our full truckload and freight brokerage businesses (particularly our last mile delivery logistics operations, our over-the-road expedite operations and our intermodal drayage operations), we engage independent contractors who own and operate their own equipment. Accordingly, we are dependent on third-parties to provide truck, rail, ocean, air and other transportation services and to report certain events to us, including delivery information and cargo claims. This reliance could cause delays in reporting certain events, including recognizing revenue and claims. Our inability to maintain positive relationships with independent transportation providers could significantly limit our ability to serve our customers on competitive terms. If we are unable to secure sufficient equipment or other transportation services to meet our commitments to our customers or provide our services on competitive terms, our operating results could be materially and adversely affected and our customers could switch to our competitors temporarily or permanently. Many of these risks are beyond our control, including the following:
● equipment shortages in the transportation industry, particularly among contracted truckload carriers and railroads;
● interruptions in service or stoppages in transportation as a result of labor disputes, network congestion, weather-related issues, “Acts of God,” or acts of terrorism;
● changes in regulations impacting transportation;
● increases in operating expenses for carriers, such as fuel costs, insurance premiums and licensing expenses, that result in a reduction in available carriers; and
● changes in transportation rates.
Increases in independent contractor driver compensation or other difficulties attracting and retaining qualified independent contractor drivers could adversely affect our profitability and ability to maintain or grow our independent contractor driver fleet.
Our business operates through fleets of vehicles that are owned and operated by independent contractors. These independent contractors are responsible for maintaining and operating their own equipment and paying their own fuel, insurance, licenses and other operating costs. Turnover and bankruptcy among independent contractor drivers often limit the pool of qualified independent contractor drivers and increase competition for their services. In addition, regulations such as the FMCSA Compliance Safety Accountability program may further reduce the pool of qualified independent contractor drivers. Thus, our continued reliance on independent contractor drivers could limit our ability to grow our ground transportation fleet.
In the future, we may experience difficulty in attracting and retaining sufficient numbers of qualified independent contractor drivers. Additionally, our agreements with independent contractor drivers are terminable by either party upon short notice and without penalty. Consequently, we regularly need to recruit qualified independent contractor drivers to replace those who have left our fleet. If we are unable to retain our existing independent contractor drivers or recruit new independent contractor drivers, our business and results of operations could be adversely affected.
The compensation we offer our independent contractor drivers is subject to market conditions and we may find it necessary to continue to increase independent contractor drivers’ compensation in future periods. If we are unable to continue to attract and retain a sufficient number of independent contractor drivers, we could be required to increase our mileage rates and accessorial pay or operate with fewer trucks and face difficulty meeting shipper demands, all of which would adversely affect our profitability and ability to maintain our size or to pursue our growth strategy.
11 |
We are dependent on computer and communications systems; and a systems failure or data breach could cause a significant disruption to our business.
Our business depends on the efficient and uninterrupted operation of our computer and communications hardware systems and infrastructure. Our operations and those of our technology and communications service providers are vulnerable to interruption by fire, earthquake, natural disasters, power loss, telecommunications failure, terrorist attacks, Internet failures, computer viruses, data breaches (including cyber-attacks or cyber intrusions over the Internet, malware and the like) and other events generally beyond our control. We mitigate the risk of business interruption by maintaining redundant computer systems, redundant networks, and backup systems. In the event of a significant system failure, our business could experience significant disruption.
We operate in a highly competitive industry and, if we are unable to adequately address factors that may adversely affect our revenue and costs, our business could suffer.
Competition in the transportation services industry is intense. Increased competition may lead to revenue reductions, reduced profit margins, or a loss of market share, any one of which could harm our business. There are many factors that could impair our profitability, including the following:
● competition with other transportation services companies, some of which offer different services or have a broader coverage network, more fully developed information technology systems and greater capital resources than we do;
● reduction by our competitors of their rates to gain business, especially during times of declining economic growth, which reductions may limit our ability to maintain or increase rates, maintain our operating margins or maintain significant growth in our business;
● solicitation by shippers of bids from multiple transportation providers for their shipping needs and the resulting depression of freight rates or loss of business to competitors;
● establishment by our competitors of cooperative relationships to increase their ability to address shipper needs;
● our current or prospective customers may decide to develop internal capabilities for some of the services that we provide; and
● the development of new technologies or business models could result in our disintermediation in certain businesses, such as freight brokerage.
Our results of operations may be affected by seasonal factors.
Our productivity may decrease during the winter season when severe winter weather impedes operations. Also, some shippers may reduce their shipments after the winter holiday season. At the same time, operating expenses may increase and fuel efficiency may decline due to engine idling during periods of inclement weather. Harsh weather conditions generally also result in higher accident frequency, increased freight claims, and higher equipment repair expenditures.
Status of independent contractors.
In recent years, the topic of the classification of individuals as employees or independent contractors has gained increased attention among federal and state regulators as well as the plaintiffs’ bar. Various legislative or regulatory proposals have been introduced at the federal and state levels that may affect the classification status of individuals as independent contractors or employees for either employment tax purposes (withholding, social security, Medicare and unemployment taxes) or other benefits available to employees (most notably, workers’ compensation benefits). Recently, certain states (most prominently, California) have seen significant increased activity by tax and other regulators and numerous class action lawsuits filed against transportation companies that engage independent contractors.
12 |
The Company classifies its third party shipping providers as independent contractors for all purposes, including employment tax and employee benefits. There can be no assurance that legislative, judicial, administrative or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the employee/independent contractor classification of third party shipping providers doing business with the Company. Although we believe that there are no proposals currently pending that would significantly change the employee/independent contractor classification of third party shipping providers doing business with the Company, potential changes, if any, could have a material adverse effect on our operating model. Further, the costs associated with any such potential changes could have a material adverse effect on the Company’s results of operations and financial condition if we were unable to pass through to our customers an increase in price corresponding to such increased costs. Moreover, class action litigation in this area against other transportation companies has resulted in significant damage awards and/or monetary settlements for workers who have been allegedly misclassified as independent contractors and the legal and other related expenses associated with litigating these cases can be substantial.
Our business is subject to the risks of earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by man-made problems such as strikes and terrorism.
Natural disasters such as earthquakes, tsunamis, hurricanes, tornadoes, floods or other adverse weather and climate conditions, whether occurring in the United States or abroad, could disrupt our operations or the operations of our customers or could damage or destroy infrastructure necessary to transport products as part of the supply chain. Specifically, these events may damage or destroy our assets, disrupt fuel supplies, increase fuel costs, disrupt freight shipments or routes, and affect regional economies. As a result, these events could make it difficult or impossible for us to provide logistics and transportation services; disrupt or prevent our ability to perform functions at the corporate level; and/or otherwise impede our ability to continue business operations in a continuous manner consistent with the level and extent of business activities prior to the occurrence of the unexpected event, which could adversely affect our business and results of operations or make our results more volatile.
GENERAL OPERATING RISK
We have insufficient funds to develop our business, which may adversely affect our future growth.
We will need to raise substantial additional capital to fund our operations and to develop and launch our services. We may need to sell equity securities or borrow funds in order to develop these growth strategies and our inability to raise the additional capital and/or borrow the funds needed to implement these plans may adversely affect our business and future growth.
Our future capital requirements may be substantial and will depend on many factors including:
● | marketing and developing expenses; | |
● | revenue received from sales and operations, if any, in the future; | |
● | the expenses needed to attract and retain skilled personnel; and | |
● | the costs associated with being a public company. |
Raising capital in the future could cause dilution to our existing shareholders, and may restrict our operations or require us to relinquish rights.
In the future, we may seek additional capital through a combination of private and public equity offerings, debt financings and collaborations and strategic and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring debt, making capital expenditures or declaring dividends. If we raise additional funds through collaboration, strategic alliance and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates, or grant licenses on terms that are not favorable to us.
13 |
We will incur significant costs as a result of operating as a public company, and our management may be required to devote substantial time to compliance initiatives.
As a public company, we incur significant legal, accounting and other expenses, which are approximately $100,000 annually. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC, have imposed various requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls as well as mandating certain corporate governance practices. Our management and other personnel will devote a substantial amount of time and financial resources to these compliance initiatives.
If we fail to staff our accounting and finance function adequately, or maintain internal control systems adequate to meet the demands that are placed upon us as a public company, we may be unable to report our financial results accurately or in a timely manner and our business and stock price, assuming that a market for our stock develops, may suffer. The costs of being a public company, as well as diversion of management’s time and attention, may have a material adverse effect on our future business, financial condition and results of operations.
RISKS RELATED TO OWNERSHIP OF OUR COMMON STOCK
If a public market for our common stock develops, it may be volatile. This may affect the ability of our investors to sell their shares as well as the price at which they sell their shares.
The market price for shares of our common stock may be significantly affected by factors such as variations in quarterly and yearly operating results, general trends in the medical wholesaling industry, and changes in state or federal regulations affecting us and our industry. Furthermore, in recent years the stock market has experienced extreme price and volume fluctuations that are unrelated or disproportionate to the operating performance of the affected companies. Such broad market fluctuations may adversely affect the market price of our common stock, if a market for it develops.
As an “emerging growth company” under the JOBS Act, we are permitted to rely on exemptions from certain disclosure requirements.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to and may rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
● | have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; | |
● | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
● | submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay”, “say-on-frequency” and “say-on-golden parachute;” and | |
● | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive’s compensation to median employee compensation. |
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are not choosing to “opt out” of this provision. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
14 |
We will remain an “emerging growth company” until the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration under the Securities Act, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
Until such time, however, we cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
We do not intend to pay cash dividends in the foreseeable future.
We have never paid dividends on our common stock and do not presently intend to pay any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will be re-invested into the Company to further its business strategy. Because we do not anticipate paying dividends in the future, the only opportunity for our stockholders to realize the creation of value in our common stock will likely be through a sale of those shares.
We have the right to issue shares of preferred stock. If we were to issue preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the common stock.
We are authorized to issue 4,000,000 shares of preferred stock, with such rights, preferences and privileges as may be determined from time-to-time by our Board of Directors. Our Board of Directors is empowered, without stockholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights, and other rights, preferences and privileges for the preferred stock. The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could adversely reduce the voting rights and powers of the common stock and the portion of the Company’s assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of the common stock being offered. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of the Company, to the detriment of the investors in the common stock being offered. We cannot assure you that the Company will not, under certain circumstances, issue shares of its preferred stock.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis should be read in conjunction with the historical financial statements and the related notes thereto contained in this Current Report. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in this Current Report, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this report.
15 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We were originally incorporated under the laws of the State of Nevada on July 25, 2008 under the name Loran Connection Corp. We were formed to provide a variety of services in the area of individual and group tourism and business support in Ukraine. We subsequently filed a resale registration statement with the SEC on May 28, 2009, which was declared effective on October 28, 2009. On January 25, 2012, we filed an amendment to our articles of incorporation to, among other things, change our name to “PetroTerra Corp.” and effect a thirty-two-for-one reverse split. We changed our name to reflect a proposed change in our business operations. On October 2, 2013, in connection with a change of control in the management of the Company, the Company began business operations in the oil and gas sector. On December 18, 2013, we filed a certificate of change to effect a one-for-two reverse stock split of our authorized and our outstanding shares of common stock and preferred stock. On July 1, 2015, we filed a certificate of change to effect a one-for-two and one half reverse stock split of our authorized and our outstanding shares of common stock. Since January 2016, as a result of the decline in the oil and gas markets, we generated minimal sales revenue and our operations were subject to all the risks inherent in the establishment of a new business enterprise. Since January 2016, we have not engaged in any operations and our business has been dormant. As such, we have been a “shell” company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Reverse Merger
On March 30, 2017 (the “Closing Date”), our company and Save on Transport entered into a Share Exchange Agreement dated as of the same date (the “Share Exchange Agreement”). Pursuant to the terms of the Share Exchange Agreement, Save on Transport became a wholly-owned subsidiary of ours on the Closing Date (the “Reverse Merger”). In the Reverse Merger, we purchased all of the issued and outstanding common stock of Save on Transport from Steven Yariv, and in exchange, we issued 114,202,944 shares of our common stock, par value 0.001 per share (the “Common Stock”), to Steven Yariv, and Steven Yariv was appointed Chief Executive Officer and elected as the Chairman of our Board of Directors.
Save on Transport operates as an automobile shipping company that provides transportation, brokerage, and logistics services relating to vehicle shipping.
At the closing of the Reverse Merger, Lawrence Sands, our former Chief Executive Officer, Chief Financial Officer and sole director, resigned from all of his positions. Steven Yariv was also elected as the Chairman of our Board of Directors and appointed Chief Executive Officer.
As a result of the Reverse Merger and the change in business and operations of our company from a public “shell” company to a company engaged in the business of automobile shipping, a discussion of the past financial results of our company is not pertinent, and under generally accepted accounting principles in the United States the historical financial results of Save on Transport, the accounting acquirer, prior to the Reverse Merger are considered the historical financial results of our company. The Reverse Merger was accounted for as a recapitalization effected by a Reverse Merger, wherein Save on Transport is considered the acquirer for accounting and financial reporting purposes.
The following discussion highlights the results of operations of Save on Transport and the principal factors that have affected its financial condition as well as its liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the financial condition and results of operations presented herein. The following discussion and analysis is based on the audited and financial statements contained in this Current Report, which have been prepared in accordance with generally accepted accounting principles in the United States. You should read the discussion and analysis together with such financial statements and the related notes thereto.
16 |
Basis of Presentation
The audited financial statements for the period from July 12, 2016 (inception) to December 31, 2016 include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.
Results of Operations
For the period from July 12, 2016 (inception) through December 31, 2016
The following table sets forth our revenues, expenses and net loss for the period from July 12, 2016 (inception) through December 31, 2016. The financial information below is derived from our audited financial statements included as an exhibit to this Current Report.
For
the period from July 12, 2016 through December 31, 2016 | ||||
Revenue | $ | 72,222 | ||
Cost of Sales | $ | 50,954 | ||
Gross Profit | $ | 21,268 | ||
Operating Expenses: | ||||
Legal and professional | $ | 5,871 | ||
Payroll and related expenses | $ | 9,919 | ||
Rent - affiliate | $ | 1,500 | ||
General and administrative expenses | $ | 3,952 | ||
Total Operating Expenses | $ | 21,242 | ||
Operating Income | $ | 26 | ||
Net Income | $ | 26 |
Revenues
The Company’s revenues were $72,222 for the period from July 12, 2016 (inception) through December 31, 2016. The revenue consists of individual customers contracting to transport a vehicle from location to location.
Cost of Revenue
Our cost of revenue were $50,954 for the period from July 12, 2016 (inception) through December 31, 2016 consisting primarily of $50,375 carrier fees.
Operating Expenses
Total operating expenses were $21,242 for the period from July 12, 2016 (inception) through December 31, 2016 for legal and professional fees of $5,871, payroll and related expenses of $9,919, rent to an affiliate of $1,500 and general and administrative expenses of $3,952.
17 |
Operating Income and Net Income
The Company’s operating income and net income were $26 for the period from July 12, 2016 (inception) through December 31, 2016.
Liquidity and Capital Resources
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At December 31, 2016, we had a cash balance of $11,275. Our working capital was $8,126 at December 31, 2016.
We reported a net increase in cash for the period from July 12, 2016 (inception) through December 31, 2016 of $11,275.
Operating activities
Net cash flows used in operating activities for the period from July 12, 2016 (inception) through December 31, 2016 amounted to $3,625 and was primarily attributable to net income of $26, a decrease in cash due to prepaid expenses and other current assets of $2,626, and an increase of cash due to the increase in accounts payable of $1,318, deferred revenue of $2,800 and payroll tax payable of $2,107.
Financing activities
Net cash flows provided by financing activities was $8,100 for the period of July 12, 2016 (inception) through the December 31, 2016. We received proceeds from shareholder loans of $1,680 and subsequently repaid the advances and $8,100 from proceeds from the common stock issued to the founding shareholder.
Going Concern Consideration
Our operations and financial results are subject to numerous various risks and uncertainties that could adversely affect our business, financial condition and results of operations. We have earned a nominal net income since our inception and the resulting Stockholder’s equity amounted to $8,126 as of December 31, 2016, and losses are anticipated in the development of our business, raising substantial doubt about our ability to continue as a going concern. The ability to continue as a going concern is dependent upon our generating profitable operations in the future and/or obtaining the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they become due. Our future financial results are also uncertain due to a number of factors, some of which are outside our control. These risk factors include, but are not limited to, our ability to raise additional funding and the results of our proposed operations.
Contractual Obligations
We may have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments.
Off Balance Sheet Arrangements
As of the date of this Current Report, we had no off-balance sheet arrangements. We are not aware of any material transactions that are not disclosed in our financial statements.
18 |
Significant Accounting Policies and Critical Accounting Estimates
The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on the results that we report in our financial statements. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates regarding matters that are inherently uncertain. Our most critical accounting estimates include:
Revenue Recognition – We recognize revenue in accordance with ACS - 605, “Revenue recognition”, ASC-605 requires that four basic criteria be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. The Company recognizes operating revenues and the related direct costs of such revenue as of the date the freight is delivered by the carrier. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 605-45, Principal Agent Considerations, the Company recognizes revenue on a gross basis.
Recently Enacted Accounting Standards
For a description of accounting changes and recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see “Note 2: Recent Accounting Pronouncements” in the financial statements filed with this Current Report.
Quantitative and Qualitative Disclosures About Market Risk
We are not required to provide quantitative and qualitative disclosures about market risk because we are a smaller reporting company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. In accordance with Securities and Exchange Commission rules, shares of our Common Stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person. Subject to community property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect to all shares of our Common Stock indicated as beneficially owned by them.
The following table sets forth information with respect to the beneficial ownership of our Common Stock as of March 30, 2017, after the Reverse Merger, by (i) each stockholder known by us to be the beneficial owner of more than 5% of our Common Stock (our only class of voting securities), (ii) each of our directors and executive officers, and (iii) all of our directors and executive officers as a group. To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. Other than the Reverse Merger, to our knowledge, there is no arrangement, including any pledge, by any person of securities of the Company or any of its parents, the operation of which may at a subsequent date result in a change of control of the Company.
19 |
Unless otherwise indicated in the following table, the address for each person named in the table is c/o Save on Transport, 2833 Exchange Court, West Palm Beach, FL 33409.
Name and address of beneficial owner | Amount
and nature of beneficial ownership | Percent
of class (1) | ||||
Directors and Executive Officers | ||||||
Steven Yariv | 114,202,944 shares | 70.0 | % | |||
All directors and executive officers as a group | 114,202,944 shares | 70.0 | % | |||
5% Shareholders | ||||||
None |
(1) Applicable percentage ownership is based on 115,147,064 shares of Common Stock outstanding as of March 30, 2017.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers
Below are the names of and certain information regarding the Company’s current executive officers and directors:
Name | Age | Position | Date Named to Board of Directors/as Executive Officer | |||||
Steven Yariv (1) | 43 | Chief Executive Officer and Director | March 30, 2017 |
(1) Steven Yariv had been the Chief Executive Officer and Sole Director of Save on Transport since its inception.
Directors are elected to serve until their successors are elected and qualified. Directors are elected by a plurality of the votes cast at the annual meeting of stockholders and hold office until the expiration of the term for which he or she was elected and until a successor has been elected and qualified.
A majority of the authorized number of directors constitutes a quorum of the Board of Directors for the transaction of business. The directors must be present at the meeting to constitute a quorum. However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members of the Board of Directors individually or collectively consent in writing to the action. Executive officers are appointed by the Board of Directors and serve at its pleasure.
The principal occupation and business experience during at least the past five years for our executive officers and directors is as follows:
Steven Yariv – Chief Executive Officer and Director
Steven Yariv is Chief Executive Officer and Chairman of the Board of Directors of the Company and the Chief Executive Officer of Save on Transport. Mr. Yariv has been the Chief Executive Officer/President of Save on Transport since inception, and he has been involved in the transportation industry for 15 years.
20 |
Director Independence
We are not currently subject to the listing requirements of any national securities exchange or inter-dealer quotation system which has requirements that a majority of the Board of Directors be “independent” and, as a result, we are not at this time required to have our Board of Directors comprised of a majority of “independent directors.” We do not have an independent director under the applicable standards of the SEC and the Nasdaq stock market.
Family Relationships
There are no family relationships among our directors and executive officers.
Involvement in Certain Legal Proceedings
None of our directors or executive officers has been involved in any of the following events during the past ten years:
● | any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; | |
● | any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences); | |
● | being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or | |
● | being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our outstanding common stock, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely upon a review by us of Forms 3 and 4 relating to fiscal years 2016 and 2015 as furnished to us under Rule 16a-3(d) under the Act, and Forms 5 and amendments thereto furnished to us with respect to fiscal year 2016, we believe that during the fiscal years ended December 31, 2016 and 2015, there was no failure to comply with Section 16(a) filing requirements applicable to our officers, directors and 10% stockholders.
Code of Ethics
The Company expects to adopt a code of ethics during fiscal year 2017.
Audit Committee
We do not have an audit committee and as a result our board of directors performs the duties of an audit committee. Our board of directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.
Compensation Committee
We do not have an compensation committee and as a result our board of directors performs the duties of a compensation committee. Our board of directors reviews and approves various compensation policies and matters and reviews and approves salaries, bonuses and other matters relating to our officers. [The committee reviews all senior corporate employees after the end of each fiscal year to determine compensation for the subsequent year. Particular attention is paid to each employee’s contributions to our current and future success, as well as their salary level in comparison to the market value of personnel with similar skills and responsibilities.]
21 |
Summary Compensation Table
The following table sets forth information concerning the total compensation paid or accrued by us and Save on Transport during the last two fiscal years indicated to (i) all individuals that served as our or Save on Transport’s principal executive officer or acted in a similar capacity for us or Save on Transport at any time during the most recent fiscal year indicated; (ii) the two most highly compensated executive officers who were serving as executive officers of us or Save on Transport at the end of the most recent fiscal year indicated that received annual compensation during such fiscal year in excess of $100,000; and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii) above but for the fact that the individual was not serving as an executive officer of us or Save on Transport at the end of the most recent fiscal year indicated.
Name
& Principal Position | Fiscal Year ended Dec. 31, | Salary ($) | Bonus ($) | Stock Awards (4) ($) | Option Awards($) | Non-Equity Incentive Plan Compensation ($) | Non-Qualified Deferred Compensation Earnings ($) | All
Other Compensation ($) | Total ($) | |||||||||||||||||||||||||||
John Barton, Chief Executive Officer/Chief Financial Officer (1) | 2016 | 120,000 | 0 | 9,600 | (5) | 0 | 0 | 0 | 0 | 129,600 | ||||||||||||||||||||||||||
2015 | 120,000 | 0 | 336,000 | (6) | 0 | 0 | 0 | 0 | 456,000 | |||||||||||||||||||||||||||
Kurt Reinecke, Chief Operating Officer (2) | 2016 | 82,500 | 0 | 65,600 | (7) | 0 | 0 | 0 | 0 | 148,100 | ||||||||||||||||||||||||||
2015 | 41,250 | 0 | 100,000 | (8) | 0 | 0 | 0 | 0 | 141,250 | |||||||||||||||||||||||||||
Lawrence Sands, Interim Chief Executive Officer and Chief Financial Officer (9) | 2016 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
2015 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||
Steven Yariv, Chief Executive Officer (3) | 2016 | 9,000 | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||
2015 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1) On January 9, 2017, Mr. Barton resigned as our Chief Executive Officer and Chief Financial Officer. The compensation listed reflects compensation for Mr. Barton in his dual role as Chief Executive Officer and Chief Financial Officer.
(2) On January 9, 2017, Mr. Reinecke resigned as our Chief Operating Officer.
(3) Reflects compensation received from Save on Transport.
(4) Reflects grant date fair value of restricted stock awards computed in accordance with FASB ASC Topic 718.
(5) On February 9, 2016, John Barton was granted 160,000 shares of common stock in accordance with his employment agreement dated February 4, 2014.
(6) On February 13, 2015, John Barton was granted 160,000 shares of common stock in accordance with his employment agreement dated February 4, 2014.
(7) On October 26, 2015, the Company renewed its independent contractor agreement with Arrow Peak Minerals and Royalty LLC (“Arrow”) so that Kurt Reinecke would continue to act in the role of the Company’s Chief Operating Officer. Arrow is also entitled to receive an aggregate of 150,000 shares of common stock to be earned as follows: (i) 50,000 shares were issued upon execution of the agreement; (ii) 50,000 shares will be issued upon the six month anniversary of the commencement of the agreement; and (iii) 50,000 shares will be issued upon the one year anniversary of the commencement of the agreement.
(8) On September 16, 2014 and March 16, 2015, Kurt Reinecke was granted an aggregate 50,000 shares of common stock in accordance with his employment agreement dated September 16, 2014.
(9) Mr. Sands served as the interim Chief Executive Officer and interim Chief Financial Officer from January 14, 2017 until Mr. Sands resigned all officer positions as our Chief Operating Officer on March 30, 2017.
22 |
Employment Agreements
The Company has no employment agreements in place as of March 30, 2017.
We have no plans in place and have never maintained any plans that provide for the payment of retirement benefits or benefits that will be paid primarily following retirement including, but not limited to, tax qualified deferred benefit plans, supplemental executive retirement plans, tax-qualified deferred contribution plans and nonqualified deferred contribution plans. The Company also does not currently offer or have any benefits, such as health or life insurance, available to its employees.
Outstanding Equity Awards at Fiscal Year-End
The Company’s officers did not receive any equity awards during the period covered by this Current Report nor has any other former officer received equity awards during the period covered by this Current Report.
Director Compensation
Lawrence Sands, the Company’s sole director prior to the Reverse Merger did not receive any compensation in his role as such during the period covered by this Current Report nor has any other former director of the Company received compensation during the period covered by this Current Report. Steven Yariv, Save on Transport’s sole director [prior to the Reverse Merger] did not receive any compensation in his role as such during the period covered by this Current Report nor has any other former director of Save on Transport received compensation during the period covered by this Current Report.
23 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SEC rules require us to disclose any transaction or currently proposed transaction in which the Company is a participant and in which any related person has or will have a direct or indirect material interest involving the lesser of $120,000 or one percent (1%) of the average of the Company’s total assets as of the end of last two completed fiscal years. A related person is any executive officer, director, nominee for director, or holder of 5% or more of the Company’s Common Stock, or an immediate family member of any of those persons.
None of our officers, directors, proposed director nominees, beneficial owners of more than 5% of our shares of common stock, or any relative or spouse of any of the foregoing persons, or any relative of such spouse who has the same house as such person or who is a director or officer of any parent or subsidiary of our Company, has any direct or indirect material interest in any transaction to which we are a party since our incorporation or in any proposed transaction to which we are proposed to be a party. In the event a related party transaction is proposed, such transaction will be presented to our Board of Directors for consideration and approval. Any such transaction will require approval by a majority of the disinterested directors and such transactions will be on terms no less favorable than those available to disinterested third parties.
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Common Stock has been quoted on OTC Pink under the symbol “PTRA” since September 2016, and was quoted on the OTCQB before that. The table below sets forth for the periods indicated the quarterly high and low bid prices as reported by Nasdaq. These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions
Quarter (1) | High | Low | ||||||||
Fiscal year ended December 31, 2015 | First | $ | 2.65 | $ | 2.45 | |||||
Second | $ | 3.00 | $ | 2.3 | ||||||
Third | $ | 0.605 | $ | 0.56 | ||||||
Fourth | $ | 1.63 | $ | 1.23 |
Quarter (1)(2) | High | Low | ||||||||
Fiscal year ended December 31, 2016 | First | $ | 0.12 | $ | 0.949 | |||||
Second | $ | 0.09 | $ | 0.081 | ||||||
Third | $ | 0.07 | $ | 0.07 | ||||||
Fourth | $ | 0.0689 | $ | 0.0488 |
(1) Our Common Stock traded on the OTCQB from July 1, 2014 through August 31, 2016.
(2) The Company effected a 1:2.5 reverse stock split on July 1, 2015.
Our common stock is considered to be penny stock under rules promulgated by the Securities and Exchange Commission. Under these rules, broker-dealers participating in transactions in these securities must first deliver a risk disclosure document which describes risks associated with these stocks, broker-dealers’ duties, customers’ rights and remedies, market and other information, and make suitability determinations approving the customers for these stock transactions based on financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing, provide monthly account statements to customers, and obtain specific written consent of each customer. With these restrictions, the likely effect of designation as a penny stock is to decrease the willingness of broker- dealers to make a market for the stock, to decrease the liquidity of the stock and increase the transaction cost of sales and purchases of these stocks compared to other securities.
24 |
We have been a shell company since January 2016. As a result, we are subject to the provisions of Rule 144(i) which limit reliance on Rule 144 by shareholders owning stock in a shell company. Under current interpretations, unregistered shares issued after we first became a shell company cannot be resold under Rule 144 until the following conditions are met:
● | we cease to be a shell company; | |
● | we remained subject to the Exchange Act reporting obligations; | |
● | we file all required Exchange Act reports during the preceding 12 months; and | |
● | at least one year has elapsed from the time we filed “Form 10 information” reflecting the fact that we had ceased to be a shell company. |
Holders
As of the date of this Report, we have 115,147,064 shares of Common Stock outstanding held by approximately 44 stockholders of record.
Dividend Policy
We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
We have never had any equity compensation plans. However, we may wish to issue stock options pursuant to a Stock Option Plan in the future. Such stock options may be awarded to management, employees, members of the Company’s Board of Directors and consultants of the Company.
We have authorized capital stock consisting of 500 million shares of Common Stock, par value $0.001, and 4 million shares of preferred stock, par value $0.001 per share. As of the date of this Report, we had 115,147,064 shares of Common Stock issued and outstanding, and 4,000,000 shares of Series A convertible preferred stock issued and outstanding.
Common Stock
The holders of outstanding shares of Common Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders. There is no cumulative voting of the election of directors then standing for election. The Common Stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors. Each outstanding share of Common Stock is duly and validly issued, fully paid and non-assessable.
Preferred Stock
We may issue shares of preferred stock from time to time in one or more series, each of which will have such distinctive designation or title as shall be determined by our Board of Directors and will have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of preferred stock as may be adopted from time to time by the Board of Directors.
25 |
While we do not currently have any plans for the issuance of additional preferred stock, the issuance of such preferred stock could adversely affect the rights of the holders of Common Stock and, therefore, reduce the value of the Common Stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of the Common Stock until the Board of Directors determines the specific rights of the holders of the preferred stock; however, these effects may include:
● | Restricting dividends on the Common Stock; | |
● | Diluting the voting power of the Common Stock; | |
● | Impairing the liquidation rights of the Common Stock; or | |
● | Delaying or preventing a change in control of the Company without further action by the stockholders. |
Other than in connection with shares of preferred stock (as explained above), which preferred stock is not currently designated nor contemplated by us, we do not believe that any provision of our charter or By-Laws would delay, defer or prevent a change in control.
Dividend Policy
The Company has not declared or paid any cash dividends on its common stock, and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.
Options
The Company does not have any outstanding options to purchase shares of Common Stock.
Warrants
The Company does not have any outstanding warrants to purchase shares of Common Stock.
Other Convertible Securities
The Company does not have any other outstanding convertible securities.
Transfer Agent
The transfer agent for our Common Stock is Island Stock Transfer, and its telephone number is 727-289-0010.
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
We are currently not aware of any pending legal proceedings to which we are a party or of which any of our property is the subject, nor are we aware of any such proceedings that are contemplated by any governmental authority.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Revised Statutes and our Articles of Incorporation allow us to indemnify our officers and directors from certain liabilities and our By-Laws state that we shall indemnify every present or former director or officer of ours (each an “Indemnitee”).
26 |
Our By-Laws provide that we shall indemnify an Indemnitee against all costs, charges and expenses, including amounts paid to settle an action or satisfy a judgment, actually and reasonably incurred by such Indemnitee.
Other than discussed above, neither our By-Laws nor Articles of Incorporation includes any specific indemnification provisions for our officers or directors against liability under the Securities Act. Additionally, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES
The information regarding (1) the issuance of 114,202,944 shares of Common Stock to Steven Yariv, and (2) the issuance of all of the issued and outstanding common stock of Save on Transport to the Registrant, set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Reverse Merger and Related Transactions” is incorporated herein by reference.
Shares Issued in Connection with the Reverse Merger
To effectuate the Reverse Merger we issued to Steven Yariv 114,202,944 shares of Common Stock. This transaction is exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering. None of the shares were sold through an underwriter and accordingly, there were no discounts or commissions involved.
Sales of Unregistered Securities of Save on Transport
On the Closing Date, pursuant to the terms of the Share Exchange Agreement, Steven Yariv sold all of the issued and outstanding common stock of Save on Transport to the Registrant. This transaction was exempt from registration pursuant to Section 4(a)(2) of the Securities Act as not involving any public offering. None of the shares were sold through an underwriter and accordingly, there were no discounts or commissions involved.
ITEM 5.01 CHANGES IN CONTROL OF REGISTRANT
The information regarding change of control of the Company in connection with the Reverse Merger set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Reverse Merger and Related Transactions” is incorporated herein by reference.
ITEM 5.02 DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
The information regarding departure and election of directors and departure and appointment of principal officers of the Company in connection with the Reverse Merger set forth in Item 2.01, “Completion of Acquisition or Disposition of Assets—The Reverse Merger and Related Transactions” is incorporated herein by reference.
ITEM 5.06 CHANGE IN SHELL COMPANY STATUS
Management has determined that, subsequent to the Reverse Merger, our company is no longer a shell company as defined in Rule 12b-2 of the United States Securities Exchange Act of 1934, as amended. Please refer to Item 2.01 of this Current Report for a detailed description of the Share Exchange Agreement and the business of our company following the Reverse Merger.
27 |
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
In accordance with Item 9.01(a), Save on Transport’s audited financial statements as of December 31, 2016 and for the period from July 12, 2016 (inception) to December 31, 2016, and the accompanying notes, are included in this Report beginning on Page F-1.
(b) Pro forma financial information.
In accordance with Item 9.01(c), the following unaudited pro forma financial information with respect to the Reverse Merger reported in Item 2.01 of this Current Report on Form 8-K are included in this Report beginning on page F-10.
● | Unaudited Pro Forma Combined Balance Sheet as of December 31, 2016 | |
● | Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2016 | |
● | Notes to the Unaudited Pro Forma Combined Financial Statements. |
(c) Exhibits
In reviewing the agreements included or incorporated by reference as exhibits to this Current Report on Form 8-K, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:
● | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; | |
● | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; | |
● | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and | |
● | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.
We have filed with the U.S. Securities and Exchange Commission (the “SEC”), located on 100 F Street NE, Washington, D.C. 20549, Current Reports on Form 8-K, Quarterly Reports on form 10-Q, Annual Reports on Form 10-K, and other reports, statements and information as required under the Securities Exchange Act of 1934, as amended.
The reports, statements and other information that we have filed with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
28 |
The SEC maintains a web site (http://www.sec.gov.) that contains the registration statements, reports, proxy and information statements and other information regarding registrants that file electronically with the SEC such as us. You may access our SEC filings electronically at this SEC website. These SEC filings are also available to the public from commercial document retrieval services.
Exhibit Number |
Description | |
2.1* | Share Exchange Agreement, dated as of March 30, 2017, by and among the Registrant and Save on Transport Inc. |
[* Filed herewith]
[† Management contract or compensatory plan or arrangement]
29 |
SHARE EXCHANGE AGREEMENT
This SHARE EXCHANGE AGREEMENT (this “Agreement”), dated as of March 30, 2017 is by and among PetroTerra Corp., a Nevada corporation (the “Parent”) and Save On Transport Inc., a Florida corporation (the “Company”), the Stockholder of the Company signatory hereto (the “Stockholder”).
BACKGROUND
The Stockholders owns all of the Company’s outstanding capital stock (the “Company Stock”). Stockholder has agreed to transfer all of his or its (hereinafter “its”) shares of Company Stock to the Parent in exchange for one hundred fourteen million, two hundred two thousand, nine hundred forty-four shares (114,202,944) shares of common stock (the “Shares”), par value $0.001 per share, of the Parent (the “Parent Stock”).
The exchange of Company Stock for Parent Stock is intended to constitute a reorganization within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986 (the “Code”), as amended or such other tax free reorganization exemptions that may be available under the Code.
The Board of Directors of the Parent and of the Company has determined that it is desirable to effect this plan of reorganization and share exchange.
AGREEMENT
NOW THEREFORE, the parties agree as follows:
ARTICLE
I
EXCHANGE OF SHARES
Section 1.01 EXCHANGE BY STOCKHOLDER. At the Closing (as defined in Section 1.02 below), the Stockholder shall sell, transfer, convey, assign and deliver to the Parent its Company Stock free and clear of all Liens (as defined in Section 2.01 below) in exchange for the Parent Stock.
Section 1.02 CLOSING. The closing (the “Closing”) of the transactions contemplated hereby (the “Transactions”) shall take place on the date hereof or on such later date as the parties hereto may agree (the “Closing Date”).
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER
The Stockholder hereby represents and warrants to the Parent as follows:
Section 2.01 GOOD TITLE. The Stockholder is the record and beneficial owner, and has good title to its Company Stock, with the right and authority to sell and deliver such Company Stock to the Parent. Upon delivery of any certificate or certificates duly assigned, representing the same as herein contemplated and/or upon registering of the Parent as the new owner of the Company Stock in the share register of the Company, the Parent will receive good title to its Company Stock, free and clear of all liens, security interests, pledges, equities and claims of any kind, voting trusts, stockholder agreements and other encumbrances (collectively, “Liens”).
Section 2.02 ORGANIZATION AND STANDING OF STOCKHOLDER. If the Stockholder is an entity, such Stockholder is a corporation, limited liability company or partnership duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.
Section 2.03 POWER AND AUTHORITY. Each Stockholder that is an entity has the legal power and authority to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Stockholder to enter into this Agreement and to carry out the Transactions have been properly taken. This Agreement constitutes a legal, valid and binding obligation of the Stockholder, enforceable against such Stockholder in accordance with the terms hereof.
Section 2.04 NO CONFLICTS. The execution and delivery of this Agreement by the Stockholder and the performance by the Stockholder of its obligations hereunder in accordance with the terms hereof: (i) will not require the consent of any third party or any federal, state, local or foreign government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, domestic or foreign (“Governmental Entity”) under any statutes, laws, ordinances, rules, regulations, orders, writs, injunctions, judgments, or decrees (collectively, “Laws”); (ii) will not violate any Laws applicable to such Stockholder and (iii) will not violate or breach any contractual obligation to which such Stockholder is a party.
Section 2.05 NO FINDER’S FEE. The Stockholder has not created any obligation for any finder’s, investment banker’s or broker’s fee in connection with the Transactions.
Section 2.06 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Parent Stock to be issued to the Stockholder under this Agreement will be acquired for investment for its own account, and not with a view to the resale or distribution of any part thereof, and the Stockholder has no present intention of selling or otherwise distributing the Parent Stock, except in compliance with applicable securities laws.
Section 2.07 AVAILABLE INFORMATION. The Stockholder has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Parent.
Section 2.08 NON-REGISTRATION. The Stockholder understands that the Parent Stock to be issued to the Stockholder under this Agreement has not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and, if issued in accordance with the provisions of this Agreement, will be issued by reason of a specific exemption from the registration provisions of the Securities Act which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Stockholder’s representations as expressed herein.
Section 2.09 RESTRICTED SECURITIES. The Stockholder understands that the Parent Stock is characterized as “restricted securities” under the Securities Act inasmuch as this Agreement contemplates that, if acquired by the Stockholder pursuant hereto, the Parent Stock would be acquired in a transaction not involving a public offering.
2 |
Section 2.10 LEGENDS. It is understood that the certificates representing Parent Stock to be issued under this Agreement will bear one or all of the following legends or any legend substantially similar to the following:
(a) “THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER THE SECURITIES REPRESENTED HEREBY NOR ANY INTEREST OR PARTICIPATION THEREOF MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENSE OF SUCH REGISTRATION, UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE ACT. HEDGING TRANSACTIONS INVOLVING SUCH SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT.”
(b) Any legend required by the “blue sky” laws of any state to the extent such laws are applicable to the securities represented by the certificate so legended.
ARTICLE
III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent, subject to such exceptions as are disclosed in the Disclosure Schedule supplied by the Parent to the Company and the Stockholder, dated as of the date hereof (the “Company Disclosure Schedule”), as follows:
Section 3.01 ORGANIZATION, STANDING AND POWER. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company does not own securities of any kind in any other entity. The Company is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect. For the purposes of this Agreement, “Material Adverse Effect” shall mean any adverse effect on an entity’s business, operations, assets, prospects or financial condition of such entity, taken as a whole, and which is material to such entity or other entities controlling or controlled by such entity or which is likely to materially hinder the performance by such entity of its respective obligations hereunder.
Section 3.02 SUBSIDIARIES. Prior to giving effect to the Transactions, the Company has no Subsidiaries. For the purposes of this Agreement, “Subsidiary” shall mean, with respect to any corporation or other entity, any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by such corporation or other entity and/or any of its other Subsidiaries.
Section 3.03 CAPITAL STRUCTURE. Currently, there are 10,000 shares of Company common stock issued and outstanding. All outstanding shares of the capital stock of the Company are duly authorized, validly issued, fully paid and nonassessable and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the applicable corporation law or any contract to which the Company is a party or otherwise bound. Except as set forth on Schedule 3.03 of the Company Disclosure Schedule, there are not any bonds, debentures, notes or other indebtedness of Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of ordinary shares of the Company may vote (“Voting Company Debt”). Except as set forth above, as of the date of this Agreement, there are not any options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which the Company is a party or by which any of them is bound (i) obligating the Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, the Company or any Voting Company Debt, (ii) obligating the Company to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, contract, arrangement or undertaking or (iii) that give any person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of the Company. As of the date of this Agreement, there are not any outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company.
3 |
Section 3.04 AUTHORITY; EXECUTION AND DELIVERY; ENFORCEABILITY. The Company has the requisite corporate power and authority to enter into and perform this Agreement. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization of the Company or its Board of Directors or the Stockholder is required. This Agreement has been duly executed and delivered by the Company. This Agreement constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by equitable principles or remedies of general application.
Section 3.05 NO CONFLICTS; CONSENTS.
(a) The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby do not and will not (i) violate any provision of the Articles of Incorporation of the Company, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company is a party or by which the Company or any of its respective properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of the Company under any agreement or any commitment to which the Company is a party or by which the Company is bound or by which any of their respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or by which any property or asset of the Company is bound or affected, except, in all cases other than violations pursuant to clause (iv) (with respect to federal and state securities laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of the Company is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which, singularly or in the aggregate, do not and will not have a Material Adverse Effect. The Company is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement.
(b) Except as set forth in Schedule 3.05 of the Company Disclosure Schedule and except for required filings with the Securities and Exchange Commission (the “Commission”) and applicable “Blue Sky” or state securities commissions, no material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or filing with, or permit from, any Governmental Entity is required to be obtained or made by or with respect to the Company in connection with the execution, delivery and performance of this Agreement or the consummation of the Transactions.
4 |
Section 3.06 LITIGATION. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or the Transactions or any action taken or to be taken pursuant hereto. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against or involving the Company or any of its respective properties or assets, which individually or in the aggregate, would have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any officers or directors of the Company, in their capacities as such, which individually, or in the aggregate, would have a Material Adverse Effect.
Section 3.07 COMPLIANCE WITH APPLICABLE LAWS. The business of the Company has been and is presently being conducted in accordance with all applicable governmental laws, rules, regulations and ordinances, except as set forth on Schedule 3.07 of the Company Disclosure Schedule or such that, individually or in the aggregate, the noncompliance therewith would not have a Material Adverse Effect. The Company has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Section 3.08 BROKERS; SCHEDULE OF FEES AND EXPENSES. Except as set forth on Schedule 3.08 of the Company Disclosure Schedule, the Company has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with this Agreement or the Transactions.
Section 3.09 CONTRACTS. Except for this Agreement and as set forth on Schedule 3.09 of the Company Disclosure Schedule, the Company is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission if the Company were registering securities under the Securities Act (collectively, “Company Material Agreements”). Except as set forth on Schedule 3.09 of the Company Disclosure Schedule, the Company has in all material respects performed all the obligations required to be performed by them to date under the foregoing agreements, have received no notice of default and, to the best of the Company’s knowledge, are not now, and after giving effect to the Transactions will not be, in default under any the Company Material Agreement now in effect, the result of which could cause a Material Adverse Effect.
Section 3.10 TITLE TO PROPERTIES. The Company has and, after giving effect to the Transactions, will continue to have, good and marketable title to all of its real and personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances of any nature whatsoever, except for those indicated on Schedule 3.10 of the Company Disclosure Schedule or such that, individually or in the aggregate, do not have a Material Adverse Effect. All material leases of the Company are valid and subsisting and in full force and effect.
5 |
Section 3.11 INTELLECTUAL PROPERTY. Schedule 3.11 contains a complete and correct list of all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing held by the Company (collectively, the “Company Proprietary Rights”). The Company owns or possesses and, after giving effect to the Transactions, will continue to own or possess, all the Company Proprietary Rights which are necessary for the conduct of its business as now conducted without any conflict with the rights of others. Except as disclosed on Schedule 3.11 of the Company Disclosure Schedule, (i) as of the date of this Agreement, the Company has not received any written notice that any Company Proprietary Rights have been declared unenforceable or otherwise invalid by any court or governmental agency or will become unenforceable or otherwise invalid as a result of the Transactions, and (ii) as of the date of this Agreement, there is, to the knowledge of the Company, no material existing infringement, misuse or misappropriation of any Company Proprietary Rights by others that could have a Material Adverse Effect. The Company has not received any written notice alleging that the operation of the business of the Company infringes in any material respect upon the intellectual property rights of others.
Section 3.12 NO MATERIAL ADVERSE CHANGE. Since December 31, 2016, no event or condition has occurred with respect to the Company which has had or could reasonably be expected to have a Material Adverse Effect, except as disclosed on Schedule 3.12 of the Company Disclosure Schedule.
Section 3.13 NO UNDISCLOSED LIABILITIES. Except as disclosed on Schedule 3.13 of the Company Disclosure Schedule, the Company does not have any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those set forth on the balance sheet as of December 31, 2016 included in the Company Financial Statements or incurred in the ordinary course of the Company’s business since December 31, 2016, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on the Company.
Section 3.14 INDEBTEDNESS. Schedule 3.14 of the Company Disclosure Schedule sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Company, or for which the Company has commitments. The Company is not in default with respect to any Indebtedness. For the purposes of this Agreement, “Indebtedness” shall mean (i) any liabilities for borrowed money in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business), (ii) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others in excess of $100,000, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto), except guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business, and (iii) the present value of any lease payments in excess of $100,000 due under leases required to be capitalized in accordance with GAAP.
Section 3.15 DISCLOSURE. To the best of the Company’s knowledge, neither this Agreement nor any other documents, certificates or instruments furnished to the Parent by or on behalf of the Company in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.
Section 3.16 ADDITIONAL AGREEMENTS. Other than this Agreement, the Company does not have any agreement or understanding with the Parent or any other person or entity with respect to the Transactions or any other transactions contemplated by this Agreement.
6 |
Section 3.17 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on Schedule 3.17 of the Company Disclosure Schedule, since December 31, 2016, the Company has not:
(a) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the Company’s business;
(c) discharged or satisfied any material lien or encumbrance or paid a material amount of any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;
(e) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;
(f) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, which sale, assignment or transfer has had a Material Adverse Effect, or disclosed any proprietary confidential information to any person except in the ordinary course of business or to the Parent or its representatives;
(g) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;
(h) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;
(i) made capital expenditures or commitments therefor that aggregate in excess of $25,000;
(j) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;
(k) made charitable contributions or pledges in excess of $25,000;
(l) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;
(m) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or entered into an agreement, written or otherwise, to take any of the foregoing actions.
7 |
ARTICLE
IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT
The Parent hereby represents and warrants to the Company and the Stockholder, subject to such exceptions as are disclosed in the Disclosure Schedule supplied by the Parent to the Company and the Stockholder, dated as of the date hereof (the “Parent Disclosure Schedule”), as follows:
Section 4.01 ORGANIZATION, GOOD STANDING AND POWER. The Parent is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. Parent does not own securities of any kind in any other entity. Parent is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except for any jurisdiction(s) (alone or in the aggregate) in which the failure to be so qualified will not have a Material Adverse Effect.
Section 4.02 SUBSIDIARIES. Prior to giving effect to the Transactions, the Parent has no Subsidiaries.
Section 4.03 CAPITALIZATION. The authorized capital stock of Parent and the shares thereof issued and outstanding as of the date hereof, prior to and after giving effect to the issuance of the shares of Parent Stock in the Transactions, are set forth on Schedule 4.03 of the Parent Disclosure Schedule. All of the outstanding shares of Parent Stock and any other security of Parent have been duly and validly authorized, and, to the extent applicable, are validly issued, fully paid and non-assessable. Except as set forth on Schedule 4.03 of the Parent Disclosure Schedule, no shares of Parent Stock or any other security of Parent are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, call or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of Parent. Furthermore, except as set forth on Schedule 4.03 of the Parent Disclosure Schedule, there are no contracts, commitments, understandings, or arrangements by which Parent is or may become bound to issue additional shares of the capital stock of Parent or options, securities or rights convertible into shares of capital stock of Parent. Except as provided on Schedule 4.03 of the Parent Disclosure Schedule, Parent is not a party to or bound by any agreement or understanding granting registration or anti-dilution rights to any person with respect to any of its equity or debt securities. Except as set forth on Schedule 4.03, Parent is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of Parent. Except as set forth on Schedule 4.03 of the Parent Disclosure Schedule, the offer and sale of all capital stock, convertible securities, rights, warrants, or options of Parent issued prior to the Closing complied with all applicable federal and state securities laws, and to the best knowledge of Parent, no holder of such securities has a right of rescission or has made or threatened to make a claim for rescission or damages with respect thereto which could have a Material Adverse Effect. Parent has furnished or made available to the Stockholder and the Company true and correct copies of Parent’s Certificate of Incorporation as in effect on the date hereof (the “Parent Charter”), and Parent’s Bylaws as in effect on the date hereof (the “Parent Bylaws”).
Section 4.04 AUTHORITY; ENFORCEMENT. Parent has the requisite corporate power and authority to enter into and perform this Agreement and to issue and sell the Shares in accordance with the terms hereof. The execution, delivery and performance of this Agreement by Parent and the consummation by Parent of the Transactions have been duly and validly authorized by all necessary corporate action, and no further consent or authorization of Parent or its Board of Directors or stockholders is required. This Agreement has been duly executed and delivered by Parent. This Agreement constitutes a valid and binding obligation of Parent enforceable against Parent in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by equitable principles or remedies of general application
8 |
Section 4.05 NO CONFLICTS. The execution, delivery and performance of this Agreement by Parent and the consummation by Parent of the Transactions do not and will not (i) violate any provision of the Parent Charter or Parent Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which Parent is a party or by which Parent’s properties or assets are bound, (iii) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature on any property or asset of Parent under any agreement or any commitment to which Parent is a party or by which Parent is bound or by which any of Parent’s respective properties or assets are bound, or (iv) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to Parent or by which any property or asset of Parent is bound or affected, except, in the case of (i) above and in all cases other than violations pursuant to clause (iv) (with respect to federal and state securities laws) above, for such conflicts, defaults, terminations, amendments, acceleration, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect. The business of Parent is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations, which singularly or in the aggregate, do not and will not have a Material Adverse Effect. Parent is not required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement or issue and sell the Shares, in accordance with the terms hereof or thereof (other than any filings which may be required to be made by Parent with the Commission or state securities administrators subsequent to the Closing, or any registration statement which may be filed pursuant hereto or thereto).
Section 4.06 COMMISSION DOCUMENTS; COMMISSION FILINGS; FINANCIAL STATEMENTS. The Parent has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including, but not limited to, current reports on Form 8-K (and all of the foregoing, including filings incorporated by reference therein, filed prior to the date hereof being referred to herein as the “Commission Documents”). At the time of its filing, Parent’s Form 10-Q for the fiscal quarter ended December 31, 2016 (the “Form 10-Q”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Form 10-Q did not contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. At the time of their filing, the Commission Documents complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and did not contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of Parent included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of Parent as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).
9 |
Section 4.07 ISSUANCE OF SECURITIES. The Shares to be issued at the Closing have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Shares shall be validly issued and outstanding, fully paid and nonassessable and free and clear of all liens, encumbrances and rights of first refusal of any kind and the holders shall be entitled to all rights accorded to a holder of Parent Stock.
Section 4.08 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on Schedule 4.08 of the Parent Disclosure Schedule, since December 31, 2016, Parent has not:
(a) issued any stock, bonds or other corporate securities or any rights, options or warrants with respect thereto;
(b) borrowed any amount or incurred or become subject to any liabilities (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of Parent’s business;
(c) discharged or satisfied any material lien or encumbrance or paid a material amount of any obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business;
(d) declared or made any payment or distribution of cash or other property to stockholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;
(e) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business;
(f) sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights, which sale, assignment or transfer has had a Material Adverse Effect, or disclosed any proprietary confidential information to any person except in the ordinary course of business or to the Purchasers or their representatives;
(g) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of prospective business;
(h) made any changes in employee compensation except in the ordinary course of business and consistent with past practices;
(i) made capital expenditures or commitments therefor that aggregate in excess of $25,000;
(j) entered into any other transaction other than in the ordinary course of business, or entered into any other material transaction, whether or not in the ordinary course of business;
(k) made charitable contributions or pledges in excess of $25,000;
(l) suffered any material damage, destruction or casualty loss, whether or not covered by insurance;
10 |
(m) experienced any material problems with labor or management in connection with the terms and conditions of their employment; or
(n) entered into an agreement, written or otherwise, to take any of the foregoing actions.
Section 4.09 EMPLOYEES. Parent has no employees.
Section 4.10 LITIGATION. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of Parent, threatened against Parent which questions the validity of this Agreement or any of the Transactions or any action taken or to be taken pursuant hereto. There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of Parent, threatened against or involving Parent or any of its properties or assets, which individually or in the aggregate, would have a Material Adverse Effect. There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against Parent or any officers or directors of Parent in their capacities as such, which, individually or in the aggregate, would have a Material Adverse Effect.
Section 4.11 COMPLIANCE WITH LAW. The business of Parent has been and is presently being conducted in accordance with all applicable federal, state and local governmental laws, rules, regulations and ordinances, except as set forth in Schedule 4.11 of the Parent Disclosure Schedule or such that, individually or in the aggregate, the noncompliance therewith would not have a Material Adverse Effect. Parent has all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it unless the failure to possess such franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
Section 4.12 CONTRACTS. Except for this Agreement and as set forth on Schedule 4.12 of the Parent Disclosure Schedule, Parent is not a party to any written or oral contract, instrument, agreement, commitment, obligation, plan or arrangement, a copy of which would be required to be filed with the Commission if Parent were registering securities under the Securities Act (collectively, “Parent Material Agreements”). Except as set forth on Schedule 4.12 of the Parent Disclosure Schedule, Parent has in all material respects performed all the obligations required to be performed by Parent to date under the Parent Material Agreements, has received no notice of default and, to the best of Parent’s knowledge, is not in default under any Parent Material Agreement now in effect, the result of which could cause a Material Adverse Effect. No written or oral contract, instrument, agreement (other than the as provided to any preferred stock now or hereinafter created by a certificate of designation), commitment, obligation (other than any obligation imposed by state law), plan or arrangement of Parent limits or shall limit the payment of dividends on the Parent Stock.
Section 4.13 TITLE TO ASSETS. The Parent has good and marketable title to all of its real and personal property, if any, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances of any nature whatsoever, except for those indicated on Schedule 4.13 of the Parent Disclosure Schedule or such that, individually or in the aggregate, do not have a Material Adverse Effect.
11 |
Section 4.14 INTELLECTUAL PROPERTY. Schedule 4.14 contains a complete and correct list of all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations, and all rights with respect to the foregoing held by Parent (collectively, the “Parent Proprietary Rights”). Parent owns or possesses all the Parent Proprietary Rights which are necessary for the conduct of its business as now conducted without any conflict with the rights of others. As of the date of this Agreement, Parent has not received any written notice that any Parent Proprietary Rights have been declared unenforceable or otherwise invalid by any court or governmental agency, and there is, to the knowledge of Parent, no material existing infringement, misuse or misappropriation of any Parent Proprietary Rights by others that could have a Material Adverse Effect. Parent has not received any written notice alleging that the operation of the business of Parent infringes in any material respect upon the intellectual property rights of others.
Section 4.15 NO MATERIAL ADVERSE CHANGE. Since December 31, 2016, no event has occurred which has or could reasonably be expected to have a Material Adverse Effect.
Section 4.16 NO UNDISCLOSED LIABILITIES. Parent has no liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those set forth on the balance sheet included in the Form 10-Q or incurred in the ordinary course of Parent’s business since December 31, 2016, and which, individually or in the aggregate, do not or would not have a Material Adverse Effect on Parent.
Section 4.17 NO UNDISCLOSED EVENTS OR CIRCUMSTANCES. Since December 31, 2016, except as disclosed on Schedule 4.17 of the Parent Disclosure Schedule, no event or circumstance has occurred or exists with respect to Parent or its business, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by Parent but which has not been so publicly announced or disclosed.
Section 4.18 GOVERNMENTAL APPROVALS. Except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the Transactions, or, except as set forth in this Agreement, for the performance by Parent of its obligations under this Agreement.
Section 4.19 INDEBTEDNESS. Schedule 4.19 of the Parent Disclosure Schedule sets forth as of the date hereof all outstanding secured and unsecured Indebtedness of the Parent, or for which the Parent has commitments. The Parent is not in default with respect to any Indebtedness.
Section 4.20 DISCLOSURE. To the best of Parent’s knowledge, neither this Agreement nor any other documents, certificates or instruments furnished to the Company or the Stockholder by or on behalf of Parent in connection with the Transactions and this Agreement contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.
Section 4.21 CERTAIN FEES. The Parent has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transactions or this Agreement.
12 |
Section 4.22 SECURITIES ACT OF 1933. Assuming the accuracy and completeness of the representations, warranties and covenants of the Stockholder contained herein, the Parent has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and sale of the Shares hereunder and no registration under the Securities Act is required for the offer and sale of the Shares by the Parent to the Stockholder under this Agreement. Neither Parent nor anyone acting on its behalf, directly or indirectly, has or will sell, offer to sell or solicit offers to buy any of the Shares, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to require registration of the issuance and sale of any of the Shares under the registration provisions of the Securities Act and applicable state securities laws. Neither Parent nor any of its affiliates, nor any person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Shares. The Parent is eligible to register the Parent Stock for resale by any holder thereof (including, but not limited to, the Stockholder) under Form S-1 promulgated under the Securities Act. Except as set forth on Schedule 4.22 of the Parent Disclosure Schedule, the Parent has not granted or agreed to grant to any person any rights (including “piggy-back” registration rights) to have any securities of the Parent registered with the Commission or any other governmental authority that have not been satisfied.
Section 4.23 PRESS RELEASES. The press releases, if any, disseminated by the Parent during the twelve months preceding the date of this Agreement, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made and when made, not misleading.
Section 4.24 LISTING AND MAINTENANCE REQUIREMENTS. Except as set forth on Schedule 4.24 of the Parent Disclosure Schedule, the Parent has not, in the two years preceding the date hereof, received notice from any trading market to the effect that the Parent is not in compliance with the listing or maintenance requirements thereof. The Parent is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued listing of the Parent Stock on the trading market on which the Parent Stock is currently listed or quoted. The issuance and sale of the Shares under this Agreement does not contravene the rules and regulations of the trading market on which the Parent Stock is currently listed or quoted.
Section 4.25 APPLICATION OF TAKEOVER PROTECTIONS. The Parent has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Parent’s Charter (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Stockholder as a result of the Stockholder and the Parent fulfilling their obligations or exercising their rights under this Agreement, including, without limitation, the Parent’s issuance of the Shares and the Stockholder’s ownership of the Shares.
Section 4.26 NO ADDITIONAL AGREEMENTS. The Parent does not have any agreement or understanding with any Stockholder with respect to the transactions contemplated by this Agreement other than as specified in this Agreement.
13 |
ARTICLE
V
DELIVERIES
Section 5.01 DELIVERIES OF THE STOCKHOLDER.
(a) Concurrently herewith Stockholder is delivering to the Parent this Agreement executed by Stockholder.
(b) At or prior to the Closing, Stockholder shall deliver to the Parent (subject to the provisions of Section 6.01), duly executed stock powers for transfer by the Stockholder of its Company Stock to the Parent.
Section 5.02 DELIVERIES OF THE PARENT.
(a) Concurrently herewith, the Parent is delivering:
(i) to each Stockholder and to the Company, a copy of this Agreement executed by the Parent along with the Parent Disclosure Schedule;
(ii) to the Company, a letter of resignation of Lawrence Sands from his position as an officer and director of the Parent that will become effective upon the consummation of the Closing;
(iii) to the Company, resolutions of the Parent’s Board of Directors amending and restating the Parent Bylaws, effective upon the Closing, in form and substance acceptable to the Company;
(iv) to the Company, a certificate of good standing of the Parent issued by the Secretary of State of the State of Delaware; and
(v) to the Company, all books and records of the Parent.
(b) At or immediately after the Closing, the Parent shall deliver (subject to the provisions of Section 6.02) to Stockholder, certificates representing the new shares of Parent Common Stock issued to Stockholder in accordance with Section 1.01;
Section 5.03 DELIVERIES OF THE COMPANY.
(a) Concurrently herewith, the Company is delivering to the Parent:
(i) this Agreement executed by Company along with the Company Disclosure Schedule; and
(ii) all books and records of the Company.
ARTICLE
VI
CONDITIONS TO CLOSING
Section 6.01 STOCKHOLDER AND COMPANY CONDITIONS PRECEDENT. The obligations of the Stockholder and the Company to enter into and complete the Closing is subject, at the option of the Stockholder and the Company, to the fulfillment on or prior to the Closing Date of the following conditions.
(a) REPRESENTATIONS AND COVENANTS. The representations and warranties of the Parent contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. The Parent shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Parent on or prior to the Closing Date. The Parent shall have delivered to the Company, if requested, a certificate, dated the Closing Date, to the foregoing effect.
14 |
(b) LITIGATION. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of the Company, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of the Parent.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have been any occurrence, event, incident, action, failure to act, or transaction since February 28, 2016 which has had or is reasonably likely to cause a Parent Material Adverse Effect.
(d) POST-CLOSING CAPITALIZATION. At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of the Company and the Parent, on a fully-diluted basis, shall be as specified in Exhibit A.
(e) COMMISSION REPORTS. The Parent shall have filed all reports and other documents required to be filed by Parent under the U.S. federal securities laws through the Closing Date (which shall also include any filings required to be filed by a company with securities registered under Section 12 of the Exchange Act).
(f) OTCBB QUOTATION. The Parent shall have maintained the eligibility of the Parent Stock for quotation on the Over-the-Counter Bulletin Board and no event or circumstance shall exist on the Closing Date that would cause, or could reasonably be expected to cause, the Parent Stock to cease to be so eligible within forty-five (45) days following the Closing.
(g) DELIVERIES. The deliveries specified in Section 5.02 shall have been made by the Parent.
Section 6.02 PARENT CONDITIONS PRECEDENT. The obligations of the Parent to enter into and complete the Closing is subject, at the option of the Parent, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by the Parent in writing.
(a) REPRESENTATIONS AND COVENANTS. The representations and warranties of the Stockholder and the Company contained in this Agreement shall be true in all material respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. The Stockholder and the Company shall have performed and complied in all material respects with all covenants and agreements required by this Agreement to be performed or complied with by the Stockholder and the Company on or prior to the Closing Date. The Company shall have delivered to the Parent, if requested, a certificate, dated the Closing Date, to the foregoing effect.
(b) LITIGATION. No action, suit or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body to restrain, modify or prevent the carrying out of the Transactions or to seek damages or a discovery order in connection with such Transactions, or which has or may have, in the reasonable opinion of the Parent, a materially adverse effect on the assets, properties, business, operations or condition (financial or otherwise) of the Parent.
(c) NO MATERIAL ADVERSE CHANGE. There shall not have been any occurrence, event, incident, action, failure to act, or transaction since March 31, 2016 which has had or is reasonably likely to cause a Company Material Adverse Effect.
15 |
(d) DELIVERIES. The deliveries specified in Section 5.01 and Section 5.03 shall have been made by the Stockholder and the Company, respectively.
(e) AUDITED FINANCIAL STATEMENTS AND FORM 8-K DISCLOSURE. The Company shall have provided the Parent with reasonable assurances that the Parent will be able to comply with its obligation to file a current report on Form 8-K within four (4) days following the Closing containing the requisite audited financial statements of the Company and the requisite disclosure regarding the Company required under Item 2.01(f) of Form 8-K.
(f) POST-CLOSING CAPITALIZATION. At, and immediately after, the Closing, the authorized capitalization, and the number of issued and outstanding shares of the capital stock of the Company and the Parent, on a fully-diluted basis, shall be as specified in Exhibit A.
Section 6.03 NO SUSPENSIONS OF TRADING IN PARENT STOCK; LISTING. Trading in the Parent Stock shall not have been suspended by the Commission or any trading market (except for any suspensions of trading of not more than one trading day solely to permit dissemination of material information regarding the Parent) at any time since the date of execution of this Agreement, and the Parent Stock shall have been at all times since such date listed for trading on a trading market or eligible for quotation on the OTC Marketplace.
ARTICLE
VII
COVENANTS
Section 7.01 BLUE SKY LAWS. Parent shall take any action (other than qualifying to do business in any jurisdiction in which it is not now so qualified) required to be taken under any applicable state securities laws in connection with the issuance of Parent Stock in connection with this Agreement and pursuant to the Transactions.
Section 7.02 PUBLIC ANNOUNCEMENTS. Parent and the Company will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the Agreement and the Transactions and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national securities exchange.
Section 7.03 FEES AND EXPENSES. All fees and expenses incurred in connection with this Agreement shall be paid by the party incurring such fees or expenses, whether or not this Agreement is consummated.
Section 7.04 CONTINUED EFFORTS. Each party hereto shall use commercially reasonable efforts to (a) take all action reasonably necessary to consummate the Transactions, and (b) take such steps and do such acts as may be necessary to keep all of its representations and warranties true and correct as of the Closing Date with the same effect as if the same had been made, and this Agreement had been dated, as of the Closing Date.
Section 7.05 CONDUCT OF BUSINESS. During the period from the date hereof through the Closing Date, Parent and the Company shall carry on their respective businesses in the ordinary and usual course consistent with past practice.
16 |
Section 7.06 EXCLUSIVITY. The Parent shall not (i) solicit, initiate, or encourage the submission of any proposal or offer from any person relating to the acquisition of any capital stock or other voting securities of the Parent, or any assets of the Parent (including any acquisition structured as a merger, consolidation, share exchange or other business combination), (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any person to do or seek any of the foregoing, or (iii) take any other action that is inconsistent with the Transactions and that has the effect of avoiding the Closing contemplated hereby. The Parent shall notify the Company immediately if any person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing.
Section 7.07 FILING OF 8-K. Parent shall, and the Stockholder shall cause the Parent to, file, within four business days of the Closing Date, a current report on Form 8-K with the Commission disclosing the terms of this Agreement and other requisite disclosure regarding the Transactions and including the requisite audited consolidated financial statements of the Company and the requisite disclosure regarding the Company required under Item 2.01(f) of Form 8-K.
Section 7.08 FURNISHING OF INFORMATION. As long as any Stockholder owns any Shares and is not eligible to sell any Shares under Rule 144, the Parent covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Parent after the date hereof pursuant to the Exchange Act. As long as any Stockholder owns Shares and is not eligible to sell any Shares under Rule 144, if the Parent is not required to file reports pursuant to such laws, it will prepare and furnish to the Stockholder and make publicly available in accordance with Rule 144, such information as is required for the Stockholder to sell the Shares under Rule 144. The Parent further covenants that it will take such further action as any holder of Shares may reasonably request, all to the extent required from time to time to enable such person to sell the Shares without registration under the Securities Act within the limitation of the exemptions provided by Rule 144.
Section 7.09 INTEGRATION. The Company shall not, and shall use its best efforts to ensure that no affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Shares in a manner that would require the registration under the Securities Act of the acquisition of the Shares by the Stockholder pursuant to the Agreement, or that would be integrated with the offer or sale of the Shares for purposes of the rules and regulations of any trading market in a manner that would require stockholder approval of the sale of the securities to the Stockholder.
Section 7.10 NON-PUBLIC INFORMATION. Each of the Company and Parent covenant and agree that neither it nor any other person acting on their behalf will provide any Stockholder or its agents or counsel with any information that the Company or Parent believes constitutes material non-public information, unless prior thereto such Stockholder shall have executed a written agreement regarding the confidentiality and use of such information. Each of the Company and Parent understands and confirms that each Stockholder shall be relying on the foregoing representations in effecting transactions in securities of the Parent.
Section 7.11 LISTING OF PARENT STOCK. The Parent agrees that (i) if the Parent applies to have Parent Stock listed for trading on any exchange or any market operated by NASDAQ, it will include in such application the Shares, and will take such other action as is necessary or desirable to cause the Shares to be listed on such exchange or NASDAQ market as promptly as possible, and (ii) it will take all action reasonably necessary to continue the listing and trading of Parent Stock on any such exchange or NASDAQ market and will comply in all material respects with the Parent’s reporting, filing and other obligations under the bylaws or rules of the trading market.
17 |
ARTICLE
VIII
MISCELLANEOUS
Section 8.01 NOTICES. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given upon receipt by the parties at the following addresses (or at such other address for a party as shall be specified by like notice):
If to the Stockholder, to the address set forth below Stockholder’s signature hereto.
If to the Parent or the Company, to:
PetroTerra Corp.
980 N. Federal Highway
Boca Raton, Florida 33432
Attention: Lawrence Sands
Telephone: 561-988-1988
Telecopy:
with a copy to:
Pryor Cashman LLP
7 Times Square
New York, New York 10036
Attention: M. Ali Panjwani, Esq.
Telephone: 212-326-0820
Telecopy: 212-798-6319
Section 8.02 AMENDMENTS; WAIVERS; NO ADDITIONAL CONSIDERATION. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company, Parent and the Stockholder. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.
Section 8.03 REPLACEMENT OF SHARES. If any certificate or instrument evidencing any Shares is mutilated, lost, stolen or destroyed, the Parent shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Parent of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Shares is requested due to a mutilation thereof, the Parent may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.
Section 8.04 REMEDIES. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Stockholder, Parent and the Company will be entitled to specific performance under this Agreement. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
18 |
Section 8.05 LIMITATION OF LIABILITY. Notwithstanding anything herein to the contrary, each of the Parent and the Company acknowledge and agree that the liability of a Stockholder arising directly or indirectly, under any transaction document of any and every nature whatsoever shall be satisfied solely out of the assets of such Stockholder, and that no trustee, officer, other investment vehicle or any other affiliate of such Stockholder or any investor, shareholder or holder of shares of beneficial interest of such Stockholder shall be personally liable for any liabilities of such Stockholder.
Section 8.06 INTERPRETATION. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.
Section 8.07 SEVERABILITY. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that Transactions contemplated hereby are fulfilled to the extent possible.
Section 8.08 COUNTERPARTS; FACSIMILE EXECUTION. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Facsimile execution and delivery of this Agreement is legal, valid and binding for all purposes.
Section 8.09 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement, taken together with the Company Disclosure Schedule and the Parent Disclosure Schedule, (a) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the Transactions and (b) are not intended to confer upon any person other than the parties any rights or remedies.
Section 8.10 GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof, except to the extent the laws of Delaware are mandatorily applicable to the Transactions.
Section 8.11 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK; SIGNATURES FOLLOW]
19 |
IN WITNESS WHEREOF, The parties hereto have executed and delivered this Share Exchange Agreement as of the date first above written.
PARENT | ||
PETROTERRA CORP. | ||
By: | /s/ Lawrence Sands | |
Name: | Lawrence Sands | |
Title: | Chief Executive Officer |
COMPANY | ||
SAVE ON TRANSPORT INC. | ||
By: | /s/ Steven Yariv | |
Name: | Steven Yariv | |
Title: | Pres |
STOCKHOLDER: | |||
/s/ Steven Yariv | |||
Steven Yariv |
Address: | 2833 Exchange Ct | ||
West Palm Beach, FL 33409 | |||
Signature
Page to
Share Exchange Agreement
Exhibit A
The Parent’s authorized capital after giving effect to the Transactions consists of 500,000,000 shares of common stock, par value $0.001 per share, and 4,000,000 million shares of preferred stock, par value $0.001 per share. After giving effect to the Transactions, the Parent has 115,147,064 shares of common stock issued and outstanding.
Attached is a capitalization table which sets forth the outstanding shares of common stock, outstanding options and warrants exercisable to purchase shares of common stock, and outstanding convertible debt exercisable to purchase shares of common stock.
D |
Exhibit 4.03
Parent Disclosure Schedule (Petroterra Corp.)
Capitalization Table as of March 30, 2017
Preferred Stock | Common Stock | |||||||||||||||||||
Conversion | Total | Total | Equivalent | Equivalent | ||||||||||||||||
Name | Price | Shares | Shares | Shares | % Outstanding | |||||||||||||||
Common Stock | ||||||||||||||||||||
Non Affiliated Outstanding Shares | $ | 0.0833 | 4,000,000 | 48,019,208 | 29.4 | % | ||||||||||||||
944,120 | 944,120 | 0.6 | % | |||||||||||||||||
Issuance - Steve | 114,202,944 | 114,202,944 | 70.0 | % | ||||||||||||||||
Directors & Officers | - | |||||||||||||||||||
Total Common Stock Outstanding | 4,000,000 | 115,147,064 | 163,166,272 | 100.0 | % | |||||||||||||||
Total Authorized | 4,000,000 | 500,000,000 | ||||||||||||||||||
Shares Available for Issuance | - | 336,833,728 |
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
F-1 |
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholder of
Save on Transport Inc.
We have audited the accompanying balance sheet of Save on Transport Inc. at December 31, 2016, and the related statements of operations, changes in stockholder’s equity and cash flows for the period from July 12, 2016 (inception) to December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Save on Transport Inc. as of December 31, 2016, and the results of its operations and its cash flows for the period from July 12, 2016 (inception) to December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is in an early stage and the revenues and net income for the period from July 12, 2016 (inception) to December 31, 2016 are minimal. These matters raise substantial doubt about the Company's ability to continue as a going concern. Management’s plan in regards to these matters is also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Salberg & Company, P.A. | |
SALBERG & COMPANY, P.A. | |
Boca Raton, Florida | |
April 5, 2017 |
2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431-7328
Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com • info@salbergco.com
Member National Association of Certified Valuation Analysts • Registered with the PCAOB
Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
F-2 |
SAVE ON TRANSPORT INC
December 31, 2016 | ||||
ASSETS | ||||
Current Assets: | ||||
Cash and cash equivalents | $ | 11,725 | ||
Prepaid expenses | 676 | |||
Deferred expense | 1,950 | |||
Total Current Assets | 14,351 | |||
Total Assets | $ | 14,351 | ||
LIABILITIES AND STOCKHOLDER’S EQUITY | ||||
Current Liabilities: | ||||
Accounts payable | $ | 1,318 | ||
Deferred revenue | 2,800 | |||
Payroll taxes payable | 2,107 | |||
Total Current Liabilities | 6,225 | |||
Total Liabilities | 6,225 | |||
Commitments and contingencies (Note 5) | ||||
Stockholder's Equity: | ||||
Common stock, par value $0.01 per share; authorized 10,000 shares; issued and outstanding 10,000 shares | 100 | |||
Additional paid-in capital | 8,000 | |||
Retained earnings | 26 | |||
Total Stockholder’s Equity | 8,126 | |||
Total Liabilities and Stockholder’s Equity | $ | 14,351 |
The accompanying notes are an integral part of these financial statements.
F-3 |
SAVE ON TRANSPORT INC
For the period from July 12, 2016 (inception) to December 31, 2016 | ||||
Revenues | $ | 72,222 | ||
Total Revenue | 72,222 | |||
Cost of Revenues | ||||
Carrier fees | 50,375 | |||
Compliance | 129 | |||
Dispatch | 450 | |||
Total Cost of Revenues | 50,954 | |||
Gross Profit | 21,268 | |||
Operating Expenses: | ||||
Legal and professional | 5,871 | |||
Payroll and related expenses | 9,919 | |||
Rent - affiliate | 1,500 | |||
General and adminstrative expenses | 3,952 | |||
Total Operating Expenses | 21,242 | |||
Operating Income | 26 | |||
Net Income | $ | 26 | ||
Basic Earnings Per Share | $ | 0.00 | ||
Diluted Earnings Per Share | $ | 0.00 | ||
Weighted average shares used in per share calculations: | ||||
Basic | 10,000 | |||
Diluted | 10,000 |
The accompanying notes are an integral part of these financial statements.
F-4 |
SAVE ON TRANSPORT INC
Statement of Changes in Stockholder’s Equity
For the period from July 12, 2016 (inception) to December 31, 2016
Additional | Total | |||||||||||||||||||
Common Stock | Paid-in | Retained | Stockholder's | |||||||||||||||||
Shares | Par Value | Capital | Earnings | Equity | ||||||||||||||||
Beginning Balances, July 12, 2016 | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
Common stock issued to founder | 10,000 | 100 | 8,000 | 8,100 | ||||||||||||||||
Net income | 26 | 26 | ||||||||||||||||||
Balances, December 31, 2016 | 10,000 | $ | 100 | $ | 8,000 | $ | 26 | $ | 8,126 |
The accompanying notes are an integral part of these financial statements.
F-5 |
SAVE ON TRANSPORT INC
For the period from July 12, 2016 (inception) to December 31, 2016 | ||||
Cash Flows From Operating Activities: | ||||
Net Income | $ | 26 | ||
Adjustments to reconcile net income to net cash provided by operating activities: Increase (decrease) in cash resulting from changes in: | ||||
Prepaid expenses and other current assets | (2,626 | ) | ||
Accounts payable | 1,318 | |||
Deferred revenue | 2,800 | |||
Payroll tax payable | 2,107 | |||
Net Cash Provided By Operating Activities | 3,625 | |||
Cash Flows From Financing Activities: | ||||
Proceeds from common stock issued to founder | 8,100 | |||
Proceeds from shareholder loan | 1,680 | |||
Repayment of shareholder loan | (1,680 | ) | ||
Net Cash Provided By Financing Activities | 8,100 | |||
Net Increase in Cash and Cash Equivalent | 11,725 | |||
Cash and Cash Equivalents at Beginning of Period | - | |||
Cash and Cash Equivalents at End of Period | $ | 11,725 |
The accompanying notes are an integral part of these financial statements.
F-6 |
SAVE ON TRANSPORT INC
December 31, 2016
Note 1 — Description of Business and Basis of Presentation
Organization and Description of Business
Save On Transport Inc. (the “Company” or “Save On”) was incorporated in the state of Florida and started business on July 12, 2016 (“inception date”). Save On is a provider of integrated transportation management solutions consisting of brokerage and logistic services such as transportation scheduling, routing and other value added services related to the transportation of automobiles and other freight.
Basis of Presentation
General — The accompanying financial statements were prepared in accordance with principles generally accepted in the United States (“US GAAP”) and include all adjustments necessary for the fair presentation of the period presented.
Going Concern
The accompanying financial statements are prepared assuming the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since the Company is in an early stage and the revenues and net income for the period from July 12, 2016 (inception) to December 31, 2016 are minimal, it is management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon increasing revenues both organically, with increased marketing efforts, and potential acquisition targets, which would be accretive to the Company. Additional capital may be required for the Company to meet its revenue growth plans. The financial statements do not include any adjustments relating to recovery of recorded assets or classification of liabilities should the Company be unable to continue as a going concern.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates —The preparation of the financial statements, in accordance with US-GAAP, requires management to make estimates and assumptions about future events that affect the amounts reported in the Company’s financial statements and accompanying notes. On an ongoing basis, management evaluates and periodically adjusts its estimates and assumptions, based on historical experience, the impact of the current economic environment, and other key factors. Volatile energy markets, as well as changes in consumer spending have increased the inherent uncertainty in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
Cash and Cash Equivalents —The Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents. As of December 31, 2016, the Company did not have any cash equivalents. The Company’s cash balance does not exceed federal insured limits.
Revenue Recognition and Cost of Revenue —The Company recognizes operating revenues and the related direct costs of such revenue as of the date the freight is delivered by the carrier. Customer payments received prior to delivery are recorded as a deferred revenue liability and related carrier fees if paid prior to delivery are recorded as a deferred expense asset. In accordance with ASC Topic 605-45, Principal Agent Considerations, the Company recognizes revenue on a gross basis.
Income Taxes — The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to operating loss and tax credit carryforwards, as well as differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in income in the period that includes the enactment date.
The Company does not recognize a tax benefit for uncertain tax positions unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority based solely on the technical merits of the associated tax position. If the recognition threshold is met, the Company recognizes a tax benefit measured at the largest amount of the tax benefit that, in the management’s judgment, is greater than 50% likely to be realized. The Company records interest and penalties related to unrecognized tax positions in “Income tax expense” in the income statement.
F-7 |
SAVE ON TRANSPORT INC
Notes to Financial Statements
December 31, 2016
Earnings per Share (“EPS”) — The Company applies the provisions of ASC Topic 260, Earnings per Share, which requires companies to present basic EPS and diluted EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. There were no common stock equivalents outstanding as of December 31, 2016.
Recently Issued Accounting Pronouncements — In August 2015, FASB issued ASU 2015-14, Deferral of the Effective Date, which amends ASC Topic 606, Revenue from Contracts with Customers. ASC Topic 606 was established by previously-issued ASU 2014-09, discussed below. For public business entities, the amendments in ASU 2015-14 defer the effective date of ASU 2014-09 to annual reporting periods beginning after December 15, 2017. Early adoption of ASU 2014-09 is permitted. In May 2014, FASB issued ASU 2014-09, Revenue from Contracts with Customers, which established ASC Topic 606. The new revenue recognition standard eliminates all industry-specific guidance and provides a five-step analysis of transactions to determine when and how revenue is recognized. The premise of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The amendments in this ASU may be applied retrospectively to each period presented, or as a cumulative effect adjustment as of the date of adoption. Management is currently evaluating the accounting, transition and disclosure requirements of the standard and expects to know the financial statement impact upon adoption in 2018.
Note 3 — Deferred Expenses
The following table presents the composition of deferred expenses:
December 31, 2016 | ||||
Carrier Fees | $ | 1,950 | ||
Deferred expenses | $ | 1,950 |
Note 4 — Accounts Payable and Accrued Liabilities
The following table presents the composition of accounts payable and accrued liabilities:
December 31, 2016 | ||||
Legal and Professional | $ | 1,318 | ||
Accounts payable and accrued liabilities | $ | 1,318 |
F-8 |
SAVE ON TRANSPORT INC
Notes to Financial Statements
December 31, 2016
Note 5 — Commitments and Contingencies
From time to time, we may be involved in litigation relating to claims arising out of our operation in the normal course of business. As of December 31, 2016, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on results of our operations.
Note 6 — Stockholder’s Equity
Common Stock
On the inception date the Company issued 10,000 shares of common stock to the founder for proceeds of $8,100. Holders of common stock are entitled to one vote per share.
Note 7 — Income Taxes
The following table presents the Company’s income tax expense at an estimated effective tax rate of 15%:
2016 | ||||
Current expense: | ||||
Federal | $ | –– | ||
Income tax expense | $ | –– |
There were no deferred tax assets or liabilities as of December 31, 2016
Note 8 — Related Party Transactions
The Company executed a sublease agreement with an affiliate for office space for a one year term. The sublease commenced on August 1, 2016 at a rate of $300 per month.
Certain expenses of the Company were paid by the sole shareholder and recorded as a shareholder loan of $1,680. The shareholder loan was repaid in full prior to December 31, 2016.
Note 9 — Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through April 5, 2017, the date the financial statements were available to be issued.
On March 30, 2017, the Company closed a Share Exchange Agreement with PetroTerra Corp (Petro), a Nevada corporation, whereby the Company has agreed to transfer all of its shares of common stock to Petro in exchange for 114,202,944 shares of Petro common stock.
The transaction is being accounted for as a reverse merger between a private company and an inactive public company in which Save On, the private company, is considered to be the acquirer of Petro since the sole shareholder of Save On obtained approximately 99% voting control and management and board control. Accordingly, the reverse merger is accounted for as a recapitalization of Save On in which the assets and liabilities of both companies, on the transaction date, are recorded at their historical book values. The equity of Save On is retroactively restated to give effect to the exchange of the Save On shares for Petro shares, the historical activity of the combined entity is that of Save On and the activity of Petro is recorded only from the date of the transaction.
F-9 |
SAVE ON TRANSPORT, INC.
Pro Forma Combined Balance Sheet as of December 31, 2016
Petroterra Corp. | Save On Transport | Pro-Forma Adjustments | JE# | Combined | ||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets: | ||||||||||||||||||||
Cash | $ | - | $ | 11,725 | $ | - | $ | 1, 2, 3 | $ | 11,725 | ||||||||||
Cash held in escrow | 10,000 | 3 | 10,000 | |||||||||||||||||
Prepaid expenses | 676 | - | 676 | |||||||||||||||||
Deferred expense - asset | - | 1,950 | - | 1,950 | ||||||||||||||||
Total current assets | - | 14,351 | 10,000 | 24,351 | ||||||||||||||||
Property and equipment, net | 693 | - | (693 | ) | 1 | - | ||||||||||||||
Total Assets | $ | 693 | $ | 14,351 | $ | 9,307 | $ | - | $ | 24,351 | ||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||
Bank overdraft | $ | 78 | $ | - | $ | (78 | ) | $ | 1 | $ | - | |||||||||
Accounts payable and accrued expenses | 211,075 | 1,318 | (201,075 | ) | 1,3 | 11,318 | ||||||||||||||
Accrued liabilities, former director | 54,000 | - | (54,000 | ) | 1 | - | ||||||||||||||
Payroll taxes payable | - | 2,107 | - | 2,107 | ||||||||||||||||
Deferred revenue | - | 2,800 | - | 2,800 | ||||||||||||||||
Notes payable, related party | 15,187 | - | (15,187 | ) | 1 | - | ||||||||||||||
Total current liabilities | 280,340 | 6,225 | (270,340 | ) | 16,225 | |||||||||||||||
Total liabilities | 280,340 | 6,225 | (270,340 | ) | 16,225 | |||||||||||||||
Stockholders' deficit | ||||||||||||||||||||
Series A Convertible Preferred Stock, $0.001 par value, 4,000,000 authorized, 4,000,000 shares issued and outstanding | - | - | 4,000 | 2 | 4,000 | |||||||||||||||
Common stock, 500,000,000 authorized, 944,120 shares outstanding pre-merger, and 115,147,064 shares post-merger | 944 | 100 | 114,103 | 1,4 | 115,147 | |||||||||||||||
Additional paid in capital | 2,532,232 | 8,000 | (2,651,279 | ) | 1, 2, 4, 5 | (111,047 | ) | |||||||||||||
Accumulated deficit | (2,812,823 | ) | 26 | 2,812,823 | 1, 5 | 26 | ||||||||||||||
Total stockholders' deficit | (279,647 | ) | 8,216 | 279,647 | 8,126 | |||||||||||||||
Total liabilities and stockholders' deficit | $ | 693 | $ | 14,351 | $ | 9,307 | $ | - | $ | 24,351 |
Notes to Pro-Forma Combined Balance Sheet (Unaudited) December 31, 2016
1. | To account for pre-merger year 2017 settlements of all assets and liabilities of Petroterra, Corp. | |
2. | To record sale of Series A Preferred Stock in January 2017 for $146,091 and contribution of $63,909 capital by former CEO. | |
3. | To record $10,000 held in a cash escrow for a six month period to pay unpaid liabilities. At the end of the six months, remaining balance due to former CEO. | |
4. | To record share exchange agreement, dated March 30, 2017 between the Petroterra Corp. and Save On Transport, Inc. | |
5. | To close out accumulated deficit of Petroterra Corp. to additional paid-in capital. |
F-10 |
SAVE ON TRANSPORT, INC.
Pro Forma Combined Statement of Operations for the period from July 12, 2016 (Inception) to December 31, 2016
Petroterra Corp. (1) | Save On Transport (2) | Pro-Forma Adjustments | JE# | Combined | ||||||||||||||
Net sales | $ | - | $ | 72,222 | $ | - | $ | 72,222 | ||||||||||
Cost of sales | - | (50,954 | ) | - | (50,954 | ) | ||||||||||||
Gross profit | - | 21,268 | - | 21,268 | ||||||||||||||
Operating expenses | ||||||||||||||||||
General and administrative | 115,504 | 21,242 | - | 136,746 | ||||||||||||||
Total operating expenses | 115,504 | 21,242 | - | 136,746 | ||||||||||||||
Operating loss | (115,504 | ) | 26 | - | (115,478 | ) | ||||||||||||
Other Non-Operating Income and Expenses | ||||||||||||||||||
Other income (expense) | 10,000 | - | - | 10,000 | ||||||||||||||
Net Income (loss) before income taxes | (105,504 | ) | 26 | - | (105,478 | ) | ||||||||||||
Provision for income taxes | - | - | - | |||||||||||||||
Net loss | $ | (105,504 | ) | $ | 26 | $ | - | $ | (105,478 | ) | ||||||||
Basic and Diluted Loss per Share - Common Stock | $ | (0.11 | ) | $ | 0.00 | $ | (0.00 | ) | ||||||||||
Weighted Average Number of Shares Outstanding: | ||||||||||||||||||
Basic and Diluted Common Stock | 931,949 | 10,000 | 115,147,064 |
Notes to Pro-Forma Combined Statement of Operations (Unaudited) for the Period from July 12, 2016 (Inception) to December 31, 2016
1. | The registrant (Petroterra Corp.) statement of operations is for the period of July 1, 2016 through December 31, 2016 | |
2. | The Save on Transport statement of operations is from the period of inception (July 12, 2016) through December 31, 2016. |
F-11 |
Save on Transport / Petroterra merger
Pro Forma Adjustments
For the period from July 12, 2016 to December 31, 2016
<1> | ||||||||
Bank OD | 78 | |||||||
Accounts Payable | 211,075 | |||||||
Accrued Liabilities | 54,000 | |||||||
Notes Payable | 15,187 | |||||||
Property & Equipment | 693 | |||||||
Cash | 200,000 | |||||||
Retained Earnings - Gain on settlement of liabilities | 79,647 | |||||||
$ | 280,340 | $ | 280,340 |
(to account for the pre-merger year 2017 settlement of Petrotrerra assets and liabilities)
<2> | ||||||||
Cash | 210,000 | |||||||
Preferred Stock | 4,000 | |||||||
APIC-sale of preferred stock | 142,091 | |||||||
APIC-capital contribution | 63,909 | |||||||
$ | 210,000 | $ | 210,000 |
(to record the sale of preferred stock fo $146,091 and capital contribution by former CEO for $63,909)
<3> | ||||||||
Cash Held in Escrow | 10,000 | |||||||
Cash | 10,000 | |||||||
APIC | 10,000 | |||||||
Accrued liabilities | 10,000 | |||||||
$ | 20,000 | $ | 20,000 |
(to book cash held at closing for John Barton )
<4> | ||||||||
APIC | $ | 114,103 | ||||||
Common Stock | $ | 114,103 |
(to record the share exchange agreement between Petroterra and Save On)
<5> | ||||||||
APIC | $ | 2,733,176 | ||||||
Retained Earnings | $ | 2,733,176 |
(to close out accumulated deficit of Petroterra to APIC)
F-12 |
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